Infrastructure spending could lead to large GDP gain in 2015

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Infrastructure spending could lead to large GDP gain in 2015

A former secretary-general of the UN Conference on Trade and Development, Supachai Panitchpakdi, recently told an economic forum that Thailand’s GDP could rise by as much as five percent in 2015, primarily on the back of the government’s planned infrastructure spending.

While this is the kind of positive news the country has been hoping to hear for some months now, the reality is that the comment came with the proviso that an anticipated flood of foreign capital may lead to foreign exchange volatility, and the pace of recovery across the world’s economies may also be a risk factor for the Thai economic paradigm.

Nonetheless, the former secretary-general claimed Thailand’s economic fundamentals remained robust and the overall political situation had settled down and was expected to remain calm into 2015.

Mr Supachai suggested the government concentrate more on the promotion of tourism into Thailand, as this would help spread income directly to the people. He also wanted the government to encourage the private sector to embrace modern technological advances in their manufacturing.

Mr Supachai appeared to be of the belief that recent negatives which had impacted the overall tourist numbers coming into Thailand, such as martial law and, arguably more importantly, high-profile murder and other criminal cases, would prove to be short-term impediments that will be overcome.

The former secretary-general suggested the government’s investment and spending plans would begin to have an impact around the middle of 2015.

Of course, the optimistic projections of Mr Supachai can be tempered by the mutterings from the National Economic and Social Development Board (NESDB) which clipped its 2014 GDP forecast from 1.5 to 2.5 percent in May to just 1.5 to two percent just three months later. It also cut the export growth estimate for this year to just two percent, down from what now looks to have been a largely unattainable 3.7 percent. The NESDB had also been compelled to cut overall total investment for 2014

Nonetheless, the NESDB is also projecting an overall optimistic outlook for 2015, basically agreeing with Mr Supachai that GDP could grow by up to 4.5 percent, although it has a lower starting point, at 3.5 percent.

Thailand narrowly avoided a technical recession when the economy managed to expand by 0.4 percent year-on-year in the second quarter of this year, across both the agricultural and non-agricultural sectors. This followed a contraction of 0.5 percent for the first quarter of 2014.

Naturally, all economic eyes will be focussing on the figures coming out of the next two quarters as they relate to GDP, with the hope that the numbers continue to show growth, however minimal, rather than stagnation or, worse, contraction.