Foreign investment into Thailand surged in the first quarter, further evidence that Southeast Asian nations are benefiting as businesses seek new locations in the region to avoid an escalating US-China trade war.
Applications for foreign direct investment climbed to 84.1 billion baht in the first quarter, up 253% from the same period last year, according to Pisit Puapan, executive director of the Ministry of Finance’s Macroeconomic Policy Bureau, citing official data from the nation’s Board of Investment.
Thailand joins countries like Malaysia and Vietnam that are reporting soaring investment as global supply chains shift. Approved FDI into Malaysia’s manufacturing rose 127% in the first quarter from a year ago, and the central bank governor recently said the positive spinoff from the trade war could add 10 basis points to economic growth.
The jump in FDI in Thailand comes at a time of weakening export demand, which is weighing on the economy.
The Finance Ministry in April downgraded its growth outlook for this year to 3.8%, based on a 3.4% export rise.
The expected gains in shipments in the six months through December are mainly due to base effects, says Mr Pisit. (Finance Ministry file photo)
In an interview in Bangkok on Thursday, Mr Pisit said exports may show some improvement in the second half of this year and solid growth in tourism helping to underpin the economy.
The expected gains in shipments in the six months through December are mainly due to base effects given the "dramatic change" in the goods export picture in the same period last year when global growth deteriorated, he said.
Longer-term, the ministry still sees reasons to be upbeat about exports. More Chinese investors are coming to Thailand as they spread out across Southeast Asia — potentially a result of both tariff strains at home as well as rising labor and production costs in China.
On the services side, Mr Pisit sees Thailand continuing to benefit from solid growth in tourism. The nation is on track to achieve 40 million visitors this year, bolstered by a rise in Indian, Japanese and Malaysian tourists even as arrivals from China continue to slide.
Gen Prayut said in Friday the trade war is a serious concern for Thailand that has the potential to undermine global business.
"We have to alleviate this tension and create a greater balance," he said in a speech at the Bloomberg Asean Business Summit in Bangkok on Friday.
The trade dispute had led to "greater uncertainty in the global economic situation and greater competition", he said, noting Thailand was trying to expedite the Regional Comprehensive Economic Partnership (Rcep) trade agreement.
"Even though the economy appears to slow down, the Thai economy still has good fundamentals for future growth," the general said. "The government will continue with the focus on infrastructure projects, investments in key industrial zones and support for the agricultural sector."
Referencing the contested March 24 election that saw him win a second term in office, Gen Prayut said: "I can assure the private sector that Asean and Thailand are ready."
The incoming administration faces the weakest economic growth since 2014 as exports, investment and tourism fizzle.
Gen Prayut has prioritised infrastructure and technological upgrades, as well as removing red tape, to bolster the economic outlook.
Some major projects were slowed by the delay in government formation after the March election.
The government has said Thailand will use its position as Asean chair to push for the finalisation of the 16-nation Rcep trade pact — which is backed by China — before the end of 2019.