THAILAND’S equity market has clocked a 10% return in baht terms (8.3% in ringgit terms as of Feb 28) since September 2017.
The economy expanded by 4% year-on-year (YoY) in the fourth quarter of 2017 (4Q17), bringing its 2017 full-year growth to 3.9% compared to 3.3% in 2016.
In expenditure terms, private consumption and exports picked up favourably along with private investments as public investments and government spending slowed in4Q.
Sector wise, tourism-related sectors and manufacturing did most of the heavy lifting in 4Q, while agriculture sector’s growth moderated unexpectedly.
The heavy rain and cold temperature in the northeast and southern regions affected paddy yields and fisheries production leading to a slowdown in agriculture growth, and farmers’ income and production was impacted negatively.
The pressure on the sector could persist given the rainy weather experienced last month.
Furthermore, with a high-base figure from 1Q17, we foresee agriculture growth to moderate in 1Q18.
The sector will resume to support growth of the economy as weather condition improves when dry season (March to May) approaches.
Thailand remains as one of the favourite holiday destination for foreign tourists. The kingdom saw 19.5% YoY jump in foreign tourist arrival, led by Chinese, Korean, Russian and Indian arrivals.
The strong increase in number of tourists and receipts showed hotel and restaurants sector accelerates by 15.3% YoY.
The wholesale and retail trade sector also accelerated in tandem with higher tourist arrival and stronger household consumption.
The extension of global economic recovery in 2018 is likely to lend further support for inbound arrivals.
The robust growth of tourism-related and manufacturing sectors has managed to cushion the impact from lower income in the agriculture sector.
Private consumption expanded by 3.5% YoY in 4Q. The low interest-rate environment led to higher expenditure on durable goods and services, and better loan growth.
We expect private consumption to recover into 2018 for a few good reasons.
Firstly, the higher water levels in major dams could help improve agriculture employment during dry season.
Second, the increases in private investments and machinery imports are encouraging signs of expansion in production capacity and utilisation, which could help absorb more labour force.
Lastly, the acceleration of tourism-related sector is giving a boost to various service sectors. All these catalysts are formulating a positive employment condition and household income base for the people.
The expansion of public investment in 2017 had to rely on an increase in disbursement owing to a mere 2.8% increase in capital budget for fiscal year 2017.
The capital budget disbursement was obstructed by flooding in several areas. The change in public procurement regulations that required time for adaptation, saw public investment contracting by 1.2% YoY in 2017.
We believe public investment growth will accelerate in 2018. There’s a 14.7% and 45.7% increases in annual government and state-owned enterprise capital budgets for fiscal year 2018.
The bulk will largely go into infrastructure and logistic projects. There are various infrastructure projects moving forward to construction phase, which could speed up budget disbursement.