Ministry sees surge in investment

Ministry sees surge in investment

A condominium construction site in Bangkok. Private investment is expected to be a key economic driver next year. SEKSAN ROJJANAMETAKUN
A condominium construction site in Bangkok. Private investment is expected to be a key economic driver next year. SEKSAN ROJJANAMETAKUN

The Finance Ministry is optimistic the private sector will step up its investment to the tune of 400 billion baht next year, a crucial driving force for economic growth.

The amount of private investment will be nearly half of the 900 billion baht the state will be investing next year, permanent secretary for finance Somchai Sujjapongse said, adding the public investment spree will encourage private investment.

Of the total, 300 billion baht will come from state enterprise investment, 190 billion from the mid-year budget and 390 billion from the government's budget.

If the government manages to push the private sector to invest, the Thai economy can grow at its full capacity of 4-5%, he said.

Larger private investment is crucial to boost and sustain Thailand's economic growth, and until recent years it had represented a bigger share of the country's GDP than public investment.

Tepid private-sector investment has eroded Thailand's competitiveness. In the past decade, private-sector investment fell to a low of 2% of GDP in 2014, versus 14% on average in the decades before.

Mr Somchai said the Finance Ministry has no plans to renew the double corporate income tax deduction for expenses incurred on investments, which is due to expire at the end of this year.

Despite the expiry of the tax privilege, he believes that the private sector will accelerate investment, spurred on by the massive public investment.

The Finance Ministry's Fiscal Policy Office (FPO) has estimated that private investment will expand by 1.6% this year, well above the 1% and 2% contractions in 2014 and 2015, respectively. The ministry's think tank has forecast that public investment will grow 10.7% this year, compared with a 29.8% rise last year and a 7.3% fall in 2014.

The FPO has also projected that Thailand's economic growth will come in at 3.3% this year and 3.4% next, higher than the Bank of Thailand's forecasts at 3.2% for both 2016 and 2017.

Public investment, particularly for big-ticket infrastructure projects, and improving farm income will underpin growth next year.

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