Infrastructure spending spree kicks into gear
The Thai economy is being boosted by spending on public infrastructure projects, which is likely to jump from around 3.5 to 4 per cent of GDP this upcoming fiscal year, starting October 1.
The spending rise will also boost the public debt-to-GDP ratio to between 44 and 48 per cent, though that is still far below the 60-per-cent threshold that would trigger concern.
However, an export slowdown since the start of this year and high household debt have remained hindrances to GDP growth, which is forecast at 2.8-3 per cent for 2016.
Nalin Chutchotitham, an economist at the Hongkong and Shanghai Banking Corp (HSBC), said disbursements for infrastructure projects were insignificant in the 2015 fiscal year while the 2016 fiscal year, which ends on September 30, saw just a slight increase.
But this will likely gain momentum in next year, since 12 of 20 projects worth a combined Bt1.8 trillion have already been approved by the government.
This will increase the country’s nominal GDP by 0.7 of a percentage point in the upcoming fiscal year.
According to HSBC’s Asean economist Joseph Incalcaterra, infrastructure spending has picked up in most Asean countries, contributing to the region’s ongoing economic growth.
The region’s six major economies need an estimated US$2.1 trillion in combined infrastructure spending towards 2030, but their current spending plans amount to just $910 billion.
For Thailand, the estimated spending requirement is $153 billion. Indonesia has the biggest requirement of $1.162 trillion, compared with the Philippines’ $376 billion, Vietnam’s $259 billion and Malaysia’s $109 billion.
It’s not just Thailand that is embarking on a public spending spree for infrastructure. New governments in the Philippines and Indonesia have also turned to hefty infrastructure spending to boost growth amid the export slowdown, low commodity prices and high household debts.
While the funding needs of Asean countries for public infrastructure projects are huge, the role of private-sector money remains relatively small at this stage.
In public-private sector participation (PPP) programmes in Thailand, Malaysia and Philippines, private-sector funding is concentrated in the sectors of information and communication technology, and electricity.
The Philippine PPP programmes are estimated to account for just $3 billion annually out of a total funding requirement of $25 billion per year, while Indonesia’s PPP programmes are forecast to account for 37 per cent of the total funding needs.
As for Thailand, the 12 approved projects are worth a combined Bt510 billion, or about 3.4 per cent of GDP, with mass transit lines, railways, expressways and motorways either in the pipeline or already being built.
In addition, the government has approved a Bt100-billion infrastructure fund to raise money in the equity market to finance these schemes, using existing income-generating projects as key assets.
To meet its aim of turning Thailand into a regional transport hub, the government also envisions an additional 905km of double-track railways to increase speed and links with neighbouring countries.
In addition, Thailand will spend Bt20 billion to implement projects for the digital economy and society, including Bt15 billion for broadband Internet for 39,000 villages.
