Outlook firm for 4% economic growth

The tourism and export sectors will continue to be the main growth drivers of the economy this year thanks to strong fundamentals of the global economy, the SCB Economic Intelligence Centre (EIC) said in a report. It forecasts 4 per cent growth in gross domestic product from the previous year.
 In 2018, exports of goods and the number of tourists are projected to see year-on-year expansion of 5 per cent and 80 per cent, respectively, said the EIC, a unit of Siam Commercial Bank. “Sustained growth in exports has led to an increase in capacity utilisation, lending support to private investment going forward,” the report said.
“Moreover, private investment has an additional stimulus from the government’s infrastructure investment, particularly following the greater clarity in the Eastern Economic Corridor (EEC) project after the legislature passed the EEC law. 
“This project has a high potential in attracting both domestic and foreign investment. In addition, the concern over a shortage of migrant labour has subsided, after the government postponed enforcement of the new regulation on undocumented migrant workers and eased the regulation’s rules of punishment.”
The EIC report said domestic consumer spending is projected to continue expanding, but remains reliant on the purchasing power of certain groups. 
“In 2018, growth in domestic consumption will sustain its momentum from the previous year due mainly to consumption of durable goods among high-income earners, reflected by the high rates of growth in automobiles’ sales in the early 2018,” the report said.
“Nevertheless, spending from low-income households still faces headwinds due to high household debt level and slow recovery in employment and household income, reflected by increasing unemployment rate and declining overtime employment.
“This shows that the labour market has not received full benefits from the ongoing economic expansion. In addition, farm income has been negatively impacted by falling prices of some agricultural products, thus leading to subdued expansion in consumption of non-durable goods. 
However, consumption of low-income workers will receive some support from the government’s state welfare project this year.”
The EIC researchers said that, overall, downside risks to the economy are low, but businesses in certain sectors should exercise greater caution. “First, the US’s protectionist trade policies potentially have a direct impact on some exports sectors, namely solar panels, washing machines, steel and aluminium. 
These sectors constitute a low proportion of the total values of Thai exports, however, this source of risk might be more elevated in case the US’s major trading partners retaliate and it turns into trade war scenario,” the report said.
“Second, the strength and volatility of the baht will have repercussion on exporters’ baht revenue as well as competitiveness of agricultural products. Lastly, monetary policy normalisation of major central banks, particularly the US Federal Reserve, might trigger global financial markets’ volatility and tighten global liquidity, possibly resulting in adjustment in asset prices and negative impact on growth of some economies. 
“For Thailand, the EIC assesses that the economy’s external financial stability remains intact.Therefore, volatility in the global financial markets should have limited impact on Thai economic growth this year.”