Bangkok--28 Dec--MOF
Thailand’s Economic Projection for 2010 and 2011
The Ministry of Finance made an upward revision on Thailand’s Economic Projections growth for 2010 could be as high as to 7 5.85 percent per year,from the previous forecast of 4.5 percent per yearand a continual growth would follow in 2011
Mr. Satit RungkasiriNaris Chaiyasoot, the Director-General of the Fiscal Policy Office (FPO) announced the Thailand’s economic projections as of June Decermber 2010 that the Thai Economy in 2010 is expected to better expand better at 75.85 percent per year or (or within the range of 5.0 — 6.0 percent per year), a big improvement from last year’s contraction of -2.3 percent, and higher than the previously forecasted rate as of September 2010 as of March 2010 atof 47.5 percent per year. This reflects an outstanding performance of Thai economy in 2010. The positive factors are attributed to the high export in terms of US dollars following the economic economic growth of 12.0 percent per year during the first quarter of the year coupled with the faster-than-expected recovery of the global economy,major trading partners, combined with the revival in private domestic consumption and investment.especially those in the Asian region, which Such revival is supported by increasing farm income from rising prices of major crops, as well as an expansion in production capacity in response to higher export-based economic activities. caused a projection of higher export growth. Domestic spending, both private consumption and investment, also has a tendency to revive from the low base of last year.For internal economic stability, headline inflation is projected to stand close to the previous projection at 3.3 percent(or in, while core inflation is expected to mark 0.9 percent. On the external front, Thailand is still resilient, with a projection of a current account surplus of 4.4 percent of GDP in 2010or in. The smaller surplus than last year owes to the recovery of private consumption and investment that causes higher import value growth of 37.5 percent, compared to 28.3 percent growth of export value.
On the other handGoing forward, the Thai economy in 2011 is projected to continually grow at the rate of 4.5 percent (or or withinin the range of 4.0 — 5.0 percent). The enginemain driver contributed to this growth comes fromis domestic spending, both private consumption and private investment, which are projected to continue to grow from 2010. External demand, on the other hand, is expected to soften, as the risk from the fragile economic recovery of the major trading partners is still prominent. This could, in turn, hamper Thai export. On the internal stability, headline inflation in 2011 is projected to stand at 3.5 percent (or or withinin the range of 3.0 — 4.0 percent), with the pressure from rising oil and domestic agricultural prices. On the external front, Thailand is projected to record a current account surplus of 3.6 percent of GDP (or or withinin the range of 3.1 — 4.1 percent of GDP), as export value is expected to grow 13.2 percent (or within the range of 12.2 — 14.2 percent), while import value is expected to mark a 14.6 percent growth (or within the range of 13.6 — 15.6 percent). Mr. Ekniti Nitithanprapas, the Director of Macroeconomic Policy Bureau and the Spokesperson of the Ministry of Finance, added that the export volume of goods and services in 2010 is forecasted to grow at a high rate of 11.9 percent per year, as the economies of Thailand’s major trading partners recover faster than expected. BesidesMoreover, domestic spending has an inclination towards a recovery from the low base last year. Despite the impact from the recent political predicament, private consumption is expected to grow at 3.6 percent per year, from the contraction of -1.1 percent per year in 2009. This improvement is due to the better employment situation, and higher farm income following higher agricultural price and the Government’s Farm Income Guarantee Measure. Meanwhile, private investment is expected to grow at 10.2 percent per year, from the last year’s contraction of -12.8 percent per year, supported by . Hhigher purchase orders that increasein the time concurrently with highof high capital utilization rate is among the supporting factors. Public spending still has an important role inof supporting the unceasingThai economic growth, with an acceleration of budget disbursement during the rest of the year, especially on public investment under the “Stronger Thailand 2012” project. Public investment and consumption in 2010 are thus forecasted to grow at 5.1 and 6.5 percent per year respectively.
For internal economic stability, headline inflation is projected to rise to 3.5 percent per year (or within the range of 3.0 - 4.0 percent per year) given higher oil price in the global market. Nonetheless, the extension of the Government’s measures to alleviate cost of living would help easing the inflation from the previous projection. On the external front, Thailand is projected to record a smaller current account surplus of 2.7 percent of GDP in 2010, as import growth is projected to expedite from the low base last year to the rate of 36.6 percent per year, compared to the growth rate of 22.5 percent per year of export value.
