TMB Analytics upgrades GDP growth outlook to 4.5%

TMB

Analytics, a research house of TMB Bank, has increased its economic growth forecast for the country this year to 4.5% from 4.2% after robust growth in the first quarter. Exports and tourism appear to be the major contributors to growth this year, said head Naris Sathapholdeja. The research unit has raised its 2018 export growth estimate to 8.6% from 4.8% and tourism growth outlook to 7.6% from 7.3%.

TMB Analytics also upgraded private investment growth for this year to 4.4% from 4%, domestic consumption to 3.4% from 3%, and import growth to 12.6% from 6.7%.

TMB Analytics’ new economic growth forecast is in line with the Fiscal Policy Office’s current projection of 4.5% this year and the National Economic and Social Development’s GDP growth forecast projection, ranging from 4.2-4.7%.

But the research house revised down its 2018 public investment growth forecast to 8.5% from 12% after the budget disbursement fell short of target for the first half.

Progress of the government’s Eastern Economic Corridor project is expected to bolster both private investment and public spending.

Private investment in the first quarter improved for a sixth straight quarter, particularly for durable goods, machinery and equipment, Mr Naris said.

The improved private investment boosted capacity utilisation, especially in the vehicle and petrochemical industries. Capacity utilisation of the two industries has increased to 80%.

The country’s overall capacity utilisation revved up to 68% in March.

Private consumption also improved, mainly supported by durable goods consumption, which is in line with rising consumer confidence. Higher agricultural goods prices, led by rice and palm oil, also gave a boost to farm income and helped lower household debt.

Household debt declined to 77.5% of GDP at the end of last year after peaking at 80.8% at the end of 2015, but the level is considered to be high and a further reduction is needed to support economic expansion.

According to the edited minutes of the Monetary Policy Committee (MPC) meeting last month, Thai economic growth momentum has picked up pace, driven largely by robust exports, but the domestic recovery remains uneven, cramped by swelling household debt and fragile earnings for low-income workers.

Under the rising economic momentum, TMB Analytics projected the Bank of Thailand would increase its policy rate two times in the second half with at least a 25-basis-point hike, up from the current level of 1.5%.

“The output gap is positive, reflecting that the country’s GDP is outperforming,” Mr Naris said.

An output gap is an indicator of the difference between the actual output of an economy and the maximum potential output of the economy.