Thailand: ADB predicts 3.5% Thai growth

• Apr 21, 2017

The Thai economy is expected to expand by 3.5% based on an export recovery and domestic public spending this year, with momentum set to continue next year, raising growth to 3.6%, says the Asian Development Bank (ADB).
“A sustained recovery in major economies, robust domestic consumption and the continued implementation of large public infrastructure projects are the key reasons for our projection,” said Luxmon Attapich, ADB’s senior country economist.
The ADB expects Thai merchandise exports to grow 2% this year and 4% in 2018, supported by a stronger global economic recovery and rising commodity prices.
Mrs Luxmon said the gradual recovery of global oil prices should also boost exports of petroleum products.
She said the 2% export growth forecast is rather conservative, given that it accounts for the rising trend of protectionism in international trade.
“We foresee the impact of protectionism on Thailand from the influence of US trade policy as rather moderate,” Mrs Luxmon said. “We included that impact in our risk analysis, rather than just weighing from the baseline.”
She said the recovery in private consumption is expected to continue, supported by higher farm income.
“Farm income should rise further, along with commodity prices, as prices should bounce back based on normal weather forecasts,” Mrs Luxmon said.
In addition to rising farm income, the Manila-based lender expects private investment to grow 3-4% this year, partly because of a low base last year.
Based on the recent recovery of merchandise exports, some sectors such as electronics have almost reached full capacity and are expected to invest soon to expand capacity, Mrs Luxmon said.
“Although average utilisation of industrial capacity stands at 60.5%, in some subsectors such as electronics, electrical parts and chemical products the utilisation rate exceeds 90%,” she said.
Large government infrastructure projects are also expected to spur private investment by boosting economic confidence.
“Public investment will be a key growth driver over the short term if the government can quickly implement its plan,” Mrs Luxmon said.
The forecast assumes that a general election will take place in the second half of 2018. Mrs Luxmon said most analysts don’t expect tensions in the Korean peninsula to escalate, but an event there could affect other economic factors such as crude oil prices.
“Normally when there’s a conflict, the crude oil price usually goes up, as well as low-risk assets such as gold,” she said. Higher oil prices would push up inflation, but inflationary pressure remains relatively low in Thailand, she said.
She said the government’s policy to support innovation and new technology through its Thailand 4.0 agenda is a move in the right direction, but the development of human capital is crucial to help it succeed. “A lack of skilled labour won’t disrupt development in the near future, but in the long term a scarcity of human capital will surely happen, as Thailand is an ageing society,” Mrs Luxmon said.
She suggested more education programmes supported by the private sector to help create a labour force with the required skills, as well as more support of vocational schools.
“Companies can help the government draft the curriculum for these programmes and promise graduates future careers,” Mrs Luxmon said.

Source: http://www.bangkokpost.com/business/news/1235718/adb-predicts-3-5-thai-growth