Thailand aiming for 5 percent growth as political risk falls

Thailand’s Ministry of Finance said last week it believes the economy could grow by 5 percent this year if several conditions remain optimal, including strong government spending, as Moody’s Investor Service said Thailand’s political risk has declined while holding its rating for the Kingdom steady at Baa1.

Moody’s Investor Service said last week “political risks had eased” over the past couple of years. It characterized political risk in Thailand as moderate, while praising the government’s fiscal strength as very high, and its economic and institutional strengths as high.

Thailand has a low external vulnerability, Moody’s said in maintaining its rating on the Government of Thailand’s sovereign debt at “Baa1 stable” in its midyear update.

The Thai economy expanded by 4.8 percent during the first quarter of 2018, the fastest quarterly rate in five years, but most analysts have forecast growth for this year at roughly 4.5 percent. However, Ministry of Finance Spokesperson Kulaya Tantitemit said last week that officials believe 5 percent is possible, but it would require results in several areas that exceed current expectations.

Those include the government actually spending money it has budgeted, the baht (Thailand’s currency) remaining in a slightly weaker range, tourist arrivals coming in above the national target, and the global economy growing at a slightly higher rate than what most analysts have forecast.

The Finance Ministry’s Fiscal Policy Office (FPO) has predicted that the Thai economy will grow by 4.5 percent this year. Kulaya said, however, that the FPO figure was arrived at before the government approved a $4.9 billion stimulus package. Those funds, however, need to be spent, along with 61 percent of the overall government budget to produce higher growth, the spokesperson said.

Another factor required to reach 5 percent would be for the baht to maintain an average value weaker than 32.25 to the United States dollar. The baht was trading at slightly above 33 to the dollar last week. A weaker baht helps the competitive edge of some Thai exports, and exports account for about 70 percent of Thailand’s gross domestic product.

Tourism is also an essential contributor to the Thai economy, and the government is expecting 39.5 million tourist arrivals this year. Achieving 40 million visitors is another element that would help propel growth to 5 percent, according to the Ministry of Finance.

The one factor entirely beyond the government’s control, however, is the global economy. Kulaya said that global growth of 4.28 percent, significantly higher than the prevalent forecasts of about 4 percent, is also necessary to boost Thailand’s growth to 5 percent.