Thailand

THAILAND, the Southeast Asia’s second biggest economy after Indonesia, plays a major role in promoting regional cooperation having moved from a low-income to an upper-middle income country.

Its economy grew at an average annual rate of 7.5pc in the late 1980s and early 1990s. Since the late 1990s, economic growth has been impeded by global economic shocks, natural disasters, sociopolitical tensions, and relatively low investment.

While extreme poverty has been reduced to 11pc of the population, one in 10 Thais still remain below the official poverty line of $6.20/day. Thailand aspires to reach the higher-income status within the next decade.

Thailand’s economy expanded 3.5pc in the second-quarter of 2016, surpassing the 3.2pc expansion in first-quarter, expanding at the fastest pace since first-quarter of 2013. The growth was achieved primarily due to domestic demand, helped by higher government investment.

Getting stronger growth rates requires both bigger state and private investment in the face of challenges both at home and abroad. Private investment has fallen over the past three years. The second-half growth is expected to be slower than the first-half because the pace of the government spending on large projects is not enough to keep headline GDP rising, according to a Nomura economist. The central bank governor expects higher financial disbursements for larger investment projects in the second-half of the year.

The Thai National Economic and Social Development Board recently revised its year-end forecast to 3.3pc. Although the economy has outperformed initial forecasts, the Thai central bank expects the economy to expand 3.1pc in 2016 and 3.3pc in 2017. The growth has been modest, at 2.8pc in 2015 after 0.9pc in 2014. Despite broadly positive early indicators, some experts remain cautious. DBS Bank warned that weak private sector demand combined with slowdown in manufacturing and agriculture could weigh full-year growth prospects.

Fiscal spending from April through June jumped 18pc from the same period last year to $18.7bn, accelerating from 8.7pc in the previous three months, according to the central bank. Thailand plans new borrowing of $17.74bn in the fiscal year starting October 1, to finance the budget deficit and investment projects.

However, fiscal stimulus and tourism will remain key drivers of economic growth in Thailand, but the economy still faces headwinds on the path to a broad-based and sustained recovery. Thailand’s record tourist arrivals and public works spending are expected to offset weak domestic demand and global economic drag.

The trade-dependent economy has been hit hard by the deteriorating global economic environment and the slowdown in demand for exports, which the Bank of Thailand expects to decline for the fourth consecutive year in 2016.

Philippines

THE Philippines economy, ranks as one of the most promising newly-industrialised countries and is now among the fastest-growing economies in Southeast Asia.

However, poverty has always remained a critical social problem that remains unaddressed. According to the data from the National Statistical Coordination Board, over 25pc of the population lives in poverty including 12.1pc — roughly 12.18m Filipinos — living in subsistence or extreme poverty.

The government is making efforts to bring down the poverty to as low as at least 17pc by 2022. This target is still lower than the country’s 2015 Millennium Development Goals, which is to halve the poverty rate to 16.6pc. The decline in poverty in the past has been slow and uneven, much slower than neighbouring countries. The strategy is to create employment opportunities, especially for the poor, in cities and municipalities with the potential to grow economically.

The Philippines has remained a strong performer in the region, despite slow global growth. Growth is projected to pick up with higher investment and consumption in 2016. The economy grew 6.9pc in the first-quarter of 2016, faster than the 5pc clip in the first-quarter of 2015, driven by election-related spending. This helped boost investment, household consumption and government expenditure.

The $292bn Asian economy further grew by 7pc in the second-quarter. According to the IMF, both consumption and investment have grown rapidly, while net exports have been held back by weak external demand. This brought 2016 first-half GDP growth to 6.9pc against 5.5pc in the same period last year. The IMF hopes that the country will achieve 6pc growth this year.

The ADB is also sticking with its earlier growth forecast of 6pc this year and 6.1pc in 2017. The government is targeting growth between six to 7pc this year and 6.5pc to 7.5pc in 2017.

The Philippine draft budget for 2017 reveals an overall increase of 11.6pc in spending. Education was one of the biggest winners, with a 31pc rise. According to a plan submitted to the House of Representatives, the administration’s budget could widen the deficit to $10.3bn, or 3pc of GDP, from a projected 2.7pc this year. This would almost quadruple the deficit recorded in 2015.

In addition to proposing an increase in infrastructure spending, the administration is planning a 25pc increase in the police budget.

The secretary of the department of trade and industry, reiterating the new administration’s focus on FDI, announced the government’s aim to position the Philippines as one of the top three destinations for FDI inflows in South-east Asia by the end 2022.

The government also plans to undertake reforms as part of its programme to increase FDI by 4pc this year, bringing the total to $6.3bn. Though the Philippines will be well-positioned to attract a larger portion of FDI, overall global investment flows are set to dip 10-15pc on the back of international economic uncertainty this year, before rebounding next year, according to UNCTAD.

Published in Dawn, Business & Finance weekly, September 26th, 2016