FPO slashes growth outlook to 2.8%
The Finance Ministry’s Fiscal Policy Office (FPO) downgraded the country’s economic growth outlook this year to 2.8% from 3% in August in response to the expectation of a deeper export drop.
The revision came despite a 316-billion-baht stimulus package to boost domestic demand and an additional stimulus approved last week.
Exports are estimated to decline by 2.5% this year, compared with a 0.9% fall predicted earlier, dented by the global economic slowdown and trade tensions between the US and China, said Lavaron Sangsnit, director-general of the Finance Ministry’s think tank.
The FPO predicted Thailand’s economy will grow 3.3% next year, assuming that outbound merchandise shipments will reverse course to 2.6% growth.
The FPO’s latest economic growth forecast is in line with the Bank of Thailand’s forecast of 2.8% this year and 3.3% next.
Thailand’s economy grew by 2.8% and 2.3% year-on-year in the first and second quarters, respectively. Last year the economy expanded 4.1%.
Mr Lavaron said private consumption growth is estimated at 3.8% in 2019 and 3.5% next year, while private investment will expand 2.7% this year and 4.6% in 2020, propelled by the stimulus package.
The FPO forecast public consumption will grow 2% this year and 2.5% next, and state investment will expand 1.4% this year before accelerating to 6.6% in 2020.
Thai economic growth is expected to come in at 3.1% for the six months through December, up from 2.6% in the first half, said Mr Lavaron. Government stimulus measures will contribute to higher growth in the second half.
Over 60 billion baht from the stimulus package is expected to be injected into the economy, he said.
“The stimulus measures should give a big boost to economic growth in the second half,” said Mr Lavaron.
“Some 51 billion baht has been allocated to an aid package for farmers, including an income guarantee scheme and subsidy. The stimulus package adds another 60 billion baht into circulation.”
He said uncertainties that require close monitoring include the ongoing trade row between the US and China, Brexit, China’s economic slowdown and monetary policy manoeuvring of advanced economies.
Foreign tourist arrivals are expected to increase to 39.8 million this year, in part because of the extension of a visaon-arrival fee waiver, said Mr Lavaron.
Pisit Puapan, director of the FPO’s Macroeconomic Policy Bureau, said this year’s economic growth estimate is based on the assumption that trade partners’ economies will expand 3.3%, down from 3.5% previously.
The FPO also projected trade partners’ economic growth will be steady at 3.3% in 2020.
Public spending is the main driver of Thailand’s economic growth, with a 98% disbursement ratio for regular budget and 70.3% disbursement for investment budget in fiscal 2019.
The baht is expected to average 31.1 against the greenback this year, up 3.8% from last year, he said.
The FPO is biased upward on the baht to 30.75 to the dollar next year.