TMB adjusts on meek SMEs

TMB adjusts on meek SMEs

An expressway construction site. TMB's research house expects private investment to remain low and weaken economic growth this year. PANUMAS SANGUANWONG
An expressway construction site. TMB's research house expects private investment to remain low and weaken economic growth this year. PANUMAS SANGUANWONG

TMB Analytics, TMB Bank's research house, has trimmed its forecast for the country's economic growth to 3.3% this year from 3.5% after slashing its private investment growth projection.

The research unit lowered its private investment growth forecast to 0.25% in 2017 from 3.1% earlier in response to lingering weakness from small and medium-sized enterprises (SMEs) that are part of the supply chain for large local companies, said senior vice-president Naris Sathapholdeja.

SMEs make up 99% of all business operators, and employ 20% of the workforce. SME revenues account for 43% of total national income contributed by business operators.

The 3.3% growth forecast is slightly higher than the central bank's 3.2% forecast for this year, but below the Fiscal Policy Office's 3.4% projection.

Amid the gloomy prospects of private investment, state investment and exports will be the main engine forces for economic growth in 2017, Mr Naris said.

TMB Analytics estimated that public investment growth will accelerate to 15.1% this year from 9.9% last year largely due to big-ticket infrastructure projects under the government's roadmap.

Thailand's export growth is expected to pick up to 2% this year from 0.5% last year and Asean markets, Cambodia, Laos, Myanmar and Vietnam (CLMV) in particular, are expected to buttress growth, Mr Naris said.

Thai outbound merchandise shipments to the Asean market are expected to reach 6.5% this year, compared with a 0.2% contraction in 2016.

Even though exports may grow by 2% this year, it is not sufficient to solely push the country's economic growth the full growth potential of 4-5%, he said, adding that the export sector needs structural reform.

Mr Naris said domestic consumption could bounce back this year as farm prices rise and the five-year lockup period of cars bought under the first-time car buying scheme lapses, improving the ability of households to repay debt.

TMB Analytics predicted domestic consumption growth will come in at 3% this year, up from 2.4% last year.

The research house also slashed its commercial lending growth forecast to 5.7% from 6.3% in 2017 in line with lower private investment estimates.

Despite the recent US Federal Reserve rate hikes and the increase of short-term prospects, the Bank of Thailand's Monetary Policy Committee is expected to keep its benchmark rate unchanged at 1.5% until the end of this year to accommodate the positive economic momentum.

However, the rate-setting panel will be under pressure if the Fed raises the rate to 2% as expected next year, Mr Naris said.

"The BoT is expected to increase policy rate to 2% in the second half next year, and that will be a suitable time, in line with the economic pickup anticipated under government's roadmap," he said.

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