World Bank cuts Thai 2020 GDP growth outlook to 2.7pc
The World Bank downgraded Thailand's economic growth outlook for this year to 2.7%, but the latest revised figure is still higher than the bank's growth estimate of 2.5% for last year.
A pickup in private consumption and investment due to the implementation of large public infrastructure projects will be the main economic growth driver for 2020, according to the World Bank's Thailand Economic Monitor report released on Friday.
The global lender last October predicted that Thai economic growth would come in at 2.7% in 2019 and 2.9% in 2020. Its growth forecast for Thailand this year is slightly higher than the 2.8% predicted by the Bank of Thailand but below the 3.3% projection of the Finance Ministry's Fiscal Policy Office.
Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year's significant weakness even as downside risks persist, said Birgit Hansl, the World Bank's country manager for Thailand.
The risks include a reescalation of trade tensions and trade policy uncertainty, a sharper-than-expected downturn in major economies, and financial turmoil in emergingmarket and developing economies.
"A continued deceleration of economic activity in large economies, China, the euro area and the United States, could have adverse repercussions across the East Asia region, through weaker demand for exports and the disruptions of global value chains," Ms Hansl said, adding that financial investment, commodity and confidence channels could further weaken the global economy and hurt Thailand's exports.
In 2019, declining exports and growing weaknesses in domestic demand weighed on Thai economic growth.
The baht, which has appreciated by 8.9% since last year, has also dealt a blow to international tourism and merchandise exports, the World Bank said.
The government has responded swiftly to the growth slowdown, through accommodative monetary policies and a fiscal stimulus package to boost economic growth.
Going forward, the report recommends the Thai government to consider policies to enhance the effectiveness of the stimulus by focusing on implementing major public investment projects, improving the efficiency of public investment management and providing social protection coverage for vulnerable families.
The recent growth slowdown has highlighted Thailand's long-run structural constraints, with slowing investment and low productivity growth. In the last decade, productivity growth has fallen to 1.3% during 2010-16 from 3.6% during 1999-2007.
Private investment has halved from 30% of GDP in 1997 to 15% in 2018, as foreign direct investment slowed and progress stalled on projects related to the Eastern Economic Corridor.
To achieve its vision of being a high-income country by 2037, Thailand will need to sustain long-run growth rates of above 5%, which would require a productivity growth rate of 3% and increased investment to 40% of GDP.
"Boosting productivity will be a critical part of Thailand's long-term structural reform," said Kiatipong Ariyapruchya, the World Bank's senior economist for Thailand. "Increasing productivity, particularly of manufacturing firms, will depend on increasing competition and openness to foreign direct investment and improving skills."