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Sustaining 5% growth a challenge, say economists

Aug 12. 2018
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By Wichit Chaitrong
The Nation

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Majority of population left behind despite surge in exports and spending

THE ECONOMY could grow by 5 per cent this year, but the challenge will be in how to sustain that rate, economists agreed at a roundtable discussion last week.

Gross domestic product (GDP) grew by 4.8 per cent in the first quarter this year – the fastest rate in five years – prompting the government to predict that the full-year rate could hit 5 per cent, largely thanks to increases in exports, public spending, private investment and tourism. 

But so far, the benefits haven’t trickled down to the majority of the population, who still struggle to make ends meet.

Chao Kengchon, managing director at Kasikorn Research Centre, concurred that the growth rate could reach 5 per cent if exports rose by 10 per cent and investment by 6 or 7 per cent. 

Chao was among financial experts participating in the roundtable talk hosted last Thursday by Krungthep Turakij, a sister newspaper of The Nation. 

The National Economic and Social Development Board has forecast export growth in dollar terms of 8.9 per cent, total investment of 4.7 per cent and GDP expansion by 4.5 per cent. 

Chao said Kasikorn Research anticipated GDP to grow by 4.5 per cent this year, but if the government could successfully promote new “S-curve” industries, the economy could in fact rise by 5 per cent. 

Somprawin Manprasert, chief economist at Bank of Ayudhya, was optimistic about the economy growing faster than the 4.7 per cent projected by his bank. “Our projection is quite conservative, so there is a possibility of further growth,” he said.

However, a 5-per-cent rise this year is less important than long-term growth, he added, so the main focus should on “building muscle” for future growth.

Pipat Luengnaruemitchai, assistant managing director and chief investment officer for wealth management at Phatra Securities, said his firm was expecting GDP to grow by 4.2 per cent this year. The real challenge, however, lies in achieving 5 per cent growth for the next five to 10 years, he said.

Prior to the 1997 Asian financial crisis, the Thai economy grew by about 7 per cent annually. The figure fell to 5 per cent in the wake of that crisis and plummeted to 3-to-3.5 per cent following the 2008 global economic crisis.

If the Thai economy could return to 5 per cent, it would be good for the country, Pipat said, but Thailand is facing economic constraints due to the ageing population and labour shortages. 

If the migrant labourers on whom Thailand depends returned home, the economy would be in further jeopardy. To overcome this constraint, labour productivity would have to increase dramatically, he said.

Meanwhile questions linger over whether development of the Eastern Economic Corridor (EEC) will deliver the substantial financial results on which the government is banking. It hopes infrastructure development in the corridor will revitalise the economy and increase per capita income from the equivalent of US$6,500 to $15,000, making Thailand a high-income country within the next 20 years.

Pipat lamented, though, that the “big and clumsy” government was sucking up limited resources and the failing education system was producing citizens with limited work skills.

Tim Leelahaphan, an economist at Standard Chartered Bank (Thailand), said it had forecast GDP growth of 4.3 per cent and he too said attention should be on the longer term. “What can we do? One per cent more would not make much of a difference,” he said.

And so far, the average Bangkok resident has no sense that the economy has improved, people upcountry are suffering, and foreign investors are showing little interest in Thailand. 

What is our strategy in the next four to five years and how can we build confidence among foreign investors? This is what really matters, Tim said. The coming election sends a positive signal, but investors are waiting to see what happens afterwards, he said. They don’t expect sweeping change, but they hope the new government continues developing the EEC, he said.

“And at the moment it’s only a 50-per-cent chance that the EEC will succeed.”

Regarding interest rate policy, Chao predicted that the central bank would hike the rate beyond 1.5 per cent after the election. 

Pipat agreed it would come early next year, but Somprawin expects it to happen this November. Tim forecast the increase will be split in two and come at different times before the end of this year, each time 0.25 per cent, resulting in a rate of 2 per cent. 


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