Thailand’s Economy Stabilizes as Govt. Announces Stimulus Policies

 

All eyes are on Thailand in recent months as the newly-installed military government led by Prime Minister Prayuth Chan-O-Cha scrambles to get things back on track following a series of political entanglements in one of South East Asia’s biggest economies. 

 

After the economic growth shrank last year to less than 1%, the government has promised strong stimulus package aiming at boosting domestic consumption while bringing down barriers and obstacles to foreign trade and investment. 

 

This three-month economic stimulus package (October-December 2014) was announced at an estimated USD 11.2 billion. Of that amount, roughly USD 10 billion will be allocated to measures for job creation and USD 1.2 billion will go to measures to increase rice farmers’ income. Government spending will help boost GDP as well as enhance economic prosperity. 

 

According to the Office of the National Economic and Social Development Board (NESDB), the Thai economy is projected to grow by 3.5-4.5 per cent in 2015 with supporting factors such as the improvement of the export sector, a recovery of the tourism sector, increasing private investment due to the approval of BOI’s investment projects, as well as a forecasted improvement of the global economy. 

 

The government’s economic policies are being implemented in three stages, which include: 1) an urgent phase that deals with matters needed immediate resolution; 2) a middle phase that addresses unresolved issues; and 3) a long term phase that focuses on Thailand’s sustainable development. The application of these policies has helped to reassure as well as build confidence with investors. 

 

The Bank of Thailand (BoT) recently reduced its 2015 economic growth forecast from 4.8 to 4 per cent. Lower than expected export growth and a slow recovery of the global economy are the main reasons for the downward revision. Thus, the BoT emphasizes the need to expedite government spending. 

 

The Thai government’s main economic priorities include: 1) employment creation and financial support to low income groups; 2) promoting a digital economy; 3) boosting investment in infrastructure; and, 4) improving Thailand’s productivity capacity through investment and training. 

 

 

The current government attaches great importance to reforming the energy sector. The highlighted policies include structuring energy prices to be more balanced and market-oriented and promoting use of renewable energy. 

The government is undertaking the task of drafting a Master Plan on Water Management. The Plan is expected to be completed and implemented within 2015. The Master Plan will not only tackle flood but also cover water management in all dimensions, including in times of drought, as well as water-quality monitoring. 

 

The infrastructure development plan (which spans from 2015-2022) has five target areas consisting of revamping the provincial rail network, improving public transport systems to ease traffic congestion in Bangkok, boosting the capacity of highways to connect with production bases in rural areas and neighboring countries, and improving the efficiency of water and air transport systems. 

 

The digital economy focuses on making all sector of the economy adopt Information and Communication Technology (ICT) into their operations to enhance productivity and reduce operational costs which can eventually lead to improving the economy with sustainability and quality growth 

 

Thailand is positioning itself as an attractive base for regional operations. It is hoping to project itself as a favorable option to serve as a base for business in Southeast Asia. 

 

 

In order to maintain growth momentum in 2015, the government will focus its economic management in areas such as: 1) supporting measures to assist low income farmers; 2) eliminating trade barriers, as well as promoting exports; 3) expediting key investment projects; and, 4) boosting our tourism industry. 

 

Recent data shows a positive outlook for the Thai economy. For instance, the overall consumer confidence index level is on the rise, the World Bank has ranked us as one of the top 30 easiest countries to do business, and the World Economic Forum also raised our country competitiveness level to 31 (from 37 the previous year). 

 

Despite a slight drop in the number of tourist arrivals during the first half of 2014, it is expected that the last quarter of 2014 and the coming 2015 will see a solid recovery due to the improved political climate and strong foundations of the tourism industry. 

 

The Board of Investment (BOI) recently approved the “Seven Year Investment Strategy” which will span the period 2015-2021. The primary objectives are to promote inbound value added investment, as well as Thai investment abroad in order to increase competitiveness and help the country overcome the middle income trap. 

 

On 25 December 2014, BOI held its last board meeting for the year, which approved an additional 13 large scale projects worth approximately USD 605 million (Baht 20 billion) and creating 4,000 jobs. 

 

With great emphasis placed on the country’s long-term infrastructure, it is therefore very timely to invest in Thailand. The new Investment Policy is now being implemented, favoring investment that comes with technology and innovation. 

 

Thailand is in the process of implementing Special Economic Zones (SEZs) to develop the economy along the border areas with Cambodia, Lao PDR, Myanmar and Malaysia, as well as help strengthen ASEAN integration. The five special economic zones will be in the provinces of Tak, Sa Kaeo, Trat, Mukdahan and Songkhla. 

 

 

One of Thailand’s major strengths is its geographical location. It is at the heart of Southeast Asia, and the government aims to continue to strengthen its position as the connectivity hub of ASEAN. In order to do so, it is in the process of upgrading its transportation system. 

 

As ASEAN’s 2nd largest economy, Thailand has great potential in the region. The country’s strategic location is an ideal manufacturing center for ASEAN as well as an attractive investment location for the global economy. 

 

The government aims to promote Thailand’s role and explore opportunities in the ASEAN Community. The initiatives include enhancing connectivity in the ASEAN region, promoting competitiveness, developing a skilled labor force, as well as creating Special Economic Zones (SEZs) to promote cross border trade and shared production. 

 

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8 January 2015