Thai Economy Steady But Growth Outlook Uninspiring

At a time when the currencies of emerging economies are being squeezed hard, the Thai economy, Southeast Asia’s second largest, is showing encouraging resilience. But being able to absorb shocks is not the same as achieving the growth the government so desperately wants.

The hurdles littering the path to expansion are numerous—from an aging society to a lack of engineers—making for a decidedly downbeat outlook.

While the dollar’s upswing in the wake of the US presidential election has battered the currencies of such countries as Malaysia and Indonesia, the Thai baht has remained largely stable, helping the country avoid the massive hemorrhage of capital that some of its regional neighbors are grappling with, Nikkei reported.

The Thai stock market has also shown considerable resilience, rebounding from the plunge triggered by the death of former King Bhumibol.

These bright spots have a growing number of economists there reasserting their confidence in the economy.

On Dec. 14, shortly before the expected interest rate hike by the US Federal Reserve, the English-language Bangkok Post reported that the Thai central bank chief was not especially concerned about the possible impact of a rate boost on the baht.

“The capital outflows will not be large because foreign holdings of Thai bonds is around 7-8% (of outstanding bonds),” Bank of Thailand Gov. Veerathai Santiprabhob was quoted as saying in the report. “We’re different from Malaysia and Indonesia, where foreign holdings of bonds stand at 34% and 30%, respectively. Both countries’ capital outflows are more sensitive than Thailand’s.”

Veerathai also mentioned Thailand’s sizable current-account surplus.

Not everyone was as sanguine as the banking chief; some were worried that the Fed’s move might send the baht crashing. They no doubt were remembering the 1997 Asian financial crisis, which started in Thailand when a hefty flight of foreign funds caused the currency to collapse.

Meanwhile, the business sector has revised Thailand’s 2017 export forecast upwards on the back of brighter local and global economic outlooks, says Isara Vongkusolkit, chairman of the Thai Chamber of Commerce.

Isara spoke on behalf of the Joint Standing Committee on Commerce, Industry and Banking, which he said forecasts this year’s exports to grow by 1-3%, due largely to stable oil prices, which will make it easier for importers to plan ahead.

The JSCCIB had earlier predicted growth of 0-2%, he said.