Thailand: FPO seconds 3.8% GDP growth view

The country’s economy is likely to achieve the 3.8% growth forecast by the Bank of Thailand, mainly because of consistently strong export growth, says Krisada Chinavicharana, head of the Fiscal Policy Office (FPO).

The Finance Ministry’s think tank will review its economic growth forecast late next month. It predicts Thailand’s GDP and exports this year will expand by 3.6% and 4.9%, respectively.

State investment budget disbursement, expected to be the main economic driver, stood at 70.7% as of Sept 22, falling short of the 87% target set for this fiscal year. The fiscal year ends Sept 30.

But if signed contracts are taken into account, the investment budget disbursement rate is 85.1%.

For the overall budget, 93.3% was doled out as of Sept 22, almost reaching the fiscal year target of 96%.

Mr Krisada said the undisbursed budget will be carried forward to the next fiscal year.

Almost half of the 190-billion-baht mid-year budget was already taken out as of Sept 22.

The Bank of Thailand this week raised its forecast for the country’s GDP to grow 3.8% this year, up from 3.5%. The central bank predicts 3.8% growth for 2018, up from 3.7%. The bank also increased its export growth forecast for this year and next to 8% and 3.2%, from 5% and 1.7%, respectively.

Exports for the first eight months grew 8.9% from the same period last year to $153.6 billion (5.13 trillion baht). That is two-thirds of the full-year export target of $230.5 billion.

Mr Krisada said several economic indicators in August added to signs that the economic recovery is picking up speed.

In August, domestic cement sales surged 6.1% year-on-year, a 17-month high; exports jumped 13.2%, the sixth straight month of growth; and the Thai Industries Sentiment Index stood at 85, the highest in five months.

Meanwhile, the Thai Regional Economic Sentiment Index, a survey of expectations among operators for the next six months, was higher than the 50-point threshold separating optimism from pessimism in September.

The index gauges confidence in six aspects: economic outlook, agriculture, industry, service, employment and investment.

The central region had the highest confidence at 87.9, while Bangkok and its outskirts had the lowest confidence at 61.5.

In related news, Siam Commercial Bank’s Economic Intelligence Center (EIC), raised its GDP growth forecast to 3.6% in 2017 from 3.5%, also on account of better than expected export growth.

EIC estimated that export growth will continue and expects export value in 2017 to rise by 7%, the highest level in the past six years. Moreover, the research house forecast the number of foreign tourist arrivals will reach 35.2 million in 2017, up 7.9% from last year.

While high-income earners have increased their spending, especially on durable goods, as seen in the high growth of passenger car sales, spending by middle- and low-income earners remains subdued, it said.

EIC said households will be reluctant to take on new debt as existing obligations are high, while tighter credit card and personal loan criteria based on repayment ability came into effect this quarter.

The research house also forecasts the country’s economic growth will come in at 3.5% next year, backed by both public and private investment.

Separately, the Bank of Thailand yesterday rolled out the subsidised foreign exchange option for small and medium-sized enterprises (SMEs), aiming to help cover around 50 billion baht worth of exports and imports for 17,000 SMEs.

The measures, which are jointly conducted by the central bank, the Export-Import Bank of Thailand and the Thai Bankers’ Association, include training programmes and 30,000-baht coupons for purchasing hedging options from commercial and state-owned banks.

A budget worth 500 million baht offered by the Office of Small and Medium Enterprises Promotion will be used to cover costs for the measures.

“These measures should help educate and encourage Thai SMEs to hedge against foreign exchange risk and partly help stabilise the baht’s value as exporters and importers will not rush out to buy or sell the local currency when it fluctuates,” said Vachira Arromdee, assistant governor of the financial markets operations group at the central bank.

Source: http://www.bangkokpost.com/business/finance/1333271/fpo-seconds-3-8-gdp-growth-view