FPO upbeat after Q1 growth surprise

FPO upbeat after Q1 growth surprise

The economy is expected to expand beyond the Fiscal Policy Office (FPO) forecast of 3.3% this year after its stellar performance in the first quarter, says permanent secretary for finance Somchai Sujjapongse.

The quarter's GDP growth of 3.2% beat all expectations. This is expected to accelerate in the second quarter and hit the year's highest pace of at least 4% in the third quarter before softening slightly to grow at more than 3% in the final quarter, said Mr Somchai.

A raft of the government's stimulus measures is attributed as the major growth driver.

They include the 200,000-baht handout to each of around 74,000 villages across the country to run approved projects, a 5-million-baht budget for each tambon, and 10 billion baht in loans to small and medium-sized enterprises (SMEs) that registered with the Revenue Department under a single financial account, he said.

The government is stepping up efforts to accelerate budget spending and consumption to shield the economy from ebbing exports stemming from China's cooling economy and uncertainties among major Western economies.

"It is a turning point for the Thai economy. If the referendum on the new charter wins a majority vote from people, it will give another boost to the economy to grow 3-4% certainly," Mr Somchai said.

He said 3.2% growth in the first quarter to March was a good start to the year.

With the upbeat GDP reading, the National Economic and Social Development Board (NESDB) has revised up the bottom end of its projected growth range to 3-3.5% from 2.8-3.8% estimated in February.

The government's think tank expects income generated from tourism to reach 1.68 trillion baht this year and account for 12% of GDP, up from 10% in 2015. The number of foreign tourist arrivals is also expected to hit the new target of 33 million this year, up from the previous projection of 32.5 million.

The NESDB, however, has revised down its export forecast due to a weakening of large economies. It now sees a 1.7% contraction after previously predicting 1.2% growth.

Meanwhile, the Small and Medium Enterprise Development Bank of Thailand (SME Bank) has already loaned 852 million baht to 339 SMEs who have a single financial account, president Mongkol Leelatham said.

SME Bank's five-year loans offer 5% interest for the first year and 6.75% for the remaining period. Each borrower can seek a maximum loan of 5 million baht or five times profit before tax.

The loan's other main features are a five-month grace period for principal and a five-day approval process.

The bank now charges SMEs that do not register under the single financial account at 9.125%.

Mr Mongkol said the bank may consider providing an additional 20 billion baht in loans to the scheme, taking the combined amount to 30 billion baht.

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