The Thai economy in 2012 is likely to grow within a range of 5.2 - 6.2 percent, returns to its potential after the flooding crisis has improved.
Dr. Somchai Sajjapongse, the Director-General of the Fiscal Policy Office (FPO) announced Thailand’s economic projection as of June 2012 for the Thai economy is likely to grow at the rate of 5.7 percent (within a range of 5.2-6.2 percent), higher than the previous projection in March earlier this year. The recovery of the production in response to the continuously increasing domestic and external demand at the beginning of this year is expected to be the main driver for consumption spending, private investment and exports to speedily re-establish their normal conditions. Moreover, the strong recovery of the production sector is also the main supporting factor on restoring the confidence of both domestic and foreign investors. The increase in the consumer demands for the new purchase to refurnish the damages, the higher investment demands for the re-investment on the machines and mechanical tools in the manufacturing sector, and the stimulus measures e.g. the higher minimum wage policy for low-income workers and government officials, first-time car buyer program, first-time house buyer program, the reduction of the corporate income taxes, and the rice mortgage scheme are proved to be supportive for the economic recovering from the serious flood last year. Public consumption and public investment still play the important role on boosting the economic recovery, especially from the 350-billion- baht long-term water management investment scheme to be gradually invested from mid-2012 onward. Nonetheless, the external demand is anticipated to grow at a decreasing rate due to the risks from the global economic slowdown, especially from the European sovereign debt crisis.
For internal stability, headline inflation in 2012 is anticipated to be at 3.5 percent (or within a range of 3.0 - 4.0 per cent), which is lower than that of the previous year. This results from declining growth of oil price following the fragile global recovery. The estimated current account deficit of 0.4 per cent of GDP (within the range of 0.4-1.4 per cent of GDP) from the smaller surplus of trade balance becomes a pressuring factor for external stability. This is signified from the accelerated import growth of 22.3 per cent due to a recovery in domestic demand and the total export value is likely to grow only by 12.8 per cent.
Major Assumptions and Economic Projections of 2012 (As of Jun 2012)
2012f (As of Jun 12) 2011 Average Range Major Assumptions Exogenous Variables 1) Average Economic Growth Rate of Major Trading Partners(% y-o-y) 4.0 3.7 3.2 — 4.2 2) Dubai Crude Oil Price (USD per Barrel) 105.6 113.0 108.0 — 118.0 3) Export price in USD Dollars (% y-o-y) 5.6 3.8 3.3 — 4.3 4) Import price in USD Dollars (% y-o-y) 10.1 4.3 3.8 — 4.8 Policy Variables 5) Exchange Rate (Baht per USD Dollars) 30.5 31.25 30.25 — 32.25 6) Repurchase Rate (Policy Rate) at year-end (% y-o-y) 3.25 3.00 2.50 — 3.50 7) Fiscal-Year Pubic Expenditure (Trillion Baht) 2.77 2.95 2.95 — 2.96 Projections 1) Economic Growth Rate (% y-o-y) 0.1 5.7 5.2 — 6.2 2) Real Consumption Growth (% y-o-y) 1.3 5.1 4.6 - 5.6 - Real Private Consumption 1.3 5.2 4.7 - 5.7 - Real Public Consumption 1.4 4.5 4.0 - 5.0 3) Real Investment Growth (% y-o-y) 3.3 12.7 11.7 - 13.7 - Real Private Investment 7.2 13.5 12.5 - 14.5 - Real Public Investment -8.7 9.7 8.7 - 10.7 4) Export Volume of Goods and Services (% y-o-y) 9.5 8.0 7.0 - 9.0 5) Import Volume of Goods and Services (% y-o-y) 13.6 13.4 12.4 - 14.4 6) Trade Balance (USD billion) 23.5 7.4 6.4 - 8.4 - Export Value of Goods in USD Dollar (% y-o-y) 16.4 12.8 11.8 - 13.8 - Import Value of Goods in USD dollar (% y-o-y) 24.7 22.3 21.3 - 23.3 7) Current Account (USD billion) 12.3 -1.3 (-0.4) - (-3.3) - Percentage of GDP 3.4 -0.4 (-0.1) — (-0.9) 8) Headline Inflation (% y-o-y) 3.8 3.5 3.0 — 4.0 Core Inflation (% y-o-y) 2.4 2.3 1.8 — 2.8 9) Unemployment Rate (% of total labor force) 0.7 0.6 0.5 - 0.7 f = forecast by Fiscal Policy Office, Ministry of Finance, Thailand Attachment: Thailand’s Economic Projections 2012 1. Economic Growth The Thai