Economic outlook upbeat as manufacturing surges
Economists expressed optimism about Thailand’s prospects in 2018 with most predicting at least a 4 percent expansion this year as manufacturing production levels hit a record high, consumption was growing, startups were attracting funding, infrastructure projects have begun construction and investors were showing increasing interest in the Eastern Economic Corridor.
Confidence was most clear in the manufacturing sector, the most important contributor to economic growth. According to the Financial Times, at the end of 2017, production levels hit their highest point in the history of the Nikkei-Markit Thailand manufacturing survey. This was despite several months of contraction earlier in the year. “Bucking three months of contraction … output growth surged to a record high,” the paper reported.
The increase in manufacturing output supports the trends of consumption picking up steam and exports growing at a faster-than-expected pace. Along with investment, those are the three most important pillars of the Thai economy.
Government Savings Bank President Chatchai Payuhanaveechai expressed the most bullish view of the Thai economy for 2018, telling reporters that his bank’s forecast for gross domestic product growth (GDP) this year is 4.6 percent. That is significantly higher than most other analysts’ predictions. Nonetheless, most banks, economists and other institutions are expecting that the Thai economy will grow by at least 4 percent in 2018, barring external disruptions or unforeseen factors.
The Ministry of Finance, for example, believes the economy will grow by at least 4.1 percent this year, which it has described as a conservative estimate because it leaves out investment in the Eastern Economic Corridor (EEC), the three-province advanced development zone east of Bangkok. The ministry, in fact, regards the EEC as the key to sustaining and improving Thailand’s economic growth over the coming decade.
“The EEC will be Thailand’s new engine to drive growth,” said Apisak Tantivorawong, the minister of finance. “Without the EEC, our glory will not be seen regardless of what we do in the next 10 years.”
Weak investment, especially domestic investment, is what some economists have said is the reason Thailand’s growth rate remains in the neighborhood of 4 percent, as opposed to 5 percent or higher. That higher figure would put it on a par with more rapidly growing regional economies that are less developed than Thailand.
Otherwise, most drivers of the economy are performing at or above expectations.
Tourism, a mainstay of the economy for three decades, is doing extremely well. The Kingdom set yet another record for tourist arrivals in 2017, as it welcomed its 35th million visitor for the year during the last week of December. Tourism accounts for roughly 10 percent of GDP.
Montree Sornpaisarn, chief executive at Maybank Kim Eng Securities Thailand told the Bangkok Post that Thailand’s economic recovery will continue to gain strength in 2018, propelled by growth in exports, private investment, manufacturing production, and a continuous recovery in private consumption.
While those are traditional drivers of the Thai economy, some new drivers are also getting support. The National Startup Committee announced last week that three state agencies will invest over $23 million in 35 startups in early 2018. The government’s startup support program has a budget of over $185 million.