MPC lifts economic growth, export outlook
The Bank of Thailand’s Monetary Policy Committee (MPC) yesterday raised its 2017 economic growth forecast slightly to 3.5% from 3.4% earlier predicted after revising up export growth to 5%, but kept the policy rate unchanged at 1.5%.
The rate-setting committee lifted its Thai economic growth outlook due to robust exports, said Jaturong Jantarangs, assistant governor of the monetary policy group and the MPC’s secretary.
“However, domestic demand continues to expand at a gradual pace and is not yet sufficiently broadened, reflected in low growth in non-farm income, leading the committee to keep the policy rate unchanged at this meeting,” he said.
The stronger growth outlook supported by external demand was reflected in brighter prospects for merchandise exports and continued growth of the tourism sector, Mr Jaturong said. The MPC raised its forecast for export growth to 5% this year from 2.2% predicted in March and revised down export growth for 2018 to 1.7% from the 2% projected in the past four months.
He said t he MPC also revised up the import growth forecast to 10.9% this year from 7.2%, partly paring the gain in exports. That’s why it increased its GDP growth forecast by a mere 0.1 percentage point.
The bank forecasts GDP growth will be 3.7% in 2018, up from 3.6% growth forecast earlier. The BoT also expected a higher number of tourists in this year to 34.9 million from 34.5 million estimated in March, mainly from a recovery in Chinese tourists after the crackdown on illegal tour operations.
Meanwhile, t he central bank cut its forecast for private investment growth to 1.7% from 2.4% estimated in March, due to delays in some government infrastructure investment projects. “Private investment in the non-exports sector depends on public investment, so when the infrastructure investment tends to be put off, private investment will also slow down,” said Mr Jaturong.
He said the cut in private investment growth is also attributed to the slowdown in investment in sectors such as renewable energy and telecommunication, which accelerated last year. The central bank also revised down its public investment forecast for this year to 7.7% from 11.8% forecast in March.
“Private consumption continued to expand on the back of higher farm income but non-farm income did not gain much from the export recovery, so overall purchasing power had yet to fully recover,” he said, adding higher private investment is required to raise non-farm income as it leads to higher employment and a tighter labour market.
However, the improved growth outlook was still subject to external risks, including the sustainability of trading partners’ growth, and US economic policies.