FPO: Growth risks waning, prospects up

FPO: Growth risks waning, prospects up

Risks to economic growth, including oil prices and a potential global trade war have subsided, making the Fiscal Policy Office (FPO) optimistic for this year.

Falling crude oil prices after the recent surge is curbing pressure on the Thai economy, said Soraphol Tulayasathien, director of the bureau of macroeconomic policy under the FPO.

The crude oil price declined to US$65 per barrel on June 3 from last week's high of $72 on worries about announcements from both Saudi Arabia and Russia about easing production cuts and fading concerns about the impact on renewed US sanctions on Iran, as many European countries did not follow in the US's footsteps.

The FPO raised its forecast for the average crude oil price this year to $67 a barrel from $64. Last year's average was $53.1.

He said the likelihood of a global trade war between China and the US has lessened, even though the US has decided to impose tariffs on steel and aluminium from Europe and Mexico.

Moody's Investors Service also believes the political situation is no longer a headwind for the Thai economy, he said.

Economic growth improved to the highest rate in five years to 4.8% year-on-year for the first quarter, up from 4% in the previous quarter.

The National Economic and Social Development Board raised its 2018 economic growth forecast to 4.2-4.7% from 3.6-4.6% predicted in February, and the FPO late last month upgraded its growth outlook to 4.5% from 4.2%.

The FPO has forecast that headline inflation will hit 1.2% this year, up from 0.7% last year, Mr Soraphol said.

He said the inflation outlook is based on the Bank of Thailand's estimate that globalisation and e-commerce, which allow consumers to purchase products at cheaper prices, are causing subdued inflation.

In the meantime, business confidence improved above the threshold of 50 in May due to increased business activities after April's long holiday, according to the Bank of Thailand's Business Sentiment Index (BSI) report.

The BSI rose to 51.5 last month from 49.5 in April following rises of most sub-indices.

The strong confidence was mainly from respondents in the manufacturing sector, especially in the automotive, the electrical appliances, the steel, the chemicals and petroleum and the plastics and rubber sectors, whose confidence in orders booked from both domestic and foreign markets, as well as production and performance, has increased.

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