This May Be as Good as It Gets for Thailand's Economic Growth

(Bloomberg) -- Thailand's military government can look to 2017 for the economy's best performance in five years but the strength of the recovery is expected to wane.

Gross domestic product probably increased 3.8 percent last year, the fastest pace since 2012, before easing to 3.7 percent this year and to 3.6 percent in 2019, according to a Bloomberg survey. Once prized in Southeast Asia for its economic strength, Thailand's growth is lagging peers with economies in Vietnam and Philippines expanding more than 6 percent.

“2017 and 2018 will certainly be better compared to the last few years but the underperformance of the industrial sector, particularly manufacturing, will likely continue,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. “What's really missing here is the lack of private investment before we see growth closer to 5 percent.”

Thailand's expansion has slowed this decade, averaging 3 percent through 2016 compared with 4.6 percent in the 10 years through 2010. Prime Minister Prayuth Chan-Ocha is increasing spending to a record in fiscal year 2018 which started in October while pushing ahead on a $46 billion infrastructure plan including a high-speed rail venture with China and mass transit lines in Bangkok to boost growth.

Rising exports and tourism are also giving the economy a boost and the state planning agency forecast growth of as much as 4.6 percent this year.

“Thai economy will be smooth like Teflon-coating pan as we expect investment to pick up, leading to a more broad-based recovery,” said Amonthep Chawla, head of research at CIMB Bank Thai Pcl. “Election will be the key local risk for next year. But it doesn't have much impact to the economy compared to risks from global factors. Our economy has proven its resiliency. Even if the election is delayed, the economy can still grow.”

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But even with all that optimism, private investment remains low. Wages are weak and debt burdens for households and companies are elevated, adding to risks that the recovery may falter.

The military, which has held power since a coup in 2014, said it's on course for an election in November, although doubts remain. The Bank of Thailand has held its benchmark rate near a record-low 1.5 percent since 2015 and most economists predict no change through 2018 though some forecast an increase.

Thailand's exports are coping with the strength of the baht, which advanced more than 9 percent last year, among the best performers in Asia. The central bank in December raised its forecasts for export growth to 9.3 percent for 2017 and to 4 percent for 2018.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net.

To contact the editors responsible for this story: Niluksi Koswanage at nkoswanage@bloomberg.net, Nasreen Seria at nseria@bloomberg.net, Karl Lester M. Yap, Tony Jordan

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