Thai bank forecasts 0.5 percent extra growth on stimulus.

4_39d9e8bExpected government spending of $1.6 billion on infrastructure and other programs over the next few months should produce an additional half a percentage point of gross domestic product growth, Kasikorn Bank said last week, as the International Monetary Fund (IMF) noted that the Thai economy was continuing to recover but growth would be muted by drought and China’s weakening demand for imports.

Charl Kengchon, head of the Kasikorn Bank Research Center, said the disbursement from the government budget would have a significant impact on growth if more than 70 percent of it, or $1.1 billion, is actually released and invested. A number of factors, including the need for environmental impact assessments and drawn out negotiations with some private-sector partners, have slowed the pace of actual spending on infrastructure, a key economic stimulus measure the government has been counting on to accelerate the economy.

The Cabinet is also expected to approve measures to boost Songkran spending, and Tim Leelahaphan, Thailand economist of Maybank Kim Eng Securities, said that the Songkran measures would help boost consumption and drive domestic tourism. Songkran is the Thai Buddhist New Year and falls in mid-April.

The IMF released a report last week that projects real gross domestic product (GDP) growth for Thailand of 3 percent in 2016 and 3.2 percent in 2017. That represents solid but not exceptionally strong growth for a leading economy in Southeast Asia, but is in line with figures for Malaysia and Singapore. It signifies a steady recovery, coming after a period of low growth resulting from political conflicts. The release of the IMF report follows a visit to Thailand by an IMF team from March 3 to 18.

“A slight improvement in confidence and low energy prices foreshadow a pickup in private consumption. Public investment would remain a key driver, rising over the next few years and crowding in private investment. Headline inflation is projected to turn positive in 2016,” the IMF report read.

Headline inflation fell 0.9 percent in 2015, mainly on falling energy prices, and the current account surplus rose to 8.8 percent of GDP on a significant improvement in trade, healthy tourism and import compression. The report also noted that Thailand’s financial markets performed relatively well despite several episodes of global volatility.

“Against the lackluster outlook and downside risks, Thailand’s strong fundamentals provide room for maneuver to lift economic prospects in both the near and the long run,” the IMF team wrote.