Analysts see better year for Thailand economy

The Thai economy heads into 2016 with a brighter outlook than last year, thanks to a stronger global economy and multiple measures taken by the government to reinvigorate various economic engines.

Both Kasikorn Research and Siam Commercial Bank forecast gross-domestic-product growth of no less than 3 per cent this year, compared to expected growth of 2.5-2.7 per cent in 2015, while the Bank of Thailand is more bullish with a 2016 growth projection of 3.5 per cent.

The economy is expected to gain from more positive external and internal factors this year, according to Montri Sokatiyanuluk of the National Institute of Development Administration (NIDA).

Externally, the global economy will be aided by recoveries in the US, Japan and the European Union, as well as in China, he said.

This in turn would help the Thai export sector, which should return to a growth rate of 2-3 per cent after a contraction last year.

Domestically, mega-infrastructure and transportation projects worth a combined Bt400 billion (S$15.7 billion), as well as state enterprises' investment budgets worth Bt350 billion, will be a key driver of economic growth.

In addition, the economy will benefit from proactive measures launched over the past five months by Deputy Premier Somkid Jatusripitak's economic team.

These range from revival of the multi-billion-baht Village Fund, Bt100 billion in soft loans for small and medium-sized enterprises, and Board of Investment and Finance Ministry special tax privileges for Thai and foreign investors, to the Public Private Partnership (PPP) programme for infrastructure investment, among others.

The new economic team's multiple measures since August have boosted local and foreign business confidence - as well as consumer confidence - in the Thai economy, setting the stage for stronger growth prospects in 2016.

However, Abhisit Vejjajiva, leader of the Democrat Party and former prime minister, said a full economic recovery was unlikely this year due to various risk factors, especially the lack of purchasing power among farmers and low-income people, and international pressures on the fisheries and aviation sectors.

"The tax deduction for consumption is aimed at those who have purchasing power, but there is no benefit for those who don't, so such a measure will only slightly uplift GDP figures at the year's end. I hope those who suffer economically really benefit from the government's policies," he said recently.

On mega-infrastructure projects, Abhisit said the government needed to ensure that they were economically worthwhile.

He also urged Prime Minister Prayut Chan-o-cha to personally take charge of concluding negotiations on the Thai-Chinese railway project, following protracted rounds of talks.

"If there remain world economic uncertainties, plus foreign pressures on the fisheries and aviation sectors, the economy will not return to a full recovery, so it's better for the people to follow the sufficiency-economy principles as we cannot expect a quick rebound," he explained.

Geographical advantage

NIDA's Montri said Thailand should also take advantage of the ASEAN Economic Community (AEC), which became effective at the end of last year, by implementing various measures to support several special economic zones along the borders with neighbouring countries.

Of Thailand's 77 provinces, 33 border with Myanmar, Malaysia, Laos and Cambodia, so the country has a big advantage when it comes to being a centre of the AEC for trade and investment covering both the manufacturing and service sectors.

In its latest global economic report, HSBC Thailand said the Thai economy was expected to recover gradually in 2016, but cautioned that household debt remained relatively high at over 80 per cent of GDP, which could become an obstacle to further boosting domestic consumption.

However, Thailand's public-sector debts are still comparatively low, at 43 per cent of GDP, with recent auctions of 4G spectra for mobile-phone services resulting in nearly Bt200 billion in additional state earnings.

This gives the government room to launch additional measures to stimulate the economy if growth slows down.

In addition, HSBC Thailand said the 10 new industries identified by the government as new engines of growth, and the setting up of a Bt10-billion fund to promote these sectors, would further complement the country's bid to boost foreign direct investment.

On the other hand, the European Union's "yellow card" warning on illegal, unreported and unregulated fishing practices remains a risk, as Thailand hopes to avoid a "red card", which could lead to a ban on Thai seafood exports to the lucrative EU market, HSBC's Thai unit said.

Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said a further slowdown in the Chinese economy would hurt exporters, as the Chinese market accounts for more than 10 per cent of overall exports.