Optimism despite obstacles
State officials speak on what to expect for the economy this year
Thailand's economy will face a number of disruptions this year, from the US-China trade war to domestic elections, while overall economic growth is expected to marginally decrease, according to a panel of government officials and a banker.
Speaking Monday at a seminar titled "Next Thailand Economic Challenge", the group discussed the outlook this year for the economy.
While the general view was positive, the spectre of global problems and a possible economic slowdown tempered optimism, driven by the country's likely technological progress.
Discontinued policies, poor management and political conflict may frighten investors, both local and foreign, into fleeing Thailand for Vietnam and Malaysia, warned Deputy Prime Minister Somkid Jatusripitak.
Vietnam and Malaysia have been active in strengthening their competitiveness, he said.
"Thailand may no longer be able to compete in the future with the two Asean members if our development gets stalled," he said. "The global economy remains ridden with uncertainties, led by the trade spat between China and the US as well as political problems in EU, especially in France and Britain," he said.
According to Mr Somkid, external risks will dampen the growth prospects of exports, which account for 70% of the country's GDP.
At home, he warned the general election will also pose the risk to the economy.
"If political conflicts happen again, Thailand will definitely lag behind other members and may take longer to recover," said Mr Somkid. "Even Thai investors will move out of Thailand to active competitors such as Vietnam and Malaysia, where there is relatively more efficient management."
He said Thailand is expected to end last year with growth of between 4-4.2%, adding that economic growth this year will be driven largely by private investment and tourism.
"The government will take 4-5 months to continue reforms in a bid to restructure the economy to focus more on local economic development and digital transformation among small and medium-sized enterprises and community business development, especially in the farm sector," said Mr Somkid.
He said the government is also committed to continuing the main infrastructure development at the Eastern Economic Corridor (EEC), as well as revving up the Southern Economic Corridor (SEC) development.
Economic and social reform should be continued because changes in policies will make investors less confident in Thailand, he said.
Mr Somkid said digitalisation is also key for business. The next government should continue digital infrastructure development.
"This year is crucial as Thailand assumes chairmanship of Asean," he said. "To be a gateway to CLMV [Cambodia, Laos, Myanmar and Vietnam], all parties should join hands to strengthen Thailand's role to not only be outstanding in the region, but also in the world."
CHALLENGES AND OPPORTUNITIES
Thai industries and the overall economy will be tested by a number of internal and external factors in 2019, however these challenges could provide opportunities for investors, says Industry Minister Uttama Savanayana.
The external factors he referred to are international political tensions, the US-Sino trade war and a possible economic slowdown in Europe.
Internal factors include the prospective success of government projects such as the EEC scheme and 12 targeted industries under the S-curve policy that will be the main factors governing whether the economy will grow steadily this year.
"The general election was delayed and the government hopes that will not hurt the domestic economy, but the government will stick to the time line," he said.
Mr Uttama said the economy has strong growth potential this year thanks to the tourism, service and export sectors.
He said higher telecom technology such as 5G will be a challenge in 2019 as many industrial sectors have to adjust to handle rapid changes and improve.
Mr Uttama said the ministry has prepared human resources and training programmes to further develop the country's workforce for the S-curve industries.
"We will provide new platforms to improve many skills in the labour market as workers have to handle higher industries that the government is promoting for the corridor," he said.
Mr Uttama said 2019 will see new investment flows into the EEC scheme. One of the 12 targeted industries is new-generation automobiles, which has attracted over 30 billion baht from automakers to assemble electric vehicles locally.
He said the government is promoting a bioeconomy scheme to improve local agriculture prices and increase incomes for local farmers, mainly in northeastern and northern provinces.
Notwithstanding external challenges, the government is adamant Thai exports will grow by 8% as expected this year.
"Despite the downward trend of the world economy, ongoing trade war and political changes at home, we remain positive that Thai exports are still on course for good growth," said Commerce Minister Sontirat Sontijirawong.
"The government-initiated 12 targeted industries are expected to help Thai exports edge out competitors," he said.
Mr Sontirat suggested Thai entrepreneurs shift their focus to the Asean market, which accounts for 25% of Thai exports, followed by China, India, and Latin America.
