TMB raises GDP forecast with caveat
TMB Analytics has revised up its forecast for Thailand’s full-year economic growth to 3.5% from 3.3% in the wake of robust exports. But TMB Bank’s research house raised concerns about the concentration of economic activity in a few large corporations.
The researchers predict even higher economic growth of 3.8% in 2018.
“But the stronger growth in exports mainly benefits large corporations, while Thai SMEs will continue to struggle, keeping domestic consumption sluggish,” said senior vice-president Naris Sathapholdeja. “If this trend persists, it will be impossible to see GDP growth climb higher than 4%.”
TMB Analytics’ latest forecast for this year is in line with the Bank of Thailand’s projection.
The research unit raised its export growth forecast to 5.8% in 2017 from its earlier estimate of 2% after strong export growth was registered during the first seven months, said Mr Naris.
But it forecasts lower growth of 4.8% for the country’s outbound shipments next year.
Mr Naris said 89% of total export value is contributed by large corporations, twothirds of which are multinational companies, and the rest is from local SMEs.
Large corporations employ just 13% of the workforce, while SMEs hire 55% and the
agricultural sector employs 32%.
“As a result, the strong growth in exports, the main growth engine this year, has failed to pass on [benefits] to the domestic economy, as reflected by the moderate growth in private consumption,” said Mr Naris.
TMB Analytics marginally raised its private consumption growth forecast for this year to 3.1% from 3%, predicting growth of 3.2% in 2018.
Mr Naris said the fact that private consumption is growing at a slower clip than the economy suggests that the GDP growth is not yet broad-based.
The research house forecast 9% growth in farm income this year, mainly from a recovery in agricultural prices in the first half, and zero growth in 2018 due to stabilised prices.
He said TMB Analytics has cut its private investment growth forecast for this year to 1.6% from an earlier prediction of 1.7%, while it expects stronger growth of 3.8% in 2018.
“But higher investment next year will
still mainly come from large corporations,” said Mr Naris.
Meanwhile, TMB Analytics expects the non-performing loan (NPL) ratio to peak at 3% this quarter, up from 2.95% at the end of the second quarter, diverging from the popular assumption that NPLs will peak in the fourth.
He said TMB Analytics’ view on NPLs is based on the normal practice of commercial banks, which manage their balance sheets through writing off, rescheduling and restructuring NPLs in the final quarter of every year.
Loan growth is projected at 5% this year and 5.7% in 2018, mainly due to demand from large corporations, said Mr Naris.
He expects the Bank of Thailand to keep its policy rate on hold at 1.5% throughout this year before raising the rate twice at 25 basis points each to 2% in 2018.
“But the Bank of Thailand’s policy rate cut is still possible this year, given the low inflation and weak demand-led inflationary pressure,” said Mr Naris.