Thailand's economy next year is expected to grow by 3.8% on the strength of 3.7 trillion baht in public spending coupled with the positive trend of tourism revenue, says the Finance Ministry's senior economist.
Kulaya Tantitemit, executive director of the ministry's macroeconomic bureau, said public spending under the fiscal 2016 budget that began Oct 1, which includes budget expenditure for state enterprises and local administrations, will be higher than fiscal 2015's 3.4 trillion baht in line with rising expenses at government agencies.
Government spending has continued to rise every year. For fiscal 2016, the public consumption budget is to rise by 3% and government investment will expand by 8%, due to megaprojects such as water management systems, roads and double-track rail.
Kulaya: Fiscal budget, tourism to stir growth
"The Fiscal Policy Office (FPO) projects the public expenditure growth rate conservatively, especially in 2016, when we expect to see a disbursement rate of 91% for fixed expenses and 68% for the investment budget," Ms Kulaya said.
For infrastructure project investment in fiscal 2016, the government expects to spend 82 billion baht, up from 35 billion in fiscal 2015.
The fiscal budget is the most effective tool to drive the economy during a time of domestic and global economic weakness, Ms Kulaya said.
Apart from the fiscal boost, tourism is another hope for the Thai economy in the year ahead. Ms Kulaya expects tourism revenue growth of 15% to 1.65 trillion baht.
Thailand's 15 major trade partners have also shown solid signs of recovery, and the Thai baht is sliding against the US dollar.
"Supported by these two positive factors, we expect to see exports return to positive territory of 3.2% growth from contractions in 2014 and 2015," Ms Kulaya said.
Challenges lying ahead for Thailand include the fragile recovery of the global economy and the volatility of international capital flows and currency exchange.
Another risk factor is the drought that continues to damage the agricultural sector and erode household consumption.
For the rest of its 2016 outlook, the FPO forecasts crude oil to rise to US$57.80 a barrel from $53 and the policy interest rate to rise to 1.75% from 1.50%.
The office is maintaining its GDP growth view of 2.8% for this year.