BANGKOK: Thailand’s economy is set to grow 3-4 percent this year thanks to fiscal spending, although exports will miss expectations as risks to the global economy increase, the state planning agency chief said.
Southeast Asia’s second-largest economy has been hit by sluggish exports and domestic demand, adding to the problems the military junta has faced in reviving it since seizing power in May 2014 to end months of political unrest.
The economy this year will be driven by government spending, strong tourism and improved domestic demand, Porametee Vimolsiri, secretary general of the National Economic and Social Development Board (NESDB), told Reuters in an interview. “We earlier expected growth of 3-4 percent this year, which should still be good,” he said of the projection made in November.
But its export growth forecast of 3 percent this year would be missed due to the deteriorating global economy, he said. The NESDB, which compiles gross domestic product data, is due to give new projections along with fourth quarter and 2015 GDP data on Feb. 15.
Porametee said the economy in October-December probably grew faster than in the third quarter on a quarterly basis, helped by accelerated car purchases ahead of tax changes which began this year. In July-September the economy expanded 1.0 percent compared with the previous quarter and 2.9 percent on the year. Porametee declined to give a forecast for the full of 2015 GDP growth, which was expected at 2.9 percent previously.
The Bank of Thailand last month cut its 2016 GDP growth forecast to 3.5 percent from 3.7 percent, with flat exports. Shipments, worth about two-thirds of the economy, contracted for the third year running in 2015. [
Porametee said the economy would continue to face risks from China’s slowdown and widespread drought at home but the government still had room to support it. “We still have fiscal space to help the economy as public debt is not high,” he said.
In a bid to boost growth, the junta has stepped up investment plans and introduced various stimulus measures particularly aimed at helping rural areas, where heavily indebted farmers have been hard hit by low commodity prices and a drought. Some 20 big infrastructure projects worth nearly 1.8 trillion baht ($50.7 billion) throughout Thailand are expected to get underway before 2018.
Asked whether interest rates would be cut further, Porametee, who is also on the Monetary Policy Committee (MPC), said there was space in monetary policy to help growth if need be. “We are not closing our door on this,” he said. After surprise cuts in March and April last year, the MPC has left the policy rate steady at 1.50 percent, near a record low of 1.25 percent, leaving fiscal policy to help growth. The MPC next reviews policy on March 23.
