Thailand’s economic prospects continued to get brighter as the first quarter of 2010 came to a close and the data revealed healthy growth in production and improved consumer confidence. In a statement released by the Ministry of Finance, the forecast for economic growth during the current year was revised upwards to 4.5%, or within a range of 4% to 5%, from an earlier 3.5% forecast.
The Director-General of the Fiscal Policy Office has reported that the revised projection was made following improvements in Thailand’s exports and in its private consumption. He noted that the Thai economy is more balanced now, with its expansion being driven by both internal and external factors.
Also supporting the better than expected economic activity is the recovery of Thailand’s major trading partners. Moreover, these projections have already taken into account the potential impact of the suspension of projects in Map Ta Phut, as well as the political situation. And if these issues find resolution and there is an acceleration of disbursements under the economic stimulus “Stronger Thailand 2012” program, the upper end of the range for economic growth at 5% could be hit.
A spokesman for the Ministry of Finance has also reported that the export volume of goods and services for the coming year is forecasted to grow by 9.7%, which is a significant improvement from the contraction in 2009, and that private consumption is projected to expand by 4.3% and private investment by 8.2%. It should be noted that during February alone, exports increased by 23.5% year- over-year (yoy), hitting US$14,255 million. The driving force behind this was increased exports of automotives, electrical appliances, computers and rubber. And adding to the improved economic outlook is the fact that income from foreign tourist arrivals shows strength as tourist arrivals hit 1.6 million persons.
The Bank of Thailand reports that “private investment continued to improve, increasing by 1.6 percent from the previous month or 11.4 percent (yoy). This was partly from imports of capital goods, especially industrial machinery used in electronic, vehicle and electrical appliance industries. Besides, fiscal stimulus remained supportive partly owing to the increased disbursement of projects under the Strong Thailand 2012 Project, especially farmers’ income guarantee scheme.” The BOT also reports that improving domestic and external demand led to an 80.8% (yoy) expansion in import value of US$13,803 million. And that import quantity grew by 62.6 percent (yoy) following expansions in raw materials and intermediate goods, whereas the import price rose by 11.2 percent (yoy).
The increased import of raw materials bodes well for export of manufactured goods further in the year. Looking at the preliminary data, the manufacturing production index (MPI) for January and February shows a 29.1% and 30.2% increase measuring 76 products, with vehicles increasing in January by 52.1% and in February by a very strong 102.8%. Iron and Steel likewise show a strong upward trend at 47.8% and 60.2% for the frst two months of the year, with electronics averaging a 64% increase.
The economic recovery is clearly underway, and by all accounts the coming months will continue to shine. In its Economic Outlook report issued in February 2010, the National Economic and Social Development Board noted “The recovery in 2010 will be supported by export and manufacturing production expansion, and the regain of domestic private demand.” And that the “Thai economy tends to grow at a faster pace than previously expected…”
The NESDB report also noted that the revival of Thailand’s economy will be concentrated on sectors such as electronic products, vehicles and equipments, and electrical appliances, which will benefit from the inventory liquidation cycle in major countries. In addition to manufacturing, the NESDB has forecasted an expansion in the construction sector, as public construction is likely to accelerate with the implementation of the second government economic stimulus plan. With relaxation of credit approvals and expansion of the mass- transit system into Bangkok’s suburbs, private construction will also benefit and see growth this year.
Then too, last September the Board of Investment included the manufacture of completely built housing units (CBU) in its investment promotion scheme, granting import duty exemption on machinery in every zone. This should also help promote the application of new technologies and construction knowledge. And as indicated above, tourism continues to do well thus far with arrival figures for 2010 forecasted to be 16 million persons, which is a 13.5% increase over the previous year.
New markets continue to be targeted by the Tourism Authority of Thailand, including attracting more regional tourists, as well as expanding others. So all in all the year is off to a great start and renewed vigor is being injected into the system. Investors can rest assured that as the global economy returns to a more normal pace of growth, Thailand will continue to enjoy its traditional path of steady and strong economic growth under an attentive and business friendly government and people.
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The Office of the Board of Investment is a government agency under the Office of the Prime Minister. Its core roles and responsibilities are to promote valuable investment, both investment into Thailand and Thai overseas investment.