Mega projects, tourism to propel Thai growth

Expanding domestic demand, services to help economy, says minister 


A SLEW of billion-dollar infrastructure projects and an upswing in tourism will fuel Thailand’s expansion this year, shielding the economy from weaker exports and any possible delay in the budget approval due to elections, according to Finance Minister Arkhom Termpittayapaisith. 

Government approvals for three projects at a combined investment of about 524 billion baht (RM66.82 billion) will ensure capital spending remains on track, Arkhom said in an interview last week in his office, citing a high-speed railway line connecting three airports, an expansion of an airport southeast of Bangkok and a deep seaport. 

Private sector investment was on the mend too with rising imports of machinery and equipment, he said. 

The Finance Ministry is sticking to its forecast for a GDP expansion of 3.8% this year, even though a below-par performance last quarter needs to be factored in, Arkhom said. Firm domestic demand and an improving services sector will also keep the recovery on track, he said. 

Thailand posted the slowest growth rate among South-East Asia’s major economies last year and now faces the risk of a delay in Parliament passing the 3.35 trillion baht budget for next fiscal year with elections tentatively slated for May. Any delay in the formation of government and passage of the budget — akin to the last election 

year in 2019 when growth halved to 2.1% from a year earlier — may slow major state spending and hurt the recovery. 

“We are quite comfortable in our growth path despite many people saying that we have the lowest rate in Asean,” Arkhom said in Bangkok. “Tourism has been helping Thai economy a lot, particularly in the short-term recovery. We expect more improvement in the tourism sector after the Chinese reopening.” 

Foreign tourists are returning to Thailand in droves, with arrivals topping two million for a second straight month in January. The 

recovery is expected to gain speed with China, the country’s biggest source of visitors pre-pandemic, allowing outbound group tours earlier this month. 

While tourism will support private consumption, a slowdown in Thailand’s major trade partners is seen as a headwind, Arkhom said. A sustained expansionary fiscal policy and gradual normalisation in interest rates will ensure the recovery remains intact, he said. 

The Bank of Thailand (BoT) has been one of the most dovish central banks in the region, increasing its benchmark rate by only 100 basis points since August. BoT’s monetary policy committee had said that a gradual and measured normalisation was needed to nurse the economic recovery. 

The Finance Ministry and the central bank agree on the need for a coordinated response to ensure the economy recovers fully, Arkhom said, adding “you wouldn’t see the MPC (Monetary Policy Committee) being aggressive in raising the rates”. 

Headline inflation may ease to a range of 3% to 4% later this year from a 14-year high of 7.86% in August as global energy and commodity prices ease and amid continued government subsidy on electricity, cooking gas and diesel prices for targeted groups, Arkhom said. 

Other key points from the interview: 

• Arkhom estimates linkage of three airports to cost 234.8 billion baht, U-Tapao airport expansion at 204.3 billion baht and Laem Chabang deep seaport at 84.4 billion baht. 

• Central bank will manage and closely monitor baht moves. 

• Government is committed to reducing fiscal deficit and sticking to 10-year roadmap to achieve budget balance. 

• To boost revenue-to-GDP ratio to 17%-18% from current 14% through consolidation of tax exemptions and expansion of base, including imposing VAT (value-added tax) on e-commerce platforms. 

• Public debt seen hovering around 60% of GDP. 

• Rising interest rates unlikely to significantly increase cost of government borrowing as 85% of debt is in fixed rates and tenure. 

• To continue to bring down household debt levels from 86% of GDP, although 70% of total is backed by assets such as houses and cars. Bloomberg 

  • This article first appeared in The Malaysian Reserve weekly print edition