The economy is gaining traction. From a meager 0.7% growth in 2014, when the country was in a political mess, expansion is expected to have reached 3% or even a bit higher in 2016. The pace of recovery, however, is still uneven. The Thai economy looks poised for modest growth in 2017 as domestic strengths are expected to cushion larger downside risks from external headwinds, the central bank and economists say. The Bank of Thailand’s Monetary Policy Committee (MPC) has maintained its economic growth forecasts of 3.2% for 2016 and 2017, noting that downside risks to the Thai economy largely come from external factors. External risks include potentially weaker-than-expected growth of Thailand’s trade counterparts — China in particular — uncertainties over the soon-to-be US president’s protectionist campaign promises and the recovery pace of Chinese tourist arrivals.
The coming general elections in a number of European countries, which could shift their policy directions and wild swings in the financial markets resulting from the divergence of monetary polices for advanced economies, will contribute to greater downside risks in 2017. The Bank of Thailand has estimated that the government’s harsh measures to curb illegal tour operators will knock off 1.2 million and 2.2 million foreign tourist arrivals, most of them Chinese, to Thailand in 2016 and 2017, respectively. The tourism sector, accounting for 10% of the country’s GDP, has played an important role in driving Thai economic growth over the past several years in light of anaemic exports, private investment and domestic consumption.
Bank of Thailand governor Veerathai Santiprabhob has been sanguine that Thai economic growth will continue in 2017, although that growth will be trammeled as some sectors, including farming, continue to struggle. The possibility of protectionist US trade policies being imposed on China by President-elect Donald Trump has fanned fears among economists that it could lower the Chinese export value to the US and, in turn, put pressure on Thailand’s shipments of raw materials to China for reexport. “Even though the US has no plans to directly impose trade protection measures on Thailand, its stance towards China could lower Thailand’s and other Asean members’ exports of raw materials to China in 2017,” says Amornthep Chawla, head of research at CIMB Thai Bank. Whether the protectionist US trade measures will be implemented remains uncertain and this will compel importers to reduce their merchandise orders from Thailand in the first half of 2017, he says. “While risks of a drop in Thai merchandise exports in both 2016 and 2017 still loom, that contraction will be smaller than Thailand’s exports to the fast-growing CLMV (Cambodia, Laos, Myanmar Vietnam) countries, which will provide a buffer,” Mr Amornthep says.