Finance Ministry hikes growth outlook to 4.5%

Finance Ministry hikes growth outlook to 4.5%

Uptick based on global rebound and Q1 result

An overhead view of cargo containers at Bangkok port. The Finance Ministry expects merchandise shipments to grow by more than 8% this year.  PATTARAPONG CHATPATTARASILL
An overhead view of cargo containers at Bangkok port. The Finance Ministry expects merchandise shipments to grow by more than 8% this year.  PATTARAPONG CHATPATTARASILL

The Finance Ministry has raised Thailand's GDP growth forecast for the year to 4.5% after the economy expanded by a surprising 4.8% in the first quarter, the fastest pace in five years.

The new forecast is based on assumptions that merchandise shipments will grow by more than 8% and the global economy will expand by close to 4% rate this year, said Finance Ministry spokeswoman Kulaya Tantitemit.

The Fiscal Policy Office (FPO), the ministry's think tank, earlier predicted 4.2% growth for 2018. But after the robust first-quarter GDP reading, the National Economic and Social Development Board raised its GDP growth forecast range to 4.2-4.7% from 3.6-4.6% in February, while the Bank of Thailand's Monetary Policy Committee will review its 4.1% forecast at its June meeting.

Ms Kulaya said growth risks, particularly external factors, have subsided.

State investment is expected to expand by close to 10% this year, compared with the FPO's current forecast of 8.9%, while private investment growth is seen rising by at least 3%, or a bit below the projection of 3.8%.

The FPO also raised the inflation forecast to 1.4% this year from 1.2% previously. The office is scheduled to review this year's GDP growth projection in the next two months.

A clearer political climate would also support the country's economic growth, Ms Kulaya said, while overall farming income remains weak.

Soraphol Tulayasathien, director of the bureau of macroeconomic policy under the FPO, said that risks to world economic growth, including the potential trade war between the US and China and geopolitical tensions in the Korean Peninsula, have receded.

A source at the Finance Ministry said that Moody's Investors Service, which recently met Finance Ministry officials while surveying Thai economic data, has changed its view and says politics is no longer a headwind for the economy.

The international credit rating agency previously voiced concerns about the military-led government.

In the meantime, Ms Kulaya said the government managed to gather 1.29 trillion baht in revenue for the seven months to April, exceeding the target by 60.5 billion or 4.9%.

The higher-than-expected revenue was due to income contribution from state enterprises and non-tax-collecting state agencies, which surpassed targets by 30.4 billion and 23.1 billion baht, respectively.

During the October-April period, all three tax-collecting agencies fell shy of targets.

The Revenue Department missed its target by 6.55 billion baht or 0.7% at 899 billion baht, largely due to lower-than-expected revenue from value-added tax and personal income tax.

However, the Revenue Department's seven-month tax collection was 3.7% higher than a year earlier.

The shortfall was narrowed by petroleum tax revenue being 283% higher than targeted and corporate income tax revenue coming in 2.3% higher than expected.

Ms Kulaya said upstream petroleum operators' earnings and retroactive tax payments contributed to stellar petroleum tax collection.

The Excise Department gathered 322 billion baht for the seven months to April, missing the target by 2.28 billion baht or 0.7%.

Excise tax on fuel, liquor and beer fell short of target by 7.38 billion baht, 4.34 billion and 2 billion, respectively, while those for tobacco and automobiles outpaced the target by 4.67 billion baht and 4 billion, respectively.

Tobacco is liable for higher excise taxes with the new excise tax law, effective from last Sept 16, Ms Kulaya said, adding that the larger-than-targeted excise tax collected from cars could be down to increased auto sales.

The Customs Department fetched 63.3 billion baht in tax revenue during the first seven months of fiscal 2018, falling short of the target by 2.07 billion baht or 3.2%.

Separately, the Stock Exchange of Thailand index Thursday closed at 1,732.51 points, down 21.09 or 1.2% from Wednesday's close.

Foreign investors were net sellers of 4.7 billion baht, with brokerage firms selling 134 million baht worth of shares.

Philip Securities Thailand said investors' sentiment remains shrouded by negative factors after US President Donald Trump's order for a national security probe into vehicle imports.

On the domestic front, political uncertainty still looms amid the result of an assessment on the organic bill related to the election of MPs and possible government intervention to offset rising energy prices, said Philip Securities Thailand.

The government's possible intervention has put pressure on energy stocks, subsequently resulting in a downward SET index outlook, the securities firm said.

Energy stocks fell considerably Thursday, with PTT down 5.1% and PTTEP and BGRIM dropping 3.1% and 7.4%, respectively.

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