SCBT forecasts 4.3% GDP growth for 2018
BoT expected to raise interest rate twice
Thailand’s economic growth outlook is expected to remain bright this year, with a 4.3% forecast attributed to improvement in manufacturing, services, and agricultural sectors, says Standard Chartered Bank Thai (SCBT).
The manufacturing sector, which accounts for 40% of the country’s GDP, has been improving since last year, said SCBT economist Tim Leelahaphan.
Imports rose 15% year-on-year during January to November 2017. Robust growth in imports — particularly capital goods, raw materials, and equipment — suggests a strong foundation for export growth in 2018, which is projected at 6.5% by the Commerce Ministry, said Mr Tim.
The services sector showed strong growth momentum last year led by the tourism segment. The Tourism Council of Thailand projects 38 million foreign tourist arrivals this year, up almost 9% from last year’s projection of 35 million.
Tourists are expected to generate income of 2.2 trillion baht or 15% of GDP, he said. The farm sector, which accounts for 10% of GDP, is expected to recover this year as no droughts are projected, enuring crop yields, he said.
SCBT expects Thailand’s economy to expand by 4% in 2017.
The National Economic and Social Development Board (NESDB) reported in November the third quarter of 2017 saw the highest growth since the first quarter of 2013, after expanding by 3.8% in the second quarter and 3.3% in the first quarter of 2017.
In the first nine months of 2017, the economy grew by 3.8% year-on-year, with the main contributors being export growth, continued expansion of private consumption and the recovering manufacturing sector.
The NESDB forecasts 3.6-4.6% growth for 2018, up from its estimate of 3.9% growth for 2017 and 3.2% growth in 2016.
Mr Tim predicts the Bank of Thailand will raise the interest rate in the second half, with a 25 basis point hike expected in the third and fourth quarters, bringing the year-end policy interest rate to 2%.
Robust economic growth as well as higher inflationary pressure, led by an increase in oil prices, food prices, and minimum wage are factors supporting the rate hike, he said.
Thailand’s central bank is also expected to follow other central banks on policy rate normalisation, led by the US Federal Reserve, he added. The central banks of Canada, the UK, and South Korea have recently raised rates and Malaysia’s central bank is expected to follow suit early this year, said Mr Tim.
The baht’s value is forecast at 31 against the US dollar this year-end, he said. The dollar’s weakening value and Thailand’s current account surplus is derived from export growth, strong tourism, and foreign capital inflows are factors driving up the baht’s strength.
“The baht is projected to be stronger by 5% throughout this year, whereby a 2% appreciation has already occurred since the beginning of this year,” said Mr Tim.