Public investment and tourism cited as crucial to the economy
The Finance Ministry’s think tank, the Fiscal Policy Office (FPO), has made it clear that public investment and the tourism sector are the two key sectors upon which it is hoping the overall economy can hang tough for the rest of 2015. This came after a hoped-for boost in exports was dashed amid continuing poor numbers.
The FPO is in the process of assessing whether public investment and tourism will completely offset the export decline, although the recent outbreak of the Middle Eastern Respiratory Syndrome (MERS) will not provide any relief on the tourism side of the economic equation.
Another key factor in the overall health of the Thai economy will be whether the Comptroller General’s Department achieves its 87 percent target for disbursement of the investment budget by the end of the fiscal year on 30 September.
The department is of the opinion it will reach at least 85 to 86 percent of disbursements by the end of the fiscal year, with 187 billion of the 449-billion total budget having been allocated by the end of May. That was 41.6 percent of the total budget and by the end of May there were 209 billion baht’s worth of contracts signed, which pushed the total to 45.6 percent.
The FPO recently announced that Thailand could achieve the stated target of 3.7 percent economic growth if a minimum of 70 percent of the public investment budget was allocated and disbursed. That figure seems likely to be surpassed. Notably, the Bank of Thailand reduced its growth forecast by 0.1 percent in June, down from a previously expected 3.8 percent.
As of the end of May, almost 65 percent (or 1.67 trillion baht) of the 2.575-trillion baht budget expenditure for the 2014-2015 fiscal year had been disbursed.
The Commerce Ministry issued a report showing that exports in April had declined by 1.7 percent year-on-year, totalling the equivalent of $US16.9 billion. That was the fourth successive month of contraction in the exports sector, albeit April was the smallest contraction of the four months.
Nonetheless, the end result is that by the end of April exports had contracted by just under four percent in the first four months of this year and show little sign of recovering in the short term.
The bright spot for the economy came with the quite tremendous surge in tourist numbers, up by a whopping 23.9 percent for the first four months of this year to 10.3 million arrivals.
The FPO will be releasing its latest forecast for Thai economic growth towards the end of July.