Raise productivity and improve the domestic economy says ADB
The Asian Development Bank (ADB) recently delivered its Asian Development Outlook 2012 report which basically warned the nations of Asia that they would need to concentrate on raising productivity and look inwardly at improving their domestic economies as the global growth is likely to remain moderate in the short to mid-term.
In its assessment of Thailand, the ADB lowered its gross domestic growth projection figure from 5.5 percent to 5.2 percent for 2012. Looking at the prospects for 2013 in Thailand, the ADB had previously suggested the country would witness a 5.5percent growth, but has now cut this quite sharply to an even 5 percent.
Of course the government, via its spokesman Deputy Prime Minister and Finance Minister Kittiratt na-Ranong, suggested Thailand would still achieve its 5.5 to 5.7 percent growth target for 2012.
He noted, “The economy can’t rely on exports, which are suffering from the impacts of the global economic slowdown. But domestic consumption and investment continue to perform well and together with the government’s plan to speed up budget disbursement this should help bolster growth.”
This was in contrast to the statement issued by the ADB’s chief economist for the Thailand sector who claimed the government’s rice pledging policy, as one example, would prove a long-term failure.
The ADB suggested the Thai government’s policies which were focussed on domestic consumption will be unsustainable over the long term unless moves are made to improve productivity.
The ADB believes the government would be better placed by implementing measures to improve rice yields and marketing the undoubted quality of Thailand’s rice breeds.
The Finance Minister claimed Thailand was on track to see anywhere between 20.5 and 21.5 million foreign visitors in 2012, and this sector of the economy will also greatly aid in domestic consumption.
While this is true in the short term, the long-term future of high tourism numbers is inextricably linked with the economic health of the countries from which the tourist numbers come.
For example, China is increasingly important as a source of large tourist numbers into the kingdom. It has an ever-growing middle class with greater disposable income and so the numbers are likely to grow in the short to medium term.
Nonetheless, this can only be sustained as long as the Chinese economy itself continues to grow and increasingly there are signs its domestic numbers are weakening alongside most of the rest of the global economy.
So, a reliance on high tourism numbers to help sustain domestic consumption in Thailand has its risks.
The ADB’s chief economist stated, “Developing Asia must adapt to a moderate growth environment and…do more to reduce their reliance on exports…”