The Director-General of FPO concluded that in spite of the bright prospect of full recovery, the Thai economy still faces risks from public debt crisis in Europe that could dampen down the global economic recovery. This could play a significant role to Thailand, given the high export dependencet nature of Thailand. On the domestic side, political uncertainty and drought could hinder the revival of private spending. As a result, it is still necessary for the public sector to revive and strengthen domestic spending to mitigate external risks, and to create the balance of the engine for economic growth from both domestic and external forces.
Attachment: Thailand’s Economic Projections for 2010 and 2011
1. Thailand’s Economic Projections for 2010
1.1 Economic Growth
The Thai economy in 2010 is forecasted to grow better at 75.85 percent, per year (or within the range of 5.0 — 6.0 percent per year), an improvement from March September 2010 projection of 4.5 percent per year. The main positive factors attributing to this growth is from the stellar recovery of the Thai economy during the first quarter of 2010 at 12.0 percent per yearexport volume of goods and services projected to grow at 15.1 percent, combinedfollowing with the faster-than-expectedsteady economic recovery of major trading partners in Asia and new market economies in particular, especially those in Asia. Private sector also has a tendency to domestically spend more than last year, which would act as a main driver for Thai economy. Private consumption is expected to grow at 4.8 percent, owing to the better employment situation, higher farm income, and rising consumer confidence following the resolution of the political turmoil. This leads to the rebound of growth of export volume of goods and services being projected at 11.9 percent per year (or within the range of 11.4 — 12.4 percent per year). Domestic spending, in addition, has a tendency of recoverycontinues to recover. Private investment growth, in addition, in particular is projected to grow rebound at a positive high rate of 10.215.1 percent per year, (or within the range of 11.4 — 12.4 percent per year), supported byconsistent with the high and near-full level of capital utilization rate higher purchase orders in many industries. The good prospect of consumption and export growths also calls for additional business investment to meet growing domestic and external demands. the time of high capital utilization ratewith the supporting factors of the accelerated capital utilization rate following increasing orders from home and abroad, especially in export-oriented industry such as motor vehicles, electronic parts, and electrical appliances. The construction sector also starts to show the sign of improvement, as shown by higher sales of construction materials such as cement, iron, and steel. Private consumption, that weakenedon the other hand, is expected to better expand, owing to the better employment situation, higher farm income following higher global agricultural prices, and Farm Income Guarantee Program. Furthermore, public spending still plays an important role in supporting the Thai economy to unceasingly grow’s continual growth. To be more specific More specifically, public consumption is expected to expand 5.3 percent as a result of the acceleration of budget disbursement to meet the set target. However, public capital expenditure is expected to soften due to delays in SOE’s budget disbursement. Public capital expenditure is thus forecasted to show a weaker growth of 0.5 percent. Lastly, under the “Stronger Thailand 2012” project would help public investment grow at the increasing rate of 5.1 percent per year (or within the range of 4.1 — 6.1 percent per year). The acceleration of budget disbursement during the rest of the year would help catalyzing public consumption to grow at 6.5 percent per year (or within the range of 5.9-7.1 percent per year). Iimport volume of goods and services has a tendency to grow at a high rate of 22.1 percent, following an expansion of domestic demand and more manufacturing of export goods. is expected to expedite its growth rate to 21.1 percent per year (or within the range of 20.0 — 22.2 percent per year) with the recovery of domestic spending and more manufacturing of export goods.
1.2 Economic Stability
Internal economic stability is expected to remain resilient, with headline inflation in 2010 expected to rise to 3.3 percent. This is due to the pressure from higher oil price in the global market along with higher agriculture price due to climate change. Core inflation that excludes food and energy prices is projected to rise to 0.9 percent. Unemployment rate is expected to improve atto 1.1 percent of total labor force as employment easesexpands with the economic recovery. As for external stability, current account in 2010 is projected to record a smaller surplus than last year of 8.3 billion US Dollar13.514.0 billion US dDollars, , or approximately 2.7 percent of G12.614.2billion US Dollars due mainly to the higher growth of import value relative to export value. Import value is forecasted to ggrow at 37.55 percent 45.9from the fast domestic spending and import price in the global market, while export value is projected to expand at 22.525.028.3 percent24.853 due to the revival of export volume following the economic recovery of trading partners.
e and major and higher export price.
