Bank of Thailand: Economy failed to reach growth potential

  • Thailand’s economy gained further traction in 2017, but has not reached its growth potential, while an accommodative monetary policy stance is “necessary” to shore up domestic demand going forward, says the Bank of Thailand.
  • “Although the macroeconomic outlook is clearly improving, with signs of small and medium-sized enterprises in many sectors beginning to gain benefits, the factors underpinning domestic demand, especially employment conditions, remain soft,” the central bank’s Monetary Policy Committee (MPC) said in its latest edited minutes. Together with the effects of elevated household debt, these factors have resulted in relatively low demand-pull inflationary pressures, the minutes said.
  • The economy grew by 4.3% y/y in 3Q17 – the strongest growth in 18 quarters – after expanding by 3.8% in 2Q17 and 3.3% in 1Q17, according to the National Economic and Social Development Board. The expansion was driven by exports, personal spending and private investment. In the first nine months of 2017, the economy grew by 3.8% y/y.
  • The MPC has upgraded its 2018 GDP growth outlook from 3.8% to 3.9%. The upward revision is attributed to continued improvements in merchandise exports and tourism, underpinned by growth among Thailand’s trading partners. There was stronger than expected growth in external sectors, while domestic demand is likely to expand at a slightly slower pace than previously predicted because of the temporary postponement of some infrastructure investment projects, the minutes said.
  • “While the Thai economy is gaining traction, growth has yet to trickle down sufficiently and in a broad-based manner to employment and household income,” the minutes said. “This is seen by a dip in employment within the non-agricultural sectors, especially low-paid, day labourers in the manufacturing and construction sectors, and self-employed business owners.”

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