JAKARTA - Asia-Pacific chief economist for IHS Global Insight Rajiv Biswas provides analysis on Thailand’s latest economic condition. Followings are highlights:
Report Summary:
- With Thailand plunged into deep mourning following the passing of the revered monarch who unified the nation for the past seven decades, the near-term headwinds to Thailand’s economic recovery are likely to increase.
- Although Thai economic growth has shown improving momentum during H1 2016, the nation is now entering a period of protracted official mourning which will be likely to have a dampening impact on retail sales and private consumption expenditure during Q4 2016.
- IHS Global Insight forecasts that Thai GDP growth will be 3.1% in 2016, with economic growth momentum moderating during Q4 2016. For calendar 2017, GDP growth is forecast to be 2.9%.
Thai Economy Continues to Face Economic Headwinds
The Thai economy has faced significant headwinds due to political uncertainty since late 2013, which has dampened domestic demand and resulted in a significant slowdown in foreign direct investment inflows. Furthermore, Thailand is an export-oriented economy with exports accounting for a significant share of GDP. The slowdown in world trade has hit Asian export growth during 2015-16, and Thai exports have also been impacted, with total exports down 1.2% year-on-year during the first eight months of 2016.
Foreign direct investment inflows into Thailand have also slowed significantly during 2014 and 2015, moderating from US$15.9 billion in 2013 to US$5 billion in 2014 and US$9 billion in 2015. This reflects increased investor concerns about the Thai economic outlook, with relatively sluggish economic growth over 2013-2015, as well as increasing competition from other Asian nations such as Vietnam, Indonesia and India for foreign direct investment into their manufacturing sectors.
However, despite these economic headwinds, the Thai economy is still a very competitive manufacturing export hub for autos and electronics due to its excellent infrastructure and a skilled workforce. Thailand is relatively highly ranked on the World Bank Ease of Doing Business global rankings for 2016, at 49th place, well above China (84th), Indonesia (109th) and India (130th). A key positive factor for the economy has been the rapid growth of Chinese tourist visitors, which has risen from 2.8 million in 2012 to an estimated 7.9 million in 2015, accounting for around 26% of total international tourists. With around 10% of GDP attributable to the tourism industry, the surging numbers of Chinese tourists has become an important stabilizing factor for economic growth since 2013, as domestic demand growth has slowed down.
Major infrastructure development projects are also expected to help underpin economic growth over the medium term, including a number of significant railway projects that are planned, including the first phase of a joint Thai-Chinese high speed railway project that will cost US$ 5.2 billion, and a joint Thai-Japanese high speed rail project linking Bangkok with Chiang Mai.
Therefore despite the near-term economic headwinds, the medium to long term outlook for Thailand is still favorable, with Thailand also benefiting from the rapid economic growth of the rest of APAC, notably the strong growth in Chinese consumption expenditure which is driving tourism inflows into Thailand. Total Thai GDP in nominal US$ terms is forecast to grow from US$400 billion in 2016 to a projected US$650 billion by 2025, according to IHS Global Insight forecasts.
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