Thailand Economic Momentum Picks Up in 2015

Gross domestic product grew 2.8% from a year earlier in the three months to December, slowing from 2.9% in the third quarter, though slightly stronger than a median forecast of 2.65% by 14 economists polled by The Wall Street Journal.

On a quarterly basis, the Thai economy grew a seasonally adjusted 0.8% in the fourth quarter, compared with the poll’s median forecast of 0.9%. The country’s GDP grew 1.0% in the July-to-September period from the previous quarter.

Thailand’s economy expanded 2.8% in 2015, improving significantly from 2014’s revised 0.8% growth and slightly better than the poll’s 2.75% median forecast.

The National Economic and Social Development Board, the Thai government’s economic-planning arm, attributed the stronger-than-expected growth in 2015 to the government’s fiscal spending and investment, as well as higher household spending, which grew 2.5% from the previous year in the fourth quarter.

Weak exports continued to weigh on Thailand’s economy in 2015, contracting for the third consecutive year by 5.7% due to a slow global recovery and falling oil and farm-product prices. Overseas shipments make up about two-thirds of Thailand’s gross domestic product.

The slump in exports contrasted with an expansion in the tourism sector, which accounts for about 10% of GDP. Last year, tourist arrivals rose 20.4%, contributing to the 22.0% growth in tourism revenue.

Thailand’s private consumption and investment rose 1.1% and 1.0%, respectively last year. Economists believe public investment will again be the main growth driver this year, but some doubt it would be sufficient to support economic momentum in the face of external headwinds.

Pareena Phuangsiri, an economist at Kasikornbank, said drought and the possibility of exports stagnating are the economy’s main challenges this year.

“We think fiscal support alone is now insufficient to shore up domestic recovery amidst heightened external uncertainties,” said Charnon Boonnuch, an economist at Tisco Financial Group.

Last week, Deputy Prime Minister Somkid Jatusripitak said the government is planning to reduce the country’s dependence on exports and boost domestic purchasing power.

The Thai government cut its 2016 GDP growth estimate to 2.8%-3.8% from its earlier projection of 3.0%-4.0%.

NESDB Secretary-General Porametee Vimolsiri attributed the downward revision to the weak trade outlook and risks from a global slowdown, particularly in China, although the country’s economy should continue be supported by the acceleration in government spending and investment, especially in key infrastructure development projects.

But questions over the country’s growth outlook remain.

“We doubt growth will pick up strongly this year. Thailand’s unstable political situation will continue to hang over the outlook for private investment, while high levels of household debt will keep private consumption growth subdued,” Krystal Tan, an Asia economist at Capital Economics, said in a note. “Meanwhile, lackluster external demand and declining competitiveness will weigh on goods exports.”

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Feb. 14, 2016 11:49 p.m. ET