Stimulus spending, tourism help bolster Thai growth

Tourists from Singapore posing for a selfie at the Chatuchak market in Bangkok in 2014.
Tourists from Singapore posing for a selfie at the Chatuchak market in Bangkok in 2014. PHOTO: BLOOMBERG

BANGKOK • Thailand's economy showed signs of a turnaround with its fastest quarterly growth this year, as the military government's stimulus spending and a rise in tourist arrivals offset weak local demand and exports.

Gross domestic product expanded 1 per cent in the three months through September from the previous quarter, the National Economic and Social Development Board (NESDB) said yesterday.

That compares with the 0.6 per cent median estimate in a Bloomberg News survey of 20 analysts. GDP climbed 2.9 per cent from a year earlier, more than the median forecast of 2.5 per cent in a separate survey.

"There are reasons to think the economy's recovery has further to run over the coming quarters," said Ms Krystal Tan, Singapore-based Asia economist at Capital Economics. While the recovery is unlikely to be as strong as some analysts expect, the country's budget that began at the start of last month includes a 20 per cent year-on-year increase in public investment, and an improvement in global conditions should support exports, she said.

Premier Prayut Chan-o-cha is seeking to accelerate spending on railways, roads and checkpoints to boost border trade with neighbouring countries as faltering overseas sales of Thailand's disk drives and automobiles subdues South-east Asia's No. 2 economy.

The central bank this month kept its key interest rate unchanged for the fourth straight meeting as it waits to assess if the stimulus will succeed in boosting local demand.

"Fiscal policy is the most effective tool at the moment," said Mr Tim Leelahaphan, a Bangkok- based economist at Maybank Kim Eng Securities Thailand.

"We have to see very, very weak data points in order to justify another cut, but we are not going to see that because in the final quarter it will be much better than the third quarter," as some stimulus policies are implemented, he said.

Accelerating government spending and a gradual recovery of the global economy and export prices will support the economy next year, said Mr Porametee Vimolsiri, secretary-general of the NESDB. Spending and tax benefits from stimulus packages will help, with the government set to spend 359 billion baht (S$14 billion) during October and November from six stimulus measures, he said.

"Tourism remains our hero," he said. Even with the short-term impact from the deadly Bangkok bombing, tourist arrivals last quarter totalled 7.3 million, rising 24 per cent from a year earlier, he said. "If things go as we expect, the economy will continue to recover this year and next." The agency predicts GDP growth this year will be 2.9 per cent, the fastest in three years.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 17, 2015, with the headline 'Stimulus spending, tourism help bolster Thai growth'. Print Edition | Subscribe