He said the ministry has already ordered related departments to ramp up tapping into second-tier Chinese cities.
Mr Sontirat said the Thailand-China relationship is at a 20-year peak, with tightening cooperation on several projects to increase trade and investment.
For example, a Hong Kong Economic Trade Office will be launched next month in Thailand, offering a good opportunity for Thai entrepreneurs to secure business matching deals with Hong Kong investors to tap into China.
He said Thailand and South Korea are scheduled to hold a joint trade committee meeting in the first half of this year to create business linkages to stimulate more bilateral trade and Korean investment in Thailand.
In a joint move to narrow income disparity, the ministry will beef up efforts to promote small and medium-sized enterprises to tap into e-commerce, notably in CLMV, which has a combined 200 million people.
He said the e-commerce model from China will be also applied to develop community businesses and rural economies, to help communities to generate more income.
The challenge is to make related parties work together to turn policy into concrete action, said Mr Sontirat.
"Above all, Thailand should keep developing the farm sector, which is the cornerstone of Thai industry. Innovation should be injected and enhanced to tackle low farm prices," he said.
NEW YEAR, NEW TECH
The government has promoted the Thailand 4.0 policy and aspires to a digital-driven economy to ensure competitiveness.
Suvit Maesincee, the science and technology minister, said the Thailand 4.0 policy has been pushed in 13 categories such as large science infrastructure, big data and intelligence systems, S-curve tech, smart farmers, a regional science park innovation hub, the Startup Nation roadmap, and the EEC.
"Thais need to see the momentum of digital transformation and innovation growth in the same way economic growth is viewed," he said.
The critical factor is the upcoming general election.
Mr Suvit said the country needs the next government to continue the digital transformation, especially through the three major pillars of economic, business and human transformation.
Economic transformation comprises digital transformation and technology capability.
Business transformation means the business system has to transform its operational management with digital innovation.
Human transformation covers building up careers for the future and massive re-skilling of the population.
Mr Suvit said the economic world has been changing dramatically, in a manner called VUCA (volatility, uncertainty, complexity, and ambiguity). The VUCA concept is gaining relevance as a way to characterise the current environment and leadership is required to navigate it successfully.
Thailand's economy needs to be transformed into a value economy, driven by wisdom and innovation through vertical industries such as biotech, Internet of Things (IoT), blockchain, and virtual reality, he said.
Mr Suvit said overall expenditure for R&D and innovation in the country has reached almost 1% of GDP, up from 0.25% in the past five years, thanks to the government's series of stimulus packages and private sector awareness in dealing with the new economy.
JUST A BIT SLOWER
Krungthai Bank (KTB) forecast the country's economic growth will expand at a slower pace of 4.1% this year from 4.3% predicted for 2018 amid the mounting uncertainties, said Roong Mallikamas, senior executive vice-president at KTB. This year's projection has already taken into account impacts from the trade dispute, she said.
"A sharp economic adjustment is expected to be seen sporadically, reflecting how investors are wary of the uncertainties," said Mrs Roong.
This year's economic growth forecast is based on the assumption that Thailand's merchandise outbound shipments will grow 4-5%.
The US economic growth momentum is expected to continue, with improving employment and still-benign inflation, while two hikes are expected by the Federal Reserve fund rate this year, less than the three increases estimated earlier, said Mrs Roong.
The Chinese economy is expected to slow down in the long run, crippled by the trade spat.
"The Bank of Thailand is expected to raise the policy rate another 0.25 percentage points this year as the central bank is prioritising corporate companies and households that earlier enjoyed benefits of low rates, while small business operators' debt liabilities remain low because they still cannot obtain bank loans. I believe the central bank will issue measures to build up stability for particular groups. Macroprudential measures are expected periodically," she said.
The Bank of Thailand's rate-setting panel in December hiked the one-day repurchase rate by 25 basis points to 1.75% after keeping the rate at 1.5% since 2015.
The baht remains a safe haven for foreigners, but it may not reflect the country's economic fundamentals, so business operators should hedge the currency against foreign exchange risks, said Mrs Roong.