Industry leaders raise forecasts for Thai economic growth

Bankers and builders are seeing eye-to-eye on the positive prospects for the Thai economy as a group of major industrialists and a leading commercial bank raised their forecasts for the Kingdom’s economic growth last week following news that factory output rose nearly 5 percent and the finance minister told state banks to hold interest rates steady.

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) lifted its prediction for economic growth this year to a range of 4 to 4.5 percent on expectations that exports will expand between 5 to 8 percent and that tourism revenues will remain strong, said Chen Namchaisiri, the chairman of the influential group. The JSCCIB is composed of high-level executives from the Board of Trade, the Federation of Thai Industries and the Thai Banker’s Association.

Matching the Committee’s raise in forecast, the Economic Intelligence Center of Siam Commercial Bank, one of the big four commercial banks in Thailand, also increased its range for anticipated gross domestic product (GDP) growth to between 4 and 4.5 percent for the year. The bank also cited export growth of 5 percent and strong performance by the tourism sector as factors in its rosier outlook.

The Thai National Shippers’ Council is maintaining its target for export growth at no less than 6 percent for this year. Exports grew by 10.3 percent year-on-year during the first two months of 2018.

The bank’s report said that “Sustained growth in exports has led to an increase in capacity utilization, lending support to private investment going forward.” Reflecting the bank’s findings, the Ministry of Industry announced last week that industrial output rose by 4.7 percent year-on-year in February, a stronger showing than expected, on higher production of cars, petroleum, hard drives and plastic pellets.

Both the JSCCIB and the bank cautioned, however, that if trade conflicts between the United States and China escalate then Thailand might suffer some of the fallout and that could affect economic growth. Another possible setback would be if the baht, Thailand’s currency, becomes too strong, as that would make some exports less competitive.

Thailand’s economy grew by 3.9 percent in 2017 after expanding 3.3 percent in 2016, a significant improvement in a single year and the fastest pace in five years.

Despite accelerating growth and the strong baht, inflation remained low and so Minister of Finance Apisak Tantivorawong instructed state-run banks to keep interest rates at their current level throughout the year, even though he believes the central bank will raise the policy rate by a quarter of a point, in order to broaden economic growth.