Business groups voice new optimism on economy

Members of the Thai Chamber of Commerce are more optimistic that the economy will pick up steam during the second half of this year as higher farm and oil prices help boost growth. Meanwhile, the industrial confidence index rose slightly month on month on news the severe drought gripping rural areas has begun to ease with the onset of seasonal rains.

“We strongly believe that the economy will recover in the second half,” said Isara Vongkusolkit, chairman of the chamber.

The Thai Chamber of Commerce (TCC) forecasts the economy will grow by 3.3 percent in the second half from about 3.2 percent in the first half. Total growth for the year should be between 3.2 and 3.5 percent, according to the Chamber. Earlier this year, some analysts were skeptical as to whether or not the economy would achieve growth of 3 percent.

Another important factor in the Chamber’s forecast is that construction has finally started on some projects that are part of the government’s massive infrastructure upgrade. With the long-awaited release of funds for building rail lines and roads, the injection of investment should serve to further stimulate growth.

Commodities prices, especially for rice, have been rising after several years of steady declines, and that should directly benefit farmers and rural communities, as well as related industries and the economy as a whole. Isara estimated that every 1,000 baht or $28 increase in the price for one ton of rice would produce an additional $850 million for the economy, while every 28 cents rise in the price of rubber would reel in an additional $1.1 billion.

“We estimate about [$2.8 billion] will be generated once higher prices of other farm products are included. This will be another key factor to boost the economic recovery in the second half,’’ Isara said.

Reduced concern over the drought helped boost the Thai Industries Sentiment Index last month. It rose to 86.4 points from 85 in April, Federation of Thailand Industries Chairman Chen Namchaisiri said. Another confidence raiser was that businesses saw that the state’s industrial-sector promotion policy was bearing fruit, he said.

Thailand’s fiscal position also drew praise from financial news agency Bloomberg News. “Without much fanfare, Thailand has run up the biggest current-account surplus among major emerging markets,’’ the agency wrote. “The current-account surplus in the first quarter ballooned to an annualized 10.2 percent of gross domestic product, an improvement that Richard Iley, chief economist for Asia at BNP Paribas, describes as phenomenal.”

Thailand has used the surplus to increase its foreign-exchange reserves by about $20 billion this year. That provides an excellent buffer against volatility or any unexpected capital outflows.  Bloomberg reported that the increase in reserves has been the fastest of any other emerging market, according to BNP.