Thailand’s Economic Outlook Projection 2011 The Thai economy in 2011 is expected to expand moderately due to global economic concerns, and is expected to continue steadily in 2012
Mr. Naris Chaiyasoot, the Director-General of the Fiscal Policy Office (FPO) announced Thailand’s economic projection as of September 2011 for the Thai economy in 2011 to grow at an annualized rate of 4.0 percent (or within a range of 3.8-4.3 percent). The rate of growth is lower than that of the previous year, due to a slowdown in domestic demand, in particular in private consumption, which is attributed largely to the flooding situation in the northern, central and northeastern provinces of Thailand, coupled with pressure from inflation. Meanwhile the volume of exported goods and services in 2011 is expected to expand at a high rate driven by higher than expected growth in the first half of 2011. However, the US economic slowdown and the European sovereign debt crisis continue to create downside risks that may adversely affect the exports of goods and services. Meanwhile, private investment in 2011 is expected to grow steadily and support higher demand for goods for the remainder of the year buoyed by the recovery from Japan’s tsunami disaster in Q2/2011. Reflecting internal stability, headline inflation in 2011 is likely to rise to 3.8 percent per year (or within a range of 3.6 — 4.1 percent), due to higher costs of production especially in raw food costs which have been poor weather conditions and the increasing in world oil prices.
Looking forward, the Thai economy in 2012 is forecasted to continue steadily at an annualized rate of 4.5 percent (or within a range of 4.0 — 5.0 percent). Domestic and external demand will both continue to drive economic growth with high employment, coupled with government policies that stimulate domestic spending, in particular the new minimum wage policy for laborers and government officials. With regard to internal stability, headline inflation in 2012 is forecasted to gradually climb to 3.3 percent (or within a range of 2.8 — 3.8 percent) due to moderate global oil demand growth.
Major Assumptions and Economic Projections of 2011 and 2012 (As of Sep 2011)
2010 2011f 2012f (As of Sep 2011) (As of Sep 2011) Average Range Average Range Major Assumptions Exogenous Variables 1) Average Economic Growth Rate of Major Trading Partners(% y-o-y) 4.8 3.2 3.0 — 3.5 3.5 3.0 - 4.0 2) Dubai Crude Oil Price (USD per Barrel) 78.2 101.0 96.0 — 106.0 115.0 110.0 - 120.0 3) Export price in USD Dollars (% y-o-y) 9.1 7.0 6.5 — 7.5 7.5 6.5 - 8.5 4) Import price in USD Dollars (% y-o-y) 8.1 10.0 9.5 — 10.5 4.5 3.5 - 5.5 Policy Variables 5) Exchange Rate (Baht per USD Dollars) 31.7 30.5 30.3 — 30.8 30.0 29.0 - 31.0 6) Repurchase Rate (Policy Rate) at year-end (% y-o-y) 2.00 3.50 3.25 — 3.75 3.75 3.25 - 4.00 7) Fiscal-Year Pubic Expenditure (Trillion Baht) 2.52 2.81 2.80 — 2.82 2.95 2.93 - 2.96 Projections 1) Economic Growth Rate (% y-o-y) 7.8 4.0 3.8 — 4.3 4.5 4.0 - 5.0 2) Real Consumption Growth (% y-o-y) 5.1 3.7 3.2 — 4.2 4.2 3.7 — 4.7 - Real Private Consumption 4.8 3.9 3.4 — 4.4 4.4 3.9 — 4.9 - Real Public Consumption 6.4 2.7 2.2 — 3.2 2.8 2.3 — 3.3 3) Real Investment Growth (% y-o-y) 9.4 7.4 6.9 - 7.9 8.3 7.8 - 8.8 - Real Private Investment 13.8 11.3 10.8 - 11.8 10.9 9.9 - 11.9 - Real Public Investment -2.2 -1.4 (-1.9)-(-0.9) 5.5 4.5 - 6.5 4) Export Volume of Goods and Services (% y-o-y) 14.7 13.2 12.7 - 13.7 5.5 4.5 - 6.5 5) Import Volume of Goods and Services (% y-o-y) 21.5 15.0 14.5 - 15.5 10.3 9.3 - 11.3 6) Trade Balance (USD billion) 14.0 9.5 8.5 - 10.5 6.0 5.0 - 7.0 - Export Value of Goods in USD Dollar (% y-o-y) 28.5 22.3 21.8 - 22.8 13.7 12.7 - 14.7 - Import Value of Goods in USD dollar (% y-o-y) 36.8 26.6 26.1 - 27.1 15.8 14.8 - 16.8 7) Current Account (USD billion) 14.8 13.5 12.1 - 13.9 9.0 6.9 - 10.9 - Percentage of GDP 4.6 3.7 3.5 - 4.0 2.2 1.7 - 2.7 8) Headline Inflation (% y-o-y) 3.3 3.8 3.6 - 4.1 3.3 2.8 - 3.8 Core Inflation (% y-o-y) 0.9 2.5 2.3 - 2.8 2.3 1.8 - 2.8 9) Unemployment Rate (% of total labor force) 1.0 0.7 0.6 - 0.8 0.7 0.6 - 0.8 f = forecast by Fiscal Policy Office, Ministry of Finance, Thailand Attachment: Thailand’s Economic Projections 2011 and 2012 1. Thailand’s Economic Projections for 2011 1.1. Economic Growth The Thai economy in 2011 is forecasted to grow at an annualized rate of 4.0 percent (or within a range of 3.8 — 4.3 percent), lower than the rate from the previous year due to a slowdown in domestic demand. Private consumption is projected to continually expand at 3.9 percent (or within a range of 3.8 - 4.8 percent), lower than last year’s level. This is mainly due to the flooding situation in the northern, central and northeastern provinces of Thailand, coupled with inflationary pressure. Nevertheless, the unemployment rate and income level remain strong owing to an increase in farm income due to a gradual rise in the prices of major commodity products and stronger tourism income which are projected to support private consumption growth. Meanwhile the volume of exported goods and services in 2011 is estimated to expand at 13.2 percent (or within a range of 12.7 — 13.7 percent) driven by an increase in the exports of goods and services in the first half of 2011. Uncertainty of the continued US recovery along with European sovereign debt crisis creates a downside risk that may lower exports of goods and services in 2011. At the same time, imports of goods and services in real terms are set to grow at roughly 15.0 percent (or within a range of 14.5 —15.5 percent), lower than last year’s rate. Private investment in 2011 is likely to grow robustly at 11.3 percent (or within a range of 10.8-11.8 percent), as it grew at the increasing rate of 10.5 percent per year in the first half of 2011. Business sentiment remains strong and entrepreneurs are expected to expand their investments in response to the higher demand for goods. Public consumption is forecasted to increase by 2.7 percent (or within a range of 2.2 — 3.2 percent ), slower than last year’s rate, owing to the delay in the budget disbursement plan in fiscal year 2012 which will impact fiscal outlays in the fourth quarter. Meanwhile, public investment is projected to contract at -1.4 percent (or within a range of -1.9 to -0.9 percent) because of the slowdown in budgetary capital expenditure disbursement in the second quarter of 2011, in particular, lower local government spending in the first half of the year negative at -5.9 percent year on year. 1.2. Economic Stability For internal stability, headline inflation in 2011 is likely to rise to 3.8 percent (or within a range of 3.6 — 4.1 percent), as a result of higher costs of production, especially in raw food costs associated with adverse climate conditions and increase in world oil prices. Unemployment is expected to hold its current low level of 0.7 percent of the total labor force (or within a range of 0.6 —0.8 percent). For external stability, the current account is projected to record a smaller surplus of USD 13.5 billion, accounting for 3.7 percent of GDP (or within a range of 3.5 — 4.0 percent of GDP) as the estimated trade balance surplus declines to USD 9.5 billion (or within a range of USD 8.5-10.5 billion). This is partially explained by accelerated import growth of 26.6 percent (or within a range of 26.1-27.1 percent) due to an increase in import prices in world markets. However, the total export value is likely to grow by 22.3 percent (or within a range of 21.8 — 22.8 percent). 2. Thailand’s Economic Projections for 2012 1.1. Economic Growth The Thai economy in 2012 is forecasted to expand steadily at an annualized rate of 4.5 percent (or within a range of 4.0 — 5.0 percent) driven by both domestic and external demand. Private consumption is projected to grow at 4.4 percent (or within a range of 3.9 - 4.9 percent ), as a result of high employment coupled with government policies that stimulate domestic spending, such as the minimum wage policy for laborers and government officials. On the other hand, private investment is estimated to grow at 10.9 percent per year (or within a range of 9.9 - 11.9 percent per year), supported by domestic spending and external demand and increased private confidence. As the global recovery continues following Japan’s tsunami disaster, exports of goods and service are expected to continually expand at 5.5 percent (or within the range of 4.5 — 6.5 percent) though the magnitude is expected to be lower than in the previous year, with downside risks from developed economies. At the same time, imports of goods and service in real terms are set to grow at 10.3 percent (or within the range of 9.3 — 11.3 percent). With respect to public spending in 2012, public consumption is likely to grow at 2.8 percent (or within a range of 2.3 — 3.3 percent), with the continuation of the budgetary disbursement plan in 2012, while acceleration of public investment is projected to grow at 5.5 percent (or within a range of 4.5 — 6.5 percent). 1.2. Economic Stability For internal stability, headline inflation in 2012 is likely to rise to 3.3 percent (or within a range of 2.8 — 3.8 percent), lower than that of the previous year due to the fragile recovery of developed countries which could lead to a slump in global oil demand and commodity prices. The economic projection has taken into consideration the possibility that the government may extend some living-cost subsidization policies due to end in December 2011. Unemployment is expected to hold its current low level of 0.7 percent of the total labor force (or within a range of 0.6 — 0.8 percent). On external stability, the current account in 2012 is projected to record a smaller surplus of USD 9.0 billion, accounting for 2.2 percent of GDP (or within a range of 1.7 — 2.7 percent of GDP) as the estimated trade balance surplus drops to USD 6.0 billion (or within a range of USD 5.0-7.0 billion), partially explained by accelerated import growth which is expected to increase to 15.8 percent per year (or within a range of 14.8-16.7 percent). However, export value is likely to grow by 13.7 percent (or within a range of 12.7 — 14.7 percent). Bureau of Macroeconomic Policy, Fiscal Policy Office, Tel: 0-2273-9020 Source: www.fpo.go.th