The Asian Development Bank (ABD) forecasts 3.5% growth for Thailand in 2017, 3.6% in 2018

ADB forecasts 3.5% growth for Thailand in 2017, but the country is still on subpar growth when compared with its Southeast Asian peers

The Asian Development Bank (ADB) forecasts Thailand’s economic growth at 3.5% this year, with export growth stated as the main factor of recovery.

Developing Asia has continued to perform well, even as recovery in the major industrial economies remains weak. The region is forecast to expand by 5.7% in 2017 and 2018, nearly the 5.8% growth achieved in 2016.

ADB’s senior economist Luxmon Attapich said Thailand’s gross domestic product (GDP) is expected to grow 3.5% this year and 3.6% in 2018, driven mainly by its exports which are likely to expand between 3% and 4% next year.

She also said any trade barriers on China will affect Thailand’s exports of electrical appliances, electronic components and machinery why could result in lower growth than targets.

Thailand is continuing structural reform and will continue its public spending to boost productivity, which promises to lift growth slightly to 3.5% in 2017 and 3.6% in 2018, also stated ADB in its latest publication Asian Development Outlook 2017: Transcending the Middle-Income Challenge.

The International Monetary Fund (IMF) has earlier adjusted its forecast for this year’s economic growth to 3% from 3.3% and projected the Thai economy to grow 3.3% next year. The World Bank forecast 3.2% growth for Thailand.Thai economy grew by 3.2% last year, inflation barely slipped back into positive territory, and the current account posted a substantial surplus.

Growth is likely to be slightly higher this year and next, while inflation should edge up and the current account surplus narrow.

How effectively the Thailand 4.0 development agenda reignites growth will hinge on how well Thailand’s youngsters upgrade their skills.

The risk of mounting household debt in some Asian economies

The ratio of debt to GDP has surged in several economies, notably rising in the Republic of Korea from 74% in late 2008 to nearly 91% in the third quarter of 2016, and to about 71% in Malaysia and Thailand.

So far the risk from high household leverage in the region is contained by favorable growth and employment conditions, fairly stable asset prices, and well capitalized banking sectors with low non-performing loan ratios.

Ratios of nonperforming mortgage loans have remained low in the region. This is true even in Thailand, where delinquencies have increased in recent years, mostly involving younger people.

Southeast Asian prospects brighten with buoyant growth across the subregion

Economic expansion accelerated by 4.7% in 2016, up by 0.1 percentage points from the previous year, as growth edged higher in several larger economies: Indonesia, the Philippines, Singapore, and Thailand.

In contrast with slower growth elsewhere, aggregate growth in Southeast Asia improved slightly to 4.7% in 2016 from 4.6% in 2015, even as growth slowed in 4 of the 10 economies and recession deepened in Brunei Darussalam.

This largely reflected a higher weighting for Indonesia, where growth accelerated last year on higher fixed investment and consumption after slowing for 4 straight years. In Malaysia, growth dipped for a second year in a row, weighed down by declining fixed investment, weaker government spending, and lower exports.

In Thailand, growth improved marginally from last year on higher consumption, aided by a tax rebate for shopping and dining, higher rural incomes, and recovery in net exports.

Cautious spending by the private sector and uncertainty in both the domestic and the external environment weakened investment in most of the larger economies. Gross investment declined in India, the ROK, Malaysia, Singapore, and Thailand in 2016.

Thailand’s tourism sector remains strong

The adverse effects of the mourning period and the crackdown on fraudulent tours dented tourist arrivals in the last quarter of 2016, but these effects have already started to wane. The number of tourist arrivals increased in January 2017 by 6.5% year on year.

Region facing capital outflows

Net capital flows to large economies in emerging Asia—the PRC, India, Indonesia, the ROK, Malaysia, the Philippines, Singapore, Thailand, Viet Nam, Taipei,China, and Hong Kong, China—have declined since the second quarter of 2014.

While net flows of foreign direct investment (FDI) into the region held up initially, they too started to reverse and flow out of the region beginning in the second half of 2015.

Reigniting growth through Thailand 4.0

With Thailand suffering subpar growth in recent years when compared with growth in its Southeast Asian peers or with its own past performance, concern is growing that the country may have slipped onto a low-growth path that leads to the middle-income trap.

Source: https://www.thailand-business-news.com/economics/57203-adb-forecasts-3-5-growth-thailand-2017-3-6-2018.html