Thailand’s growth forecast hiked to 4.5%, but substantial challenges remain
Thailand’ finance ministry raised this year’s GDP growth forecast for the country to 4.5 per cent from an earlier 4.2 per cent on the grounds of surprisingly strong growth figures in the first quarter and a general recovery of the world economy.
Thailand’s GDP grew 4.8 per cent in the first quarter of 2018, the fastest pace in five years, mainly owing to stronger industrial exports and higher tourism revenue from the surge in Chinese tourists. Manufacturing, as well as wholesale and retail trade expanded at an accelerated rate, while the hotel, restaurant and transport sectors also maintained strong growth. Meanwhile, the agricultural and construction sectors reversed from a contraction in the previous quarter to favourable growth rates.
The new forecast is based on assumptions that Thailand’s merchandise shipments will grow by more than eight per cent and the global economy will expand by close to four per cent this year, a finance ministry spokesperson told the Bangkok Post.
State investment is expected to expand by close to tenper cent this year, while the inflation forecast is 1.4 per cent.
Deputy Prime Minister Somkid Jatusripitak was quick to say that political stability under the military administration had bolstered the economy which is probably true to some extent. The Thai economy with its current account surplus is also in a strong position to avoid any volatility incurred from a US interest rates rise. Thailand has also increased foreign reserve levels in the first months of 2018.
However, sustaining this current strength in an ever-changing economic environment is the challenge. While digital penetration increases across ASEAN, there remain ample opportunities for Thai assembled product exports such as computers, integrated circuits and smartphones. Together with air conditioning units, this accounts for a combined value of almost 17 per cent of Thai exports.
But this will not go on forever as robotisation grows and pure assembling will no longer be an economic driver in the foreseeable future. Likewise, a thriving tourism sector provides good growth figures, but both industries are not strong enough to catapult Thailand among the advanced economies of the world, for which innovation is needed.
Where Thailand lacks competence is to foster an environment for innovation. The government would need to introduce innovation-friendly policies by investing in education, carrying out structural reforms and promoting competition. It would also require tighter intellectual property legislation and liberalising the national services, increasing corporate innovative capability and improving public sector efficiency and governance.
That said, Thailand’s competitiveness ranking has dropped three spots to 30th among 63 countries, according the 2018 IMD World Competitiveness Rankings report released on May 24. The drop is mainly owing to worsening of budget deficits, issue of exchange rate stability, long-term unemployment, youth unemployment, lower contributions of employers to social welfare scheme and weak adaptability of government policies and decisions, the report noted.
It recommended that Thailand creates public awareness on the urgency and the magnitude of disruptive change, accelerates education reform and retrains or reskills its workforce to cope with future challenges. Also, the government should take immediate action on applying technology and digital platforms for access to social services, including education and healthcare, enhance government and public services transformation to support changing needs of businesses and citizens and manage political transformation and public conflict during the upcoming election process.
Thailand’ finance ministry raised this year’s GDP growth forecast for the country to 4.5 per cent from an earlier 4.2 per cent on the grounds of surprisingly strong growth figures in the first quarter and a general recovery of the world economy. Thailand’s GDP grew 4.8 per cent in the first quarter of 2018, the fastest pace in five years, mainly owing to stronger industrial exports and higher tourism revenue from the surge in Chinese tourists. Manufacturing, as well as wholesale and retail trade expanded at an accelerated rate, while the hotel, restaurant and transport sectors also maintained strong growth....
Thailand’ finance ministry raised this year’s GDP growth forecast for the country to 4.5 per cent from an earlier 4.2 per cent on the grounds of surprisingly strong growth figures in the first quarter and a general recovery of the world economy.
Thailand’s GDP grew 4.8 per cent in the first quarter of 2018, the fastest pace in five years, mainly owing to stronger industrial exports and higher tourism revenue from the surge in Chinese tourists. Manufacturing, as well as wholesale and retail trade expanded at an accelerated rate, while the hotel, restaurant and transport sectors also maintained strong growth. Meanwhile, the agricultural and construction sectors reversed from a contraction in the previous quarter to favourable growth rates.
The new forecast is based on assumptions that Thailand’s merchandise shipments will grow by more than eight per cent and the global economy will expand by close to four per cent this year, a finance ministry spokesperson told the Bangkok Post.
State investment is expected to expand by close to tenper cent this year, while the inflation forecast is 1.4 per cent.
Deputy Prime Minister Somkid Jatusripitak was quick to say that political stability under the military administration had bolstered the economy which is probably true to some extent. The Thai economy with its current account surplus is also in a strong position to avoid any volatility incurred from a US interest rates rise. Thailand has also increased foreign reserve levels in the first months of 2018.
However, sustaining this current strength in an ever-changing economic environment is the challenge. While digital penetration increases across ASEAN, there remain ample opportunities for Thai assembled product exports such as computers, integrated circuits and smartphones. Together with air conditioning units, this accounts for a combined value of almost 17 per cent of Thai exports.
But this will not go on forever as robotisation grows and pure assembling will no longer be an economic driver in the foreseeable future. Likewise, a thriving tourism sector provides good growth figures, but both industries are not strong enough to catapult Thailand among the advanced economies of the world, for which innovation is needed.
Where Thailand lacks competence is to foster an environment for innovation. The government would need to introduce innovation-friendly policies by investing in education, carrying out structural reforms and promoting competition. It would also require tighter intellectual property legislation and liberalising the national services, increasing corporate innovative capability and improving public sector efficiency and governance.
That said, Thailand’s competitiveness ranking has dropped three spots to 30th among 63 countries, according the 2018 IMD World Competitiveness Rankings report released on May 24. The drop is mainly owing to worsening of budget deficits, issue of exchange rate stability, long-term unemployment, youth unemployment, lower contributions of employers to social welfare scheme and weak adaptability of government policies and decisions, the report noted.
It recommended that Thailand creates public awareness on the urgency and the magnitude of disruptive change, accelerates education reform and retrains or reskills its workforce to cope with future challenges. Also, the government should take immediate action on applying technology and digital platforms for access to social services, including education and healthcare, enhance government and public services transformation to support changing needs of businesses and citizens and manage political transformation and public conflict during the upcoming election process.
