The economic team of the Prayut Chan-o-cha government may be popping a few bottles of Champagne after the stellar economic data released by both the National Economic Social Development Board (NESDB) and the Ministry of Commerce.
The NESDB on Monday announced the country's economic growth data during the third quarter this year, revealing the economy grew at its fastest pace in more than four years with gross domestic product (GDP) growing by 4.3% year-on-year. This was better than the consensus which had anticipated GDP growth of 4.2% for the third quarter and was also at a faster clip than the 3.8% growth during the second quarter of this year and 3.3% in the first quarter.
The solid data helped push GDP growth for the nine months of 2017 to 3.8% year-on-year. The NESDB attributed the rise to the continued expansion of private consumption, a recovering manufacturing sector and an outstanding performance by the export sector.
The country, where private consumption has been sluggish, experienced growth of 3.1% year-on-year in the third quarter, in line with improving income conditions, while private investment rose by 2.9%, supported by an expansion of investment in machinery and equipment.
Among the sectors that performed well was tourism which continued to expand steadily. During the third quarter, total tourism receipts rose by 9.5% year-on-year to 693.4 billion baht, boosted by foreign tourism receipts of 453.4 billion baht, up 8.8%, and Thai tourism receipts of 240 billion baht, up 11%.
Although government investment contracted by 2.6% because of delays in spending on state projects, the sector that delivered the strongest performance in the nine-month period was exports which grew by a healthy 12.5% in the third quarter to US$61.6 billion (2.02 trillion baht), its highest growth rate in 19 quarters. Meanwhile, the manufacturing sector expanded by 4.3%, its best showing in 18 quarters.
Exports, which accounts for more than half of the country's GDP, have been outperforming this year and even the data for the month of October released on Wednesday showed continued double-digit growth, thus giving reason for the government to celebrate.
The export sector registered 13.1% year-on-year growth in October and this helped bring year-to-date (10-month) growth to 9.7% from the same period last year. This prompted the Ministry of Commerce to revise up its export target for the year to 10%.
Surprisingly, exports have grown at these levels despite the Thai baht appreciating by as much as 8% this year. The stronger baht has also helped increase imports as both capital and consumer goods imports have become cheaper with imports rising by as much as 14.6% so far this year.
But despite these decent numbers that government agencies have been releasing, another area is not looking so rosy.
Research by the Nielsen Company reported that the sales value of fast moving consumer goods (FMCG), which includes the basic necessities that people use in their daily lives, has contracted since June last year and suffered its biggest dip in May of this year, falling by 7.6% year-on-year. The research firm said sales value saw a slight recovery of 1.3% in September but last month it fell back into negative territory with a 1.8% contraction.
What this is suggesting is that the economic momentum that the manufacturing sector is witnessing is not having a trickle-down effect on grassroots people and that more work needs to be done to pull the country out of its current state.
With government spending likely to see a slowdown in the months ahead, the possibility of broad-based economic growth looks remote and the government's economic team needs to look at ways to spur growth in a more sustainable and inclusive manner than the country has experienced in the past year or so.