2. 2. Thailand’s Economic Projection for 2011
2.1 Economic Growth
Economic Stability
Thai economy in 2011 is forecasted to continue to grow at the normal rate of 4.5 percent per year (or within the range of 4.0 — 5.0 percent per year). The main driver contributed tobehind this growth is private domestic spending, both consumption and investment, which areis projected to continue to grow from 2010. Private consumption is forecasted to grow at 4.92 percent per year (or within the range of 3.74.4 — 4.75.4 percent per year) as employment and income still remain promising. Specifically, farm income is expected to increase with the rise in agricultural price, while private-sector employees’ minimum wage and government officials’ pay are being raised, along with tourism income forecasted to revive after the political situation reverts to normal. consumer confidence would pick up following an ease in political tension. Private investment, on the other hand, is projected to grow at 5.911.3 percent per year (or within the range of 4.910.3 — 6.912.3 percent per year), with improving investor confidence combined with higher capital utilization especially in export-oriented industry that has stood high since 2010. On the external side, external demand is expected to soften, due to the risk from the fragile and delayed economic recovery of the major trading partners that could hamper Thailand’s export sector. Furthermore, the momentum from the persistent global economic growth would also help supporting the growth of eExport volume of goods and services is thus projected to grow slower at at the projected rate of 65.4 percent per year (or within the range of 4.95.4 — 5.97.4 percent per year), while). This high rate is however lower than in 2010 due to high base. I import volume of goods and services is also expected to grow slower at 8.38.1 percent per year (or within the range of 7.37.1 — 9.13 percent per year). On the public spending sidein 2011, public consumption is forecasted to grow at 36.4 percent per year (or within the range of 7.32.9 — 3.9 percent9.3), follows the constantwith the steady budget disbursement in 2011. Public capital expenditure growth, on the other hand, is projected to slow downgrow faster toat 4.2 1.7 percent per year (or within the range of 0.73.2 — 2.75.2 percent per year). as the role of government in supporting the economy begins to subside in the time when private sector is fully functioning in driving the economy forward.
2.2 Economic Stability
Internal economic stability is expected to improve, with headline inflation in 2010 rises to 3.5 percent per year (or within the range of 3.0 — 4.0 percent per year). This is due to global oil and agriculture prices which are expected to rise following the global economic recovery. Unemployment rate is expected to revert to the normal rate of 1.2 percent of total labor force (or within the range of 1.1 — 1.3 percent of total labor force). As for external stability, current account in 2010 is projected to record a smaller surplus of 8.3 billion US Dollar, or approximately 2.7 percent of GDP (or within the range of 2.2 — 3.2 percent of GDP), due mainly to the higher growth of import value relative to export value. Import value is forecasted to grow at 36.6 percent per year (or within the range of 35.0 — 38.2 percent per year) from the fast domestic spending and import price in the global market. Meanwhile, export value is projected to expand at 22.5 percent per year (or within the range of 21.5 — 23.5 percent per year, due to the revival of export volume and major and higher export price.
On the internal stability, headline inflation in 2011 is projected to stand at 3.5 percent per year (or within the range of 3.0 — 4.0 percent per year), given oil price is still expected to remain steadily high, and minimum wage is being raised. Both factors put more inflationary pressure on the economy through cost of factor inputs. Unemployment is forecasted to stand at the normal rate of 1.21 percent of total labor force (or within the range of 1.01 — 1.23 percent of total labor force). On the external front,, in 2011 Thailand is projected to record a slightly smaller current account surplus of 11.913.1 billion US dDollars, equivalent to 3.64 percent of GDP (or within the range of 2.93.1 — 3.94.1 percent of GDP), as trade surplus is expected to drop fall to 11.79.4 billion US dDollars (or within the range of 10.78.4 — 10.412.7 billion US dDollars). This is due to import growth which is expected to outweigh export growth. More specifically, import value of goods is expected to grow at 13.214.6 percent per year (or within the range of 11.713.6 — 14.75.6 percent per year), while export value of goods is forecasted to grow at 12.013.2 percent per year (or within the range of 11.012.2 — 13.04.2 percent per year).
In conclusion, the Thai economy in 2010 has a tendency for a better recovery, with the positive factors coming from the stellar growth during the first quarter of 2010 in tandem with the better-than-expected economic recovery of major trading partners that would help facilitate export. In addition, the acceleration of capital utilization rate, the improving construction sector, the better employment situation, along with higher farm income; all of these would enrich domestic spending. Nevertheless, major risk factor that comes into play is from the European public debt crisis that might obstruct the global economic recovery, which would in turn trouble the export-oriented Thai economy. Also, the domestic political situation coupled with the drought might slow down the recovery in private sector. Public sector therefore needs to accelerate the budget disbursement and “Stronger Thailand 2012” project to reach their respective goals while private sector is not yet fully recovered.
Bureau of Macroeconomic Policy, Fiscal Policy Office, Tel: 0-2273-9020