2015 Thailand Business Review

January 18, 2016 | Sharon Cheong

2015 has been generous to Thailand; more so than back in 2014, when it had a 0.7 percent growth. Slowly but steadily, the Thailand economy staged a comeback from last year. It has gained momentum into this year, 2016, thanks to the 2.9 percent GDP expansion it experienced in the third quarter of 2015.

This is significant because this is above market expectations and driven by higher levels of spending by the Thai public, along with greater demands for Thai exports. These are the results of the government's investment programs: a growth that many believe will continue this year. 

The Cautiously Optimistic Thailand 

Thailand is cautiously optimistic that it will gain bigger growth in 2016 owing to its efforts to ramp up spending on infrastructure, with the key beneficiaries being technology, industry, communications, and transport. This caution manifests itself with the economic forecast of 2.7 percent growth that the Bank of Thailand (BOT) continues to maintain. More specifically:

  • Possible Forecast Downgrade: Because of the weaker demand from Asian markets in general and China in particular, the forecast might be further downgraded by BOT.
  • Manufacturing Output: For much of 2015, manufacturing output for Thailand was slow. However, this changed in the latest quarter, where it began to pick up due to the ramped-up activity of the automotive sector.
  • Agriculture Sector: The Thailand agriculture sector had negative growth because of El Niño droughts and lowered prices of commodities, which in turn had an impact on rice production as well.
  • Household Spending: Although consumer confidence is lagging, there's still a marginal third quarter growth in household spending. This suggests that consumers are wary because of the low inflation and slow economic growth of the country.
  • Headline Consumer Price Inflation: October got a slight month-on-month increase in headline consumer price inflation because of seasonally elevated retail food and fuel prices. This happened in spite of prices falling for 10 consecutive months.
  • Core Inflation and Domestic Demand: Core inflation was up 1.11 percent YTD excluding food and fuel. This economic growth, however slight, can further push domestic demand and assist return inflation to a positive outcome. 

Positive Sector Signals and Looking Ahead

In order to rally weak inflation, the Thai government will implement lowered interest rates. The Ministry of Commerce showed data that headline inflation is down by 0.77 percent year-on-year in October. Indeed, there are near record lows in interest rates at present.

Furthermore, the government will include a planned stimulus package to promote investment and assist development in sectors they've identified as growth drivers for Thailand. This package is expected to get unveiled in 2016. It should benefit the technology, construction, and automotive sectors in particular.

Meanwhile, on November, the BOT made an announcement wherein it held its benchmark lending rate at 1.5 percent; about 25 basis points off its 2010 record low. GDP should climb to 3.7 percent in 2016 according to the Bank of Thailand.

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