Thailand

Despite persisting political uncertainty and volatility, Thailand has made remarkable progress in moving from a low income to an upper income country in less than a generation.

The World Bank reports that Asia’s seventh-biggest economy falls in upper-middle-income group. When measured by purchasing power parity, per capita comes to $14,552. The IMF projects nominal GDP per-capita of $5,612 for 2015. Population below poverty line was 12.6pc in 2012, with over 80pc of the country’s 7.3m poor living in rural areas as of 2013. Unemployment levels remain below 1pc.

However, the the country’s economic struggles have deepened in recent years. The baht is down 9pc this year; exports have contracted in each of the last seven months. Domestic demand is equally weak amid high consumer debt. A deadly bomb blast in Bangkok in August further reduced tourism trade and already scant foreign investment. Thailand has seen a record capital flight in recent years. Two interest-rate cuts have failed to boost demand. The interim military government needs to combat a Chinese slowdown.

According to the ANZ economists, Thailand is one of the world’s biggest rice exporters. In 2014, it was hit by worst drought in a decade. The drought has worsened labour market conditions, shedding nearly700,000 farm jobs as well impacted 80pc of rice farming land, possibly causing a 15-20pc drop in output.

Although the government has stepped up to provide $1.8bn worth of soft loans to support farmers, the drought also has a knock-on impact on consumer spending. Consumer confidence witnessed its sixth straight month of declines in July.

According to ADB, the economy is expected to benefit this year from a relatively calm political environment, the restoration of government investment, better prospects for exports to the major industrial economies, and lower fuel costs for businesses and consumers. These factors are forecast to lift GDP growth to 3.6pc in 2015. The economy is expected to grow by 4.2pc in 2016. The interim government has approved an infrastructure programme that includes $95bn investments over eight years. Thailand will speed up investment in 17 mega projects worth nearly $47bn in fiscal years 2015 and 2016.

The government will maintain loose monetary and fiscal policies in order to support the flagging economy, with a likely increase in budget deficit. The 2016 budget sees fiscal deficit at 2.9pc of GDP this year, rising over 3.5pc next year. The country’s public debt to GDP ratio expected to rise from 42.36pc in 2015 to 51pc in 2017 and 52pc in 2020, still within fiscal stability of 60pc.

Philippines

The Philippines is the fifth-largest economy in Southeast Asia. It is considered as a newly industrialised country, which has been transitioning from an economy based on agriculture to one based more on services and manufacturing.

The government effort focuses on im­proving the investment climate and minimising disaster risks, resulting in improvements in the country’s macroeconomic fundamentals.

The development objectives are driving rapid but inclusive economic growth, accelerating employment on a massive scale, and reducing poverty.

But still poverty and unemployment vary, with around 28pc of the population living in poverty while the total number of unemployed or underemployed workers exceeds 10m.

The country had the third highest income per-capita in Southeast Asia, behind Singapore and Malaysia, in 1970.

Currently it falls in the middle income group with per-capita GDP of $2,828 in nominal terms or $6598, on purchasing power parity basis. The economy has made a remarkable transition over the last decade, with rapid growth helped by significant improvements in the fiscal deficit and gradual economic reforms.

The near-term economic outlook appears positive, with GDP growth expected to rise from 5.9pc in 2014 to 6.2pc in 2015, followed by a robust growth of around 5.5pc over the 2016-17, supported by consumption spurred by workers’ remittances.

In 2015-16, falling crude oil prices are expected to reduce oil import costs and increase household disposable income. The ADB sees growth at 6.4pc this year and 6.3pc in 2016.

The IMF has revised its growth forecast to 6.2pc for this year.

The Philippine economy is expected to perform better in 2016 as government continues to address bottlenecks in public spending in accordance with the Government Procurement Reform Act.

The slower-than-programmed pace of public spending is the most immediate and biggest challenge of the Philippine economy.

The government has set a full-year growth target of 7-8pc this year and the next.

According to Rajiv Biswas, the Asia-Pacific Chief Economist at IHS, the economy has the capacity for robust long-term economic growth between 2016-2030, transforming Philippine from its current $280bn to a $1.2trn economy by 2030. But the natural disasters have taken a toll on the economy in the past few years.

The government has already warned that climate change in the Philippines is likely to increase the severity and frequency of earthquakes and typhoons. Its vulnerability will increase further due to the impact of global warming.

One of the major negative factors that have harmed the competitiveness of the Philippines economy over the last three decades is the high level of corruption.

However, President Aquino has mounted a campaign against corruption with significant signs of improvement.

There is still an urgent need to improve governance.

Published in Dawn, Business & Finance weekly, September 28th, 2015

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