Economic outlook starts to pick up

Economic outlook starts to pick up

Gantry cranes load cargo containers onto a ship at Bangkok port. Hefty exports are one of the main factors strengthening the economy in the second half.
Gantry cranes load cargo containers onto a ship at Bangkok port. Hefty exports are one of the main factors strengthening the economy in the second half.

Experts say they expect stronger economic recovery momentum in the second half of this year, due to hefty exports, rising farm prices and massive government infrastructure, particularly in the Eastern Economic Corridor (EEC).

However, some negative factors such as a strong baht and uncertainty about the new Royal Decree on Recruitment of Foreigners that could lead to possible labour shortages still weighed on sentiment, they said.

Narongchai Akaraseranee, chairman of the Board of Directors of MFC Asset Management Plc, said Thai exports, which continue to grow at two-digit rates, are a major factor that will help boost other economic activity during the second half of the year.

"Rising exports should mean rising productivity that will lend support to major enterprises," Mr Narongchai said.

However, small and medium-sized enterprises (SMEs), farmers and other small local enterprises cannot benefit from these positive factors of rising exports or the recovering economy, as they were not confident to spend, resulting in weak purchasing power eventually weighing down the economy.

"The government has to take a closer look at smaller units of the Thai economy and see what kind of help can be provided," Mr Narongchai said.

Moreover, the government should put in place measures to help reduce the negative impact and concerns about a possible labour shortage due to the new labour law, as it would affect the Thai production sectors.

Although Prime Minister Prayut Chan-o-cha has imposed the powerful Section 44 to postpone the implementation of the law for six months, investors were unsure about how to react to the changes, which impose harsher penalties for illegal employment of foreign labour.

Uncertainty about the new law prompted many migrant workers to flee Thailand and return to their home countries with no confirmation on whether they would come back, since the economies in the neighbouring countries are growing rapidly and need workers.

Don Nakornthab, a senior director in the economic and policy department at the Bank of Thailand, also agreed that the Thai economy should be better off in the second half of the year than in the first, as there are recovering economies among Thailand's trade partners such as the US and the EU, and they should support Thai exports in the second half.

Furthermore, the government's massive investment in infrastructure in the EEC, as well as new investment in the EEC, should help boost the economy in the second half, Mr Don said.

However, businesses and the government also need to monitor external risks closely, particularly the stronger baht.

Mr Don said a stronger Thai baht would have some negative impacts such as cutting profit margins of Thai goods when they are sold in dollars.

On the other hand, it also helps cut costs of production since the costs of raw material imports are cut substantially and should help offset the benefits lost from decreasing export value.

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