2.Thai Economy Outlook in 2000
Economic recovery is expected to steadily continue in 2000 with an aconomic growth of 4.4 percent, higher than 4.1 percent growth in 1999. Factors contributing to further recovery in 2000 include export, private investment, and private consumption expenditures. Inflation rate is expected to be contained at about 2.0 percent.
(1) Overall economic stability continues in 2000 The inflation is predicted to be around 2 percent. With moderate economic recovery and excess capacity in the economic system, the pressure in inflation from cost and demand fronts will not be worrisome. The liquidity in money market will remain plentiful as in 1999, while demand for credit will increase slightly. Hence, the interest rates are expected to remain fairly the same as in 1999. The current account surplus and decreasing net capital outflows supported by the inflow of foreign direct investment will keep the international reserve at a relatively high level.
(2) Broad-based expansion in production As seenin 1999, growth will register in various production sectors ranging from agricultural, manufacturing to service sectors. The manufacturing industries will grow in line with and increasing domestic and external demand, and the accumulation of inventories. The consturction and financial sector are likely to contract for another year. However, the contraction will be much less severe compared to thoes in 1998 and 1999. The accelerating to those in 1998 and 1999. The accelerating of the debt restructuring scheme and the economic recovery will effectively help reduce non-performing loan in 2000.
(3) Private consumption expenditure is predicted to continuously increase in 2000 Thef factorscontributing to the increase include (1) the increase in export since the second quarter of 1999, (2) the delayed government expenditure under the economic stimulus package will be effectively injected into the economic system in 2000; and (3) the fiscal deficit of fiscal year 2000 will support job creation and private consumption spending. Private consumption is predicted to increase by 4.5 percent in 2000.
(4) Increasing private investment, particularly in machinery and equipment is forecasted to be seen in 2000 In 2000, businesses are expected to increase their investments, particularly in machinery and equipment, in order to improve the production process of the export-oriented industries. Increasing trend fo domestic and international competition will prompt investment demand in machinery and equipment to upgrade production competitiveness. In addition, the results of the government measures to restructure and increase productivity of real sector would be more effective and apparent in 2000. Moreover, the continuing exonomic expansion expected in the years to come will and another incentive for private investment demand. Apart from the foregoing factors, the measures approved by the Cabinet on August 10,1999 will also help stimulate private investment. To further promote exonomic recovery, support the economic restructuring process, and enhance the long-run competitiveness of the private sector, the Cabinet approved, on August 10, 1999, a set of measures to enxourage private investment. This new set of measures consists of 4 parts: (1) tax and tariff measures; (2) equity investment measures; (3) measures to premote the recovery of the real estate sector; and (4) measures to improve financing for small and medium enterprises (SMEs). In addition, the completion of the Financial Restructuring Autrority's sales of assets should allow various investment projects particularly in real estate and construction sectors to proceed from where they have left off. As result of these factors. private investment is predicted to register a growth rate of 9.0 perccent on 2000.
(5) Foreign trade Thai exports are expected to remain a driving force for economic growth in 2000, increasing be 6.5 percent on US$ value and 5 percent in volume, contributed by expected strong demand of major trading partmers. However, imports in US$ terms are forecasted to increas by 14.3 percent, reflecting the steady export performance and expanded investment activities, which together will stimulate the import of capital and raw material goods.
(6) Fiscal stance On the fiscal front, the government runs budget deficit in fiscal year 2000 to foster the continuing economic recovery before private sector could take the lead. The budget deficit of 110,000 million baht in FY 2000 together with additional gevernment expenditure under the economic stimulus package launched in 1999 will further stimulate domestic demand, and thereby economic growth.
(7) Financial situation Liquidity in the financial system will remain high 2000, while the demand for private credit should start to pick up in line with the recovering situation in production sector and private investment. The demand for credit is expected to expand by 3-4 percent, a slightly higher growth than in 1999. On the capital market front, it is expected that the government will issue a bluk of government bonds domestically to finance the budget deficit. In addition to the government bonds, the issuing the Treasury bills in money market will somewhat help absorb excess liquidity in the system and keep deposit rate form falling too much further. Therefore, it is not expected that the interest rates would gignificantly differ from those in 1999. New issues of private securities and debentures should grow in linbe with the improving economy and improving conditions in the stock market. The improving conditions of lthe stock market, as a result of the amendment of rules and regulations on securities trading, will encourage the stock market development.
--Development News Bulletin, National Economic and Social Development Board, Volume 15, No. 2 : February 2000--
Economic recovery is expected to steadily continue in 2000 with an aconomic growth of 4.4 percent, higher than 4.1 percent growth in 1999. Factors contributing to further recovery in 2000 include export, private investment, and private consumption expenditures. Inflation rate is expected to be contained at about 2.0 percent.
(1) Overall economic stability continues in 2000 The inflation is predicted to be around 2 percent. With moderate economic recovery and excess capacity in the economic system, the pressure in inflation from cost and demand fronts will not be worrisome. The liquidity in money market will remain plentiful as in 1999, while demand for credit will increase slightly. Hence, the interest rates are expected to remain fairly the same as in 1999. The current account surplus and decreasing net capital outflows supported by the inflow of foreign direct investment will keep the international reserve at a relatively high level.
(2) Broad-based expansion in production As seenin 1999, growth will register in various production sectors ranging from agricultural, manufacturing to service sectors. The manufacturing industries will grow in line with and increasing domestic and external demand, and the accumulation of inventories. The consturction and financial sector are likely to contract for another year. However, the contraction will be much less severe compared to thoes in 1998 and 1999. The accelerating to those in 1998 and 1999. The accelerating of the debt restructuring scheme and the economic recovery will effectively help reduce non-performing loan in 2000.
(3) Private consumption expenditure is predicted to continuously increase in 2000 Thef factorscontributing to the increase include (1) the increase in export since the second quarter of 1999, (2) the delayed government expenditure under the economic stimulus package will be effectively injected into the economic system in 2000; and (3) the fiscal deficit of fiscal year 2000 will support job creation and private consumption spending. Private consumption is predicted to increase by 4.5 percent in 2000.
(4) Increasing private investment, particularly in machinery and equipment is forecasted to be seen in 2000 In 2000, businesses are expected to increase their investments, particularly in machinery and equipment, in order to improve the production process of the export-oriented industries. Increasing trend fo domestic and international competition will prompt investment demand in machinery and equipment to upgrade production competitiveness. In addition, the results of the government measures to restructure and increase productivity of real sector would be more effective and apparent in 2000. Moreover, the continuing exonomic expansion expected in the years to come will and another incentive for private investment demand. Apart from the foregoing factors, the measures approved by the Cabinet on August 10,1999 will also help stimulate private investment. To further promote exonomic recovery, support the economic restructuring process, and enhance the long-run competitiveness of the private sector, the Cabinet approved, on August 10, 1999, a set of measures to enxourage private investment. This new set of measures consists of 4 parts: (1) tax and tariff measures; (2) equity investment measures; (3) measures to premote the recovery of the real estate sector; and (4) measures to improve financing for small and medium enterprises (SMEs). In addition, the completion of the Financial Restructuring Autrority's sales of assets should allow various investment projects particularly in real estate and construction sectors to proceed from where they have left off. As result of these factors. private investment is predicted to register a growth rate of 9.0 perccent on 2000.
(5) Foreign trade Thai exports are expected to remain a driving force for economic growth in 2000, increasing be 6.5 percent on US$ value and 5 percent in volume, contributed by expected strong demand of major trading partmers. However, imports in US$ terms are forecasted to increas by 14.3 percent, reflecting the steady export performance and expanded investment activities, which together will stimulate the import of capital and raw material goods.
(6) Fiscal stance On the fiscal front, the government runs budget deficit in fiscal year 2000 to foster the continuing economic recovery before private sector could take the lead. The budget deficit of 110,000 million baht in FY 2000 together with additional gevernment expenditure under the economic stimulus package launched in 1999 will further stimulate domestic demand, and thereby economic growth.
(7) Financial situation Liquidity in the financial system will remain high 2000, while the demand for private credit should start to pick up in line with the recovering situation in production sector and private investment. The demand for credit is expected to expand by 3-4 percent, a slightly higher growth than in 1999. On the capital market front, it is expected that the government will issue a bluk of government bonds domestically to finance the budget deficit. In addition to the government bonds, the issuing the Treasury bills in money market will somewhat help absorb excess liquidity in the system and keep deposit rate form falling too much further. Therefore, it is not expected that the interest rates would gignificantly differ from those in 1999. New issues of private securities and debentures should grow in linbe with the improving economy and improving conditions in the stock market. The improving conditions of lthe stock market, as a result of the amendment of rules and regulations on securities trading, will encourage the stock market development.
--Development News Bulletin, National Economic and Social Development Board, Volume 15, No. 2 : February 2000--