Thailand Economic Overview in 2016
In the first nine months of 2016, the Thai economy grew around 3.3% from the same period last year. TRIS Rating expects that the Thai economy in 2016 will expand at 3%, compared with the rate at 2.8% in 2015. The expansion was driven by:
• Private consumption, which was well expanded with the support from the government's stimulus measurement to encourage consumption.
• Consumer confidence, which increased in December 2016. The Consumer Confidence Index (CCI) equaled to 73.7 in December 2016 from 72.3 in November 2016.
• Public investment, which has grown well continuously. However, state enterprise investment was slower than our earlier expectation.
• Tourism industry, which still grew strongly. In 2016, there were 32.5 million foreign tourists, rising by 8.9% from 2015 even there has been a suppression from the zero-dollar tours since September 2016 which directly affected the Chinese tourists.
Nevertheless, Thai economic growth was still affected negatively by the contraction in export because of the uncertainty of recovery in major trading partners especially China, ASEAN, and Europe. Private investment has declined consecutively for the last three years because the entrepre-neurs were not confident in the economic recovery, the domestic demand for automobile slowed down, and the environment for the export sector was still unfavorable.
Thailand Economic Prospects in 2017
TRIS Rating expects that the gross domestic product (GDP) of Thailand will grow around 3%-3.5% in 2017. The Thai economy in 2017 should be driven by the government investment in new infrastructure projects, continuous growth in the tourism industry, and expanding household consumption. However, TRIS Rating is still concerned about external risk factors, such as the uncertainty of the global economic recovery. Other risk factors include the weakness in private investment, the high level of household debts, and the increase of non-performing loans (NPL) in financial institutions.
Supporting Factors for Thai Economic Prospects in 2017
• Private consumption has a positive momentum amid the recovery of farm income thanks to higher agricultural prices covering rubber, sugar, and tuna. Furthermore, TRIS Rating expects that the government will continue using stimulus measures to encourage domestic consumption. For instance, the adjusted and increased allowances related to the personal income tax structure should be enforced in tax year of 2017, and the Cabinet's approval of daily minimum wage should increases by Bt5-Bt10 nationwide except in eight provinces starting from the beginning of 2017. Anyhow, we still have worries about the high level of household debts and the rebound of oil price in 2017 which could affect the cost of living.
• TRIS Rating believes that the tourism industry will sustainably expand in 2017 despite effects from the suppression of "zero-dollar tours" since September 2016 which impacted the Chinese tourist arrivals. However, arrivals of tourists from ASEAN and Europe, which accounted for around 26.3% and 18.3% of total foreign tourists, respectively, still have a strong momentum. The Bank of Thailand (BOT) forecast that the number of foreign tourists in 2017 will reach 34.1 millions. Besides, the government has actively implemented tourism campaigns and offered incentives such as the waiving of VISA fees at the Thai embassies abroad, and the reduction of the Visa On Arrival (VOA) fee for foreign tourists from Bt2,000 to Bt1,000.
• Public investment and consumption will see a stronger trend in 2017. This is because the government should accelerate the budget disbursement. According to Mr. Porametee Vimolsiri, the Secretary General of the National Economic and Social Development Board (NESDB), there are 20 investment projects for transport infrastructure which have a combine budget of around Bt1.41 trillion. Four investment projects worth Bt45 billion have started construction and nine investment projects worth Bt487 billion will undergo bidding in 2017. Furthermore, the Committee of Special Economic Zone Policy has agreed on the Eastern Economic Corridor (EEC) plan for 2017-2021 which has a construction budget of around Bt713 billion. The EEC has included the 48 fast-track investment projects worth Bt6,992.7 million to be implemented in 2017. TRIS Rating believes that public investment will continue to be a key driver for the Thai economy in 2017.
• The Thai export has gradually recovered due to the improvement of commodity prices of main items, such as sugar and rubber, owing to the rebound of oil prices. TRIS Rating expects that the Thai export in 2017 will expand more than the previous year because of the recovery of agricultural prices including those of tuna and shrimp, and the positive growth momentum of the United States (US) economy. Nevertheless, TRIS Rating believes that the Thai export structure and uncertain Chinese economy will continue to be the negative factors.