FPO buoyed by private acceleration

The Fiscal Policy Office (FPO) is upbeat that private investment — a crucial engine expected to drive the country’s economic growth — is gaining ground as imported capital goods accelerated 13.7% year-onyear in May.

The sign came after a ramping up of state investment in big-ticket infrastructure projects, said Krisada Chinavicharana, director-general of the FPO.

Imported capital goods expanded 8.5% year-on-year in April, down from March’s 9.7% growth, according to the FPO’s data.

The Commerce Ministry reported imports in May surged 18.2% year-on-year, while exports jumped 13.2%, the fastest pace in 52 months.

The Finance Ministry’s think tank forecast a 2.7% expansion in private investment this year, an improvement from last year’s 0.4% increase.

It predicted government spending will continue to propel the economy, growing by 10.9% this year, up from 9.9% last year.

The FPO forecast outbound shipment growth will reach 3.3% this year, compared with flat growth last year.

Exports, the main component of GDP, increased by 12.7% in May and 7% for the first five months this year.

The FPO uses a different base in calculating export and import values than the Commerce Ministry.

The country’s economic growth will reach 4% if state agencies expedite disbursements from the 190-billion-baht mid-year budget for the 2017 fiscal year, Mr Krisada said.

The FPO set a conservative target of 50-60% of the supplementary budget being taken out by the end of this fiscal year, he said.

As of June 23, 31% of the mid-year budget had been disbursed.

The mid-year budget is aimed at spurring the rural economy through provincial clusters and Village Funds, as well as broadening the country’s continuing economic recovery.

The FPO predicts the economic expansion will be 3.6% this year, an increase from last year’s 3.2%.

In a related development, Mr Krisada is optimistic the government’s tax incentives to allow companies that invest this year to claim 1.5 times of investment as expenses will help stimulate private investment.

The tax privilege is now pending publication in the Royal Gazette.