BANGKOK – Tourism is booming, the current account is in surplus, and the comparatively high yield on local assets is enticing. No wonder the Thai baht has risen by 8% against the US dollar this year. But the currency could soon “fall foul of economic gravity”, says William Pesek on Breakingviews. “Populist pump-priming” and rising global growth are boosting Thailand for now.
But the ruling junta is dragging its feet on infrastructure upgrades while progress on cutting red tape and bank bad-loan ratios (“worse than China’s”) has proved “glacial”. Productivity and foreign investment are therefore suffering.
Meanwhile, Thailand’s leading business groups raised economic forecasts on Tuesday, citing stronger-than-expected exports and signs of recovery in private consumption and investment.
The higher forecasts suggest Southeast Asia’s second-largest economy may finally be gaining traction, though growth continues to lag its regional peers.
The country’s top business group raised its 2017 economic growth forecast to 3.7-4.0 percent from 3.5-4.0 percent projected earlier.
Exports, a key driver of the economy, are now expected to increase 6.5-7.5 percent this year, compared with 3.5-4.5 percent seen earlier, Jane Namchaisiri, chairman of a joint committee of the Federation of Thai Industries, the Thai Bankers’ Association and the Thai Board of Trade of Thailand, told a briefing.
“Exports performed better than expected in the first eight months of the year and are likely to increase steadily, thanks to a recovery in major trade partners’ economies,” he said.
In January-August, exports grew 8.9 percent from a year earlier, customs data showed, with electronics leading the gains.
The Thai National Shippers’ Council on Tuesday also raised its 2017 export growth outlook, to at least 6 percent from 5 percent, but said the baht’s strength was a risk.
The baht has appreciated by 6.9 percent this year, the most among Asian currencies.
Jane also sought to downplay another major concern for Thailand’s government and its exporters: the potential for U.S. trade protectionism.
The United States is Thailand’s number-two export market after China, and President Donald Trump said on Monday he wanted to reduce its trade deficit with Thailand.
Jane said the deficit was small compared to that of other countries and that U.S. imports from Thailand were often made by U.S. companies “so they benefit Americans already”.
Last week, the Bank of Thailand shrugged off calls from the government and businesses to cut interest rates to hold down the baht, and upgraded its 2017 economic growth forecast to 3.8 percent and its export outlook to an 8 percent increase.
After years of weakness, exports started to recover in 2017, while the number of tourists hit a record in August. The economy expanded 3.2 percent last year.
By Kitiphong Thaichareon and Chayut Setboonsarng – Reuters
Neil Collins – Financial Times