Steady economic growth set for steady climb in 2016

Most local banks and think tanks expressed positive views on the Kingdom’s economic prospects for 2016 and are expecting the steady economic recovery will continue its gradual acceleration on increased government spending, rising consumption and healthy tourism revenues.

Figures released last week showed that the economy did a bit better than forecast in the final quarter of last year. Growth registered 2.8 percent in the last three months of 2015 compared to the same period one year earlier. That was somewhat better than the average forecast of 2.65 percent among 14 economists who had been surveyed by the Wall Street Journal, but also a slightly lower than the 2.9 percent growth in the third quarter of 2015.

Overall growth for the year in Southeast Asia’s second-largest economy came in at 2.8 percent, a substantial improvement over the 0.8 percent growth for 2014, and just edging ahead of the 2.75 percent predicted by the 14 economists.

The National Economic and Social Development Board (NESDB), a government think tank that advises on policy and formulates national development plans, attributed the improvement in growth to increased government spending, which primed the country’s economic pump.  Tourism also made a strong contribution, with the sector’s revenues rising by 22 percent and now accounting for 10 percent of GDP.

But a 5.7 percent contraction in exports, which account for 70 percent of GDP, weighed down what might have been a better performance. Several economists chalked up the falling figures to a weak world economy and low prices for farm goods. Others have cited declining competitiveness of some export products because of rising labor costs and lack of value added.

While the outlook for exports in 2016 is still murky, the NESDB and many other economists believe overall growth will still continue to improve in 2016 as the government begins disbursing funds for the first of its infrastructure projects and private investors partner on those projects. The NESDB is forecasting GDP growth of between 3 percent and 4 percent depending upon external factors.

“The government has prepared measures earlier to counter the global slowdown by trying to support local spending,” NESDB secretary-general Porametee Vimolsiri, said last week. “Money from existing government stimulus and budget spending should be enough to boost the economy to the median of our current forecast at 3.3 percent.”

Krystal Tan, a Singapore-based economist at Capital Economics, said that “fiscal spending should help prop up the economy in 2016.” But Pareena Phuangsiri, an economist at Kasikorn Bank, said the economy would face challenges because of a severe drought that is affecting farmers, and the possibility that exports may continue to stagnate.

Deputy Prime Minister Somkid Jatusripitak reiterated last week that the government is planning to reduce the country’s dependence on exports and boost domestic purchasing power.