BANGKOK – The military coup introduced a measure of stability to the Thai economy which has been battling instability in the past 10 years, but there remain significant domestic and external factors that continue to weigh heavily on the Thai economy, according to The Grant Thornton International Business Report (IBR).
“Thailand needs to sustain 4 per cent GDP growth to remain at a ’neutral growth’,” Poscoe said.
In 2013, GDP growth was 1.8 per cent. In 2014 the growth forecast has been recently been revised down to 1 per cent by the National Economic and Social Development Board, and the International Monetary Fund forecast for 2015 is 4.1 per cent (below the Asean growth at 5 per cent) and 5.4 per cent in the period 2016-18.
“Given the number of times these figures have been revised down in the past, coupled with the slowdown in growth in major trading partners and the lack of sustained action of policies that encourage foreign investment, it looks likely that Thailand’s growth prospects will remain neutral at best through the next 24 months,” he added.
Aside from political concerns, the demographic make-up of Thailand remains a key concern. As in many East Asia economies, the prevailing fertility rate (1.6) is well below the replacement rate (2.1), which will further constrict the supply of workers and could seriously dampen growth prospects.
“As such, it is imperative that there is an increase in productivity to sustain any level of growth, something we have currently yet to see,” he said.
Sub-par growth in the global economy also poses a risk to economic growth in Thailand. The IMF recently lowered its growth forecasts for 2014 and 2015, warning of persistent weakness in the Eurozone, the end of the emerging market commodity boom as China slows and further difficulties in Japan which has just officially entered a technical recession.
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