Sustaining economic growth a huge challenge for Thailand

The main focus must be on the long-term growth rather than giving all the importance to an annual 5 per cent increase, he added, so the main focus should on “building muscle” for future growth.

The economy of Thailand has the potential to grow by 5 percent this year, agreed by the economists at a conference last week but were keen on finding sustainable measures to maintain it in the long run.

The Gross Domestic Product (GDP) of the country is marked on a growth scale of 4.8 per cent in the first quarter of the current year- taken to be the fastest rate in five years- thus prompting the government to predict a growth rate of 5 per cent by the end of the year because of the rapid increases in exports