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.