economy in 2012 is projected to grow at the annual rate of 5.7 per cent (or within a range of 5.2 — 6.2 per cent), higher than the previous projection on March 2012, and return to the normal condition compared to its growth of 0.1 per cent in 2011 after the effect from the flood gradually subsides. Manufacturing sector resumes its production in response to the continuously increasing domestic and external demand. It is expected that this is the main driver for consumption spending, private investment and export to speedily reestablish their normal conditions. Private consumption is projected to grow at 5.2 per cent (or within a range of 4.7 - 5.7 per cent) with the main supporting factor on restoring the confidence of domestic and foreign investors upon the economic recovering of the production sectors, especially from the production for the domestic market e.g. the food and beverages industries. The increase in the consumer demands on the new purchase to refurnish the damages, and the stimulus measures e.g. the higher minimum wage policy for low-income workers and government officials, first-time buyer car program, first-time buyer house program, the reduction of the corporate income taxes, and the rice mortgage scheme are proved to be supportive for the economic recovering from the serious flood last year. The higher investment demands, of which is expected to be 13.5 per cent (or within a range of 12.5-14.5 per cent), come mainly from the re-investment and the repair for the machines and mechanical tools in the manufacturing sector suffered from the flood. Many factories resume their productions and speedily response the purchasing orders, including the level of inventories to be at the normal track of before the flood. Public consumption and public investment still play the important role on boosting the economic recovery. It is expected that the public consumption is expanding at the rate of 4.5 per cent (or within a range of 4.0-5.0 per cent) and the public investment grows at the rate of 9.7 per cent (or within a range of 8.7-10.7 per cent) according to the short term investment measures e.g. increasing salary rate for government officials and especially from the 350-billion- baht long-term water management investment scheme to be gradually invested after mid 2012. Nonetheless, the export demand is anticipated to grow at a decreasing rate of 8.0 per cent (or within a range of 7.0-9.0 per cent) due to the risks from the global economic slowdown and the European sovereign debt crisis that expands to the real and financial sector of the EU member countries. Import volume of goods and services is expected to grow faster than the export at the rate of 13.4 per cent (or within a range of 12.4-14.4 per cent) due to the demand for raw materials from the foreign market as substitution for the damaged domestic source, of which the production sectors could only partially supply the domestic demand. 2. Economic Stability For internal stability, headline inflation in 2012 is likely to be at 3.5 per cent (or within a range of 3.0 — 4.0 per cent), lower than that of the previous year concerning the fragile global recovery which could lead to a slowdown in the rising of global oil demand and commodity prices. Unemployment is expected to stay at its current low level of 0.6 per cent (or within a range of 0.5 — 0.7 per cent of the total labor force). On external stability, the current account in 2012 is projected to record a deficit of USD 1.3 billion, accounting for 0.4 per cent of GDP (or within a range of 0.1 — 0.9 per cent of GDP) as the balance of services and money transfer are expected to be in deficit concerning freight expenses on the expected higher import resulting from the higher domestic demand. The trade surplus is expected to drop to USD 7.4 billion (or within a range of USD 6.4 - 8.4 billion), partially explained by accelerated import growth which is expected to increase to 22.3 per cent per year (or within a range of 21.3 - 23.3 per cent). However, export value is likely to grow by 12.8 per cent (or within a range of 11.8 — 13.8 per cent). Bureau of Macroeconomic Policy, Fiscal Policy Office, Tel: 0-2273-9020 Source: www.fpo.go.th