After running the country for nearly two years, the government finally has some good news: The economy has bounced back, albeit slowly. Nonetheless, this is a pleasant surprise.
The data released at the start of the week by the National Economic and Social Development Board (NESDB) showed that fourth quarter gross domestic product (GDP) came in at 2.8% which is higher than the same period last year, while overall 2015 GDP was 2.8%, against 0.8% in 2014.
The government deserves some credit for the performance which has proven difficult given the regional and global economic slowdown. One of the biggest surprises was the fact that private consumption accelerated by 2.5% during the quarter, while private investment and capital expenditure saw a rebound into positive territory with 1.9% year-on-year growth during the quarter. This was in sharp contrast to the 10.1% decline during the third quarter of the year.
The key to the success was the economic stimulus package that was aimed at accelerating the long awaited government budget disbursement. State expenditure rose by 41.4% against a 21.9% year-on-year increase during the third quarter of 2015.
All this data coupled with brighter prospects for the economy kept the Thai stock market in positive territory despite the sell-off in other markets at the start of this week. It was the market’s way of telling the administration that they had finally started to get their act together.
To help the already good data that came out in the last quarter of 2015, the latest statistics for the tourism sector, which accounts for about 10% of the country’s overall GDP, showed that tourist arrivals during the month of January alone rose by as much as 15% year-on-year to hit 3 million visitors with Chinese tourists being the single largest group.
If these tourists continue to head to Thailand, we are set to break yet another record. But we cannot be complacent because more than a quarter were from China where the economy does not seem as if it will stabilise anytime soon.
While the fallout from China, which is causing global concern, has had a limited impact as most people are gradually adapting to the situation, there are other darker clouds on the horizon. The much anticipated revival of the Japanese economy seems to be falling flat.
The country, which is one of Thailand’s leading export destinations apart from China and the United States, saw its fourth quarter GDP dip by 1.4% year-on-year, while the Chinese slowdown pushed Japanese exports down by as much as 13% in January 2016, the biggest slowdown in exports since 2009.
This kind of data is not going to allow our policymakers to sit still but they should be having sleepless nights as driving growth and keeping up the momentum will be no easy task in this environment.
Thailand, whose bread and butter for growth in the past few decades has been the export sector, has seen its exports drop by 5.6% year-on-year in the fourth quarter of the year on the back of China’s economic slowdown.
The outlook for the export sector is not that bright for 2016 either while the saving grace is most likely exports to neighbouring countries which have surprisingly shown some strength despite the weakening trends around the world. But then, how much these countries can absorb is a question many of our policymakers would not be able to answer.
The economic team, led by Deputy Prime Minister Somkid Jatusripitak, has managed to bring about some investor confidence, resulting in higher economic growth. The measures to stimulate private consumption since September 2015 managed to pay off as is evident from the data released by the NESDB.
But the challenge for the Somkid team for 2016 is how are they going to further stimulate the economy in light of the challenges facing the global economy. Will further stimulation of private consumption be the only way forward? Or should they take on some new and innovative means to keep the momentum going?
These are important questions for our policymakers. Yet, before they decide on any new measures that could create a further burden on the public, they should remember that household debt-to-GDP is expected to peak at 83.5% by the end of this year, a dangerous level. More importantly, stimulus measures if they happen to fail, could create strains on all sides.
Therefore, the best way forward is to continue with disbursements of state funds towards crucial infrastructure projects to allow money to flow into the system.
Umesh Pandey is Asia Focus editor, Bangkok Post.