UTCC: More stimulus necessary for 3% growth

The government needs to pump more money into circulation — a range of 30-50 billion baht — to reach the target of 3% economic growth this year, says the University of the Thai Chamber of Commerce (UTCC).

The second phase of the cash handout scheme, which will be forwarded for cabinet approval on Oct 22, could increase circulation by stimulating domestic travel and spending, said Thanawat Phonwichai, director of the UTCC’s Center for Economic and Business Forecasting.

For the first phase of the cash handout scheme, the UTCC estimates that 20-30 billion baht circulated, increasing economic growth by a mere 0.10.2%, Mr Thanawat said.

Previous government cash transfers to farmers to lower production costs and a scheme to reduce production costs for rubber and oil palm growers are projected to generate a combined sum of 80 billion baht, he said.

There is a 66% chance that Thailand’s 2019 GDP growth will be 2.8% and a 33% chance that growth hits 3%, according to the UTCC study.

The main factors affecting Thailand’s 2019 economic growth outlook are the Sino-US trade dispute, Brexit and the baht’s appreciation, Mr Thanawat said.

Thailand’s economy grew by 2.8% and 2.3% year-on-year in the first and second quarters, respectively.

Third-quarter economic growth is forecast at 2.5-2.6% year-on-year, while fourth-quarter GDP growth is anticipated at 3.5-4%, according to the UTCC.

In 2020, the country’s GDP growth is forecast to expand past the 3% threshold as the Sino-US trade dispute is likely to subside, Mr Thanawat said.

The baht’s appreciation will still put pressure on the tourism industry, especially for inbound Chinese tourists who are shouldering a 10% higher foreign exchange cost on the strengthening baht, he said.

The business sentiment index for small and medium-sized enterprises (SMEs) in the third quarter stood at 41.5 points, falling below the 50-point threshold and implying negative business sentiment, according to a joint survey by the UTCC and SME Development Bank.

Dampened business conditions among SMEs stemmed from tightened cash flows and lower net profits in the second quarter.