ADB hikes Thai GDP outlook on strong H1
The Asian Development Bank (ADB) has raised Thailand's economic growth forecast to 4.5% this year and 4.3% in 2019 after robust growth of 4.8% in the first half amid improving economic prospects.
"Looking ahead, we see high consumer confidence supporting domestic demand and the government's welfare programme for low-income earners helping prop up domestic demand," Thiam Hee Ng, a senior economist at ADB, said as the global lender launched its "Asian Development Outlook 2018 Update: Maintaining Stability Amid Heightened Uncertainty".
Public investment should remain strong based on the government's big-ticket infrastructure investment, while exports and tourism should also contribute to growth, Mr Ng said.
Having performed well in the first half, exports should continue to contribute to growth both this year and next. The dollar value of merchandise exports is forecast to continue to expand at an annual rate of 10% this year and next. While manufacturing will be the main source of exports, agricultural exports should also hold up well.
But high household debt of 77% of GDP at the end of the first quarter may constrain household spending, according to the latest report.
ADB's outlook supplement report issued in July upgraded Thailand's economic growth outlook to 4.2% from 4% predicted in the April report but kept its forecast for 2019 unchanged at 4.1%.
The Manila-based institute's latest view is more optimistic than the Bank of Thailand's forecasts of 4.4% this year and 4.2% in 2019.
Mr Ng said Thailand's inflation remains benign at 1.3% this year and 1.4% next, hovering at the bottom end of the Bank of Thailand's target range of 1-4%.
In the first eight months of this year, headline inflation year-on-year averaged 1.1% and core inflation averaged 0.7%, both up from 0.6% in the same period last year.
Regarding the US Federal Reserve's continuous rate hikes that have caused several emerging markets to come under pressure, he said that ample foreign reserves and a considerable current account surplus should safeguard Thailand from external shocks.
The second-largest economy in Southeast Asia has international reserves of more than US$200 billion (6.49 trillion baht), enough to cover 10 months of imports and then some.
"With inflationary pressures edging up but firmly under control, and with the balance of payments still comfortable despite capital outflow and baht depreciation, the central bank kept its policy interest rate unchanged at a low 1.5% to support the economy and firm up the economic rebound," ADB said.
Southeast Asia's growth is forecast at 5.1% this year, slightly lower than the previous view, as a combination of factors -- moderation in export growth, softer domestic demand, subdued agriculture, higher inflation, net capital outflows and a worsening balance of payments -- is dimming the growth outlook for this year in six of the 10 economies in the subregion, the ADB's updated report said.
The six economies are Indonesia, Laos, Malaysia, Myanmar, the Philippines and Vietnam.
Thailand and Brunei, by contrast, look set to outperform earlier forecasts, while Cambodia and Singapore will likely meet prior projections, the report said.