Tourism strong enough to expand economy by 3%
THE ECONOMY will be able to expand by more than 3 per cent in 2015 as tourism is still going strong, the Council of Economic Ministers has maintained.
Exports are predicted to pick up in the fourth quarter with the weaker baht while the process of private investment is still ongoing, they said, but most of the construction and real investment is expected to begin next year.
MR Pridiyathorn Devakula, deputy prime minister in charge of the economy, said exports had contracted by 4.84 per cent in the first six months due to the drop in global oil prices, which affected commodities and agriculture prices. But other countries are facing a similar situation and Thailand is lucky to have a flourishing tourism sector to help support the economy during the slowdown of global demand.
"Almost every economy will have one or two commodities or agriculture products as part of their trade arsenal so the severe drop in global oil prices by around 50 per cent has affected the export situation of the entire world and it would take until August or September until a new base price can be found," he said after the Cabinet meeting yesterday.
"Thailand’s exports have contracted by around 5 per cent in the first six months but the country is still lucky to have the tourism sector, which is currently doing well and it should be able to compensate against the decline of the export sector," he added.
Pridiyathorn explained that exports currently account for 56 per cent of the gross domestic product, which means that a 5 per cent contraction in the sector would already contribute to a subtraction of around 2.5-2.6 per cent from the overall GDP.
Slump in exports
Nevertheless, the year on year expansion of the tourism sector during the same period should be able to compensate with the slump in exports since the tourism sector currently accounts for 12 per cent of the GDP. This means that a 28 per cent expansion from the sector should already add around 3 per cent to the overall GDP expansion.
A weaker baht should also help Thailand’s exports to Japan as the deputy prime minister claimed that the Japan External Trade Organisation revealed to him the fact that exports to Japan will increase in the fourth quarter. The strengthening of the yen and the deprecation of the baht could add around 6-7 per cent profit from products that are being exported back to Japan."The GDP that has been gained from the excellent expansion in the tourism sector over the past six months is more that the GDP that has been lost from the contraction of the export sector in the same period, so the performance of the tourism sector should be able to continue to support the country’s economic expansion this year," said the deputy prime minister.
Pridiyathorn also revealed that around 2,000 factories obtained Ror Ngor 4 licenses in the first six months and BOI has approved around 1,200 projects during the same period and he expects these investments to tangibly begin next year.
Deputy Commerce Minister Apiradi Tantraporn said the export sector of other countries contracted more than that of the Kingdom’s 4.84 in the first six months. Exports in Singapore and Malaysia contracted by more than 13 per cent during the same period.
Yesterday, the Finance Ministry’s Fiscal Policy Office (FPO) said the Thai economy could be driven by tourism and acceleration of the government budget disbursement for the latter half of 2015 with growth for the whole year estimated at 3.0 per cent from the earlier estimate of 3.7 per cent this year, said Krisda Chinavicharana, director-general and also finance spokesman of the FPO.
Thailand’s current account is expected to face a surplus of about US$20.6 billion or 5.1 per cent of the nation’s gross domestic product, which is higher than last year’s, he said.
The trade account is projected to see a surplus of $26.5 billion after estimated contractions of imports and exports, in terms of value, by 5.5 per cent and 4.0 per cent, respectively.
