Thailand Needs More Capital to Keep Growth Moving

Thailand posted third-quarter economic data that shows it is on a firmer recovery track, after years of sluggishness, though economists say it needs higher private investment and government spending to stay there sustainably.

While the growth pace moderated from April-June on a quarterly basis, it beat market expectations. Exports and tourism have lifted growth for Southeast Asia’s second largest economy this year, though Thailand’s pace still lags that of peers. Keeping down Thai growth has been still-soft domestic demand and delays in the start of big infrastructure projects, Reuters reported.

On an annual basis, the economy expanded 4.3% in the third quarter, the best pace for any period since the first quarter of 2013, the National Economic and Social Development Board said on Monday.

That handily beat the Reuters poll median of 3.8% and was also above its highest forecast. Annual growth for April-June was revised to 3.8%, from 3.7%. On a quarterly basis, gross domestic product grew a seasonally adjusted 1% in July-September. That topped the 0.75% Reuters poll forecast, but was below the previous period’s pace, revised up to 1.4% from 1.3%.

“The momentum may have softened slightly but it has still remained solid for three consecutive quarters. So, I’m not too worried,” said Charnon Boonnuch, economist of Tisco Securities. He said quarterly growth could soften further in the year’s final period, but the 2018 outlook remains strong.

The planning agency revised its 2017 growth forecast to 3.9%, from 3.5-4% seen in August, and forecast 2018’s level at 3.6-4.6%.

Exports this year are now seen rising 8.6% instead of 5.7%, despite the baht being at its strongest in more than two years. In the third quarter, exports jumped 12.5%.

“External demand has so far provided ample cushion to growth,” Australia & New Zealand Bank said. “However, the government expects export growth to moderate to 5% next year, as the favorable base effect would fade from Q4 onwards.” In ANZ’s view, private investment “must pick up if the recovery is to deepen in 2018.”

Government consumption expenditure rose by 2.8% in July-September from a year earlier but dropped 4.1% from the previous three months. Public investment fell 2.6% on the year because of delays in some investment projects, NESDB head Porametee Vimolsiri told a briefing.

He said public investment spending is expected to surge by 11.8% next year from just 1.8% projected for this year, as more projects, worth more than 300 billion baht ($7.76 billion), are in the bidding process.

“We are confident that growth in Q4 will remain high, making this year’s growth outlook at 3.9% and reaching 4% next year,” Porametee said.