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[ 2018-02-20 ]

GDP outlook rosy after strong 2017

Growth partly hinges on uptick in exports

The government has expressed confidence in the country’s economic outlook after Thailand posted its strongest growth in five years in 2017, driven by robust exports and tourism.

The National Economic and Social Development Board (NESDB) on Monday forecast the Thai economy will expand in a range of 3.6-4.6% this year, based on export growth of 6.8%.

Porametee Vimolsiri, secretary-general of the NESDB, said this year’s growth will be supported largely by global economic expansion, based on higher manufacturing output; an uptick in government expenditure and acceleration of public investment; private investment recovery; the continual expansion of key economic sectors; and improvements in employment and household income.

Mr Porametee said the country’s economic growth is expected to be more stable this year thanks to promising export prospects, on the back of a rising global economy and economic expansion among Thailand’s key trading partners.

“Global economic growth and robust import growth are the key contributors for Thailand’s export expansion in 2018,” he said. “The Thai economy could possibly grow by more than the 4.1% average this year if the export performance fares better than 6.8% as forecast, with the growth momentum expected to continue in 2020.”

The NESDB projects the world economy in 2018 will record its strongest expansion in seven years — 3.8% growth.

This mainly stems from the improvement of fundamental economic factors as well as additional fiscal stimulus from the new tax cuts and employment growth in the US, said the NESDB. Meanwhile, the eurozone economy will continue to expand at a similar pace as in the previous year, slowly entering the full expansion stage of its business cycle.

Likewise, the Japanese economy is expected to continue its expansion, supported by its accommodative monetary stance, the improvement of trading partners’ economies and rising expenditure for preparing the 2020 Tokyo Olympic Games. The Chinese economy will also continue growing firmly, although some slowdown from the economic and financial restructuring will be registered.

Mr Porametee said exports may reach double-digit growth by 2020 if Thailand manages to restructure its manufacturing sector and the US economy fully recovers.

Private i nvestment is expected to increase significantly this year thanks to investment in the government’s flagship Eastern Economic Corridor, he said.

The state planning unit forecast private investment will expand by 3.7% at the end of this year from 1.7% in 2017 and 0.1% in 2016, with public investment to surge 10% against a 1.2% contraction.

But the NESDB warned the agriculture sector is likely to soften this year, while there remains some risks from global economic and financial system volatility, which could be triggered if major countries normalise their monetary policies at a clip too fast for their economic fundamentals to bear. Investor expectations towards the upturn adjustment in the commodity price cycle and rising global interest rates are also risks, as is the US trade policy direction, political conditions in Europe, and geopolitical tensions in the Korean peninsula and Middle East.

The government’s planning unit reported Monday the economy in the fourth quarter of 2017 expanded by 4%, easing from 4.3% growth in the previous quarter, and against 3.9% and 3.4% growth in the second and first quarters, respectively.

After a seasonal adjustment, the economy expanded by 0.5% in the fourth quarter from the previous three months.

Mr Porametee said lower quarterly growth was largely because of the impact of flooding on the farm sector, especially in southern and northeastern Thailand.

For the whole year, the economy expanded by 3.9% in 2017, improving from 3.3% in 2016. Export value grew by 9.7%, while private consumption and total investment increased by 3.2% and 0.9%, respectively. Headline inflation averaged 0.7% and the current account remained in a surplus at 10.8% to GDP.

Deputy Prime Minister Somkid Jatusripitak said the economic growth this year is likely to fare better than the NESDB’s forecast because of higher private investment and the government’s active investment.

He said the government will continue focusing on fostering new entrepreneurs and the local economy.

Don Nakornthab, the Bank of Thailand’s senior director for the Economic and Policy Office, said the GDP reading for the October-to-December quarter was slower than the central bank’s forecast at 4.4%, largely because of lower than expected state spending.

But full-year economic growth was in line with estimates, while external factors are critical of the country’s economic mainstay, he said.

Positive signs regarding external factors and improving domestic consumption are expected to drive economic growth, said Mr Don. A pocket of risks, including US trade policy, geopolitical tensions and domestic purchasing power warrants close monitoring.

In a related development, Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce, said the university has raised its economic growth forecast for this year to 4.4% from 4.2%. The growth prospects were propelled by the strong economic recovery in Thailand’s key trading partners, solid exports and growing tourism.

“We foresee the economy growing in a range of 4.2-4.6%, up from 4-4.5% growth forecast in October last year,” said Mr Thanavath. “The world economy is recovering well, as indicated by a gradual, upward trend in US interest rates, while Thai exports and tourism are in good condition and farm commodity prices are recovering.”