EIC expects the Thai economy to expand at 4.0% in 2018 supported by strong global economy and improving investment

Stocks and Financial Services Press Releases Monday April 2, 2018 13:00
Bangkok--2 Apr--Siam Commercial Bank

EIC's latest forecast points to continued expansion of the Thai economy at 4.0% YOY in 2018, buoyed by improving external demand and recovering investment. The tourism and export sectors will continue to be the main growth drivers of the economy this year thanks to strong fundamentals of the global economy. In 2018, exports of goods and the number of tourists are projected to expand at 5.0% YOY and 8.0% YOY, respectively. Sustained growth in exports has led to an increase in capacity utilization, lending support to private investment going forward. Moreover, private investment has an additional stimulus from the government's infrastructure investment, particularly following the greater clarity in the Eastern Economic Corridor' (EEC) project as the Thai parliament passed the EEC law. This project has a high potential in attracting both domestic and foreign investment. In addition, the concern over shortage of migrant labor has subsided, after the government postponed enforcement of the new regulation on undocumented migrant workers and eased the regulation's rules of punishment.

Domestic consumer spending is projected to continue expanding, but remains reliant on the purchasing power of certain groups. In 2018, growth in domestic consumption will sustain its momentum from the previous year due mainly to consumption of durable goods among high-income earners, reflected by the high rates of growth in automobiles' sales in the early 2018. Nevertheless, spending from low-income households still faces headwinds due to high household debt level and slow recovery in employment and household income, reflected by increasing unemployment rate and declining overtime employment. This shows that the labor market has not received full benefits from the ongoing economic expansion. In addition, farm income has been negatively impacted by falling prices of some agricultural products, thus leading to subdued expansion in consumption of non-durable goods. However, consumption of low-income workers will receive some support from the government's state welfare project this year.

Overall, downside risks to the Thai economy are low, but businesses in certain sectors should exercise greater caution. First, the US's protectionist trade policies potentially have direct impact on some exports sectors, namely solar panels, washing machines, steel and aluminum. These sectors constitute a low proportion of the total values of Thai exports, however, this source of risk might be more elevated in case the US's major trading partners retaliate and turn into trade war scenario. Second, strength and volatility of the Thai baht will have repercussion on exporters' baht revenue as well as competitiveness of Thai agricultural products. Lastly, monetary policy normalization of major central banks, particularly the Federal Reserve, might trigger global financial markets' volatility and tighten global liquidity, possibly resulting in adjustment in asset prices and negative impact on growth of some economies. For Thailand, EIC assesses that the economy's external financial stability remains intact. Therefore, volatility in the global financial markets should have limited impact on Thai economic growth this year.

By: Yunyong Thaicharoen, Ph.D.
Chief Economist and FEVP
Siam Commercial Bank Public Company Limited
EIC Online: www.scbeic.com
LINE: @SCBEIC

Latest Press Release

Fitch Assigns First-Time #AA(tha)(EXP)# to Risland (Thailand)#s Guaranteed Debt

Fitch Ratings (Thailand) Limited has assigned residential property developer Risland (Thailand) Company Limited's (RLT) proposed guaranteed debentures of up to THB3.5 billion an expected National Long-Term Rating of 'AA(tha)(EXP)'. RLT will use the...

EXIM Thailand Issues Renewable Energy Bond to Support Renewable Energy Projects, Promoting Sustainable Banking and Social-Environmental Responsibility

Mr. Pisit Serewiwattana, President of Export-Import Bank of Thailand (EXIM Thailand), has revealed that EXIM Thailand issued a USD 30 million Renewable Energy Bond which marks its thematic bond dedicating to its commitment to environmental concern. The...

SET signs MoU with SZSE to strengthen Thailand-China capital market collaboration

The Stock Exchange of Thailand (SET) today signed a memorandum of understanding (MoU) with Shenzhen Stock Exchange (SZSE) to expand business opportunities for Thai and Chinese small and medium-sized enterprises (SMEs) and broaden opportunities in...

Bangkok Bank offers financial experiences for a modern age at Money Expo 2019 under the concept of #Symphony of Digital Life by Bangkok Bank

Bangkok Bank joins Money Expo 2019 under the concept of "Symphony of Digital Life by Bangkok Bank" and invites everyone to experience digital solutions for a modern age that combine a variety of financial services and products and provide greater...

Photo Release: KBank launches 24-hour deposit service at 7-Eleven convenience stores nationwide

Mr. Wirawat Panthawangkul (second from left), KBank Senior Executive Vice President, and Mr. Weeradej Ackapolpanich (third from left), Vice President, Counter Service Co., Ltd., recently introduced "KBank Service", with Counter Service Co., Ltd. being...

Related Topics