Thailand Finance Ministry upgrades GDP growth forecast to 3.6 pct for 2017

Thailand Finance Ministry has upgraded gross domestic product (GDP) growth forecast to 3.6 percent for 2017, from the previous estimate of 3.4 percent. Fiscal spending is seen to remain highly supportive of overall growth momentum, while export demand and the tourism sector are now expected to contribute more to growth, reported DBS Bank in its research note.

There is still a lack of optimism on private sector demand despite signs that suggest a recovery is underway in private consumption growth. Import growth of consumer goods, for example, has averaged 8 percent in the second half of 2017, the strongest 6-month period since the first half of 2013. Presumably, more data is necessary to confirm the strength of the turnaround in consumption demand this year, they added.

The DBS Bank in its research noted that the one possible hurdle to stronger consumption growth is the persistently low wage growth, particularly at a time when household deleveraging is taking place. Of more concern is the outlook for private investment growth. Private investments might have shrunk by 1.5 percent last year, which would make it a fourth consecutive year of negative growth.

When compared with the recovery in private consumption last year, it is quite apparent that investment demand remains very sluggish in the private sector. As it currently stands, there is still no evidence of the anticipated positive spill over from aggressive fiscal policy to private investment demand, reported DBS Bank.

Look for more cues from the full-year 2016 GDP report later this month. For now, even if the government seems more upbeat about the outlook this year, we maintain our 2017 GDP growth forecast at 3.4 percent.