The Thai Economy is expected to reach steady-stage growth level of 4.0-5.0% in the year 2011, with accelerated Inflation
Mr. Naris Chaiyasoot, the Director-General of the Fiscal Policy Office (FPO) announced Thailand’s economic projection as of June 2011 that Thai Economy is likely to expand moderately at the annualized rate of 4.0-5.0% in 2011, remaining broadly unchanged compared with March 2011 projection. Strong domestic and external demands — in particular from private consumption which continues to grow following higher income and low unemployment rate— are expected to be the main factors driving Thai economy this year. Despite negative impacts from earthquake and Tsunami on Japan economy, Thai exports of goods and services in terms of US dollar are still increasing, resulting from strong Asian Economies, and are expected to contribute to the growth of the Thai economy in 2011 as well. Meanwhile, the internal stability remains robust, with persisting of downside risks associated with inflation pressure. The headline inflation is expected to increase to 3.8% in 2011 due to the rising commodity and oil prices. Labor market is likely to be tighten, with anticipated unemployment reaching 0.9% of the labor force.
Mr. Boonchai Charassangsomboon, Director of Bureau of Macroeconomic Policy added that exports of goods and services in terms of US dollar are anticipated to expand by 9.0% (with the range of 8.0% - 10.0%) in 2011, with the expectation of Japan economic recovery in the second half of 2011 from the natural disasters in March 2011. Domestic expenditure is set to continue its strong rebound. Private consumption will maintain momentum to further expand with expected growth of 4.3% (with the range of 3.8% - 4.8%), due mainly to high employment as well as rising farm income through drifting up of the prices of major commodity products. It is also predicted that private investment is likely to grow by 9.6% (with the range of 8.6% - 10.6%), resulting from the recovery of the disrupted supply chain, especially in the automotive industry. Fiscal outlays, however, are expected to expand by a mere 3.6% (with the range of 2.6% - 4.6%).
Reflecting economic stabilities, headline inflation is forecasted to gradually climb to 3.8% in 2011 (with the range of 3.3% - 4.8%). With regarding to external stability, Thai economy is projected to record a smaller current account surplus of 3.4% of GDP (with the range of 3.1% - 3.8%)
Major Assumptions and Economic Projections 2011 (As of June 2011)
2010 2011f (As of June 2011)
Average Range
Major Assumptions
Exogenous Variables
1) Average Economic Growth Rate of Major Trading
Partners(percent y-o-y) 4.8 3.3 3.1 — 3.6
2) Dubai Crude Oil Price (U.S. Dollars per Barrel) 78.2 101.0 96.0 — 106.0
3) Export price in U.S. Dollars (percent y-o-y) 9.1 7.0 6.0 — 8.0
4) Import price in U.S. Dollars (percent y-o-y) 8.1 10.0 9.0 — 11.0
Policy Variables
5) Exchange Rate (Baht per U.S. Dollars) 31.7 30.5 29.5 — 31.5
6) Repurchase Rate (Policy Rate) at year-end (percent y-o-y) 2.00 3.50 2.25 — 3.75
7) Fiscal-Year Pubic Expenditure (Trillion Baht) 2.52 2.79 2.78 — 2.80
Projections
1) Economic Growth Rate (percent y-o-y) 7.8 4.5 4.0 — 5.0
2) Real Consumption Growth (percent y-o-y) 5.1 4.1 3.6 — 4.6
- Real Private Consumption 4.8 4.3 3.8 — 4.8
- Real Public Consumption 6.4 3.0 2.5 — 3.5
3) Real Investment Growth (percent y-o-y) 9.4 7.4 6.9 — 7.9
- Real Private Investment 13.8 9.6 8.6 — 10.6
- Real Public Investment -2.2 3.6 2.6 — 4.6
4) Export Volume of Goods and Services (percent y-o-y) 14.7 9.0 8.0 — 10.0
5) Import Volume of Goods and Services (percent y-o-y) 21.5 10.1 9.1 — 11.1
6) Trade Balance (billion U.S. dollar) 14.0 10.8 9.8 — 11.8
- Export Value of Goods in U.S. dollar (percent y-o-y) 28.5 17.6 16.6 — 18.6
- Import Value of Goods in U.S. dollar (percent y-o-y) 36.8 20.8 19.8 — 21.8
7) Current Account (billion U.S. dollar) 14.8 12.3 10.7 — 13.2
- Percentage of GDP 4.6 3.4 3.1 — 3.8
8) Headline Inflation (percent y-o-y) 3.3 3.8 3.3 — 4.8
Core Inflation (percent y-o-y) 0.9 2.5 2.0 — 3.0
9) Unemployment Rate (percentage of total labor force) 1.0 0.9 2.0 — 3.0
f = forecast by Fiscal Policy Office, Ministry of Finance, Thailand
Attachment: Thailand’s Economic Projections 2011
1. Economic Growth
GDP is expected to grow at the annualized rate of 4.5% (with the range of 4.0 - 5.0%),
unchanged from previous projection. The contribution to growth is mainly from the strong domestic
and external demands. Private consumption is expected to rise steadily at the rate of 4.3% (with the
range of 3.8 - 4.8%), resulting from low unemployment rate as well as rising farm income. Tourism
sector is expected to grow robustly after recovering from the political turmoil last year. Private
investment, driven by near-full level of capital utilization rate in many industries especially in
export-concentrated sector, is forecasted to grow by 9.6% in 2011. As global recovery continues,
the external demand is expected to grow moderately, with downside risks from the US economy’s fragile
recovery, European sovereign debt crisis, and Japan’s pace of recovery from natural disaster. Despite
some broaden negative impacts, Asian economies continue growing robustly and Japan’s Tsunami disaster
is expected to be solved shortly. As a result, Thai exports of goods and services in real term are
in a good shape, which continually expands at 9.0% (with the range of 8.0% - 11.0%). At the same
time, imports of goods and services in real term are set to grow steadily at roughly 10.1% (with the
range of 9.1% - 11.1%). Public consumption is projected to increase by 3.0% (with the range of
2.5% - 3.5%) in order to achieve the budget disbursement plan under budgetary expenditures in the
fiscal year 2011, while public investment is likely to grow at 3.6% (with the range of 2.6% — 4.6%)
as most infrastructure projects are scheduled to start this year.
2. Economic Stability
The internal economic stability is seen to remain resilient. Headline inflation in 2011 is
likely to rise to 3.8% (in the range of 3.3 — 4.8%), resulting from anticipated hiking in crude oil
and commodity prices as well as increasing minimum wages. Unemployment is expected to hold its current
low level of 0.9% of the total labor force (with the range of 0.8% - 1.0%), mainly as a result of the
momentum gained from the economic recovery. Despite the direct impacts of global crisis, external
stability is relatively well shielded. Current account remains strong in 2011, although it is
projected to record a smaller surplus of USD 12.3 billion, accounting for 3.4% of GDP (in the range
of 3.1% - 3.8% of GDP) due to the acceleration of import. Trade balance is estimated to reach USD
10.8 billion (with the range of USD 9.8 - 11.8 billion), partially explained by accelerated import
growth which further increases to 20.8% (with the range of 19.8 — 21.8%) due to a hike of import
price in the world market. However, export value is likely to grow by 17.6% (with the range of 16.6% —
18.6%) owing to stable export price, especially from commodity prices.
Bureau of Macroeconomic Policy, Fiscal Policy Office, Tel: 0-2273-9020
Source: www.fpo.go.th