Thailand’s economy grew faster than economists estimated last quarter and is on track for strong performance next year, underpinned by a pick-up in exports and booming tourism.
GDP rose 4.3 percent from a year ago, compared with the median estimate of 3.9 percent in a Bloomberg survey of economists. Compared with the previous three months, GDP rose a seasonally adjusted 1 percent in the third quarter, higher than the 0.7 percent median estimate.
After years of lagging its neighbors, Thailand’s economy is finally catching up with the economic boom in Southeast Asia, fueled by a global trade recovery and a flood of visitors from China.
The end of a year-long mourning period for King Bhumibol Adulyadej strengthens the outlook for consumer spending into next year, while the government is ramping up spending on infrastructure projects to support growth.
The economy will probably expand 3.9 percent for the whole of this year, and 3.6 percent to 4.6 percent next year, supported by export growth of 5 percent, the National Economic and Social Development Board said.
“Economic growth next year will accelerate from this year,” National Economic and Social Development Board secretary-general Porametee Vimolsiri told reporters in Bangkok. “We might see the 4 percent level, supported by an improving global economy, government investment and a clearer recovery of private investment. We will see improving employment and revenue.”
Thailand Prime Minister Prayuth Chan-Ocha has adopted measures to boost growth, including a 1.5 trillion baht (US$45.7 billion) infrastructure spending plan, and tax breaks for year-end shopping. Thailand — under military rule since 2014 — is on course for elections next year.
“Growth is broadening with exports and tourism still doing the heavy lifting,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd in Singapore. “Our 2017 GDP growth forecast of 3.5 percent now looks light and we will be revising it to reflect the endurance of the export recovery.”
Thailand’s growth last quarter was supported by a 4.3 percent jump in manufacturing, a 6.7 percent expansion in hotels and restaurants, and an 8.1 percent increase in the transport and storage industries. Private consumption growth remained muted at 3.1 percent compared with 3 percent expansion in the second quarter, while investment rose 1.2 percent.
The response by financial markets to the data was also subdued, with the benchmark stock index rising 0.2 percent as of 12pm in Bangkok on Monday.
Julian Wee, a senior market strategist at National Australia Bank Ltd in Singapore, said the GDP data showed “domestic demand might still be quite tepid” and investment showed “little sign of revival.”
Bloomberg economist Tamara Henderson said that the pickup in third quarter growth was broad-based and the growth has scope to be stronger still in the fourth quarter with the end of the mourning period in October.
Even so, the risk of Bank of Thailand tightening appears low, Henderson said, adding that drivers of growth for this year — especially with better weather for farmers, new direct flights with China and the relocation of supply chains — might fade.
At the same time, wages are falling, debt burdens for households and firms are elevated, non-performing loans have increased and investment remains weak, she said, adding that year-on-year growth rates for household spending and investment in the third quarter were also not as strong as in quarter one.
Southeast Asian nations are enjoying a growth resurgence with expansion in Vietnam, the Philippines and Malaysia quickening. At the same time, it’s raising worries about inflation and questions about whether central banks in the region might need to tighten monetary policy soon. The Bank of Thailand has held its benchmark rate near a record low since 2015.
Porametee, who is also a member of the central bank’s Monetary Policy Committee, played down any talk of rate hikes yet.
“Fiscal and monetary policies will remain accommodative to ensure macro conditions are stable,” Porametee said. “There is no need to rush on raising interest rates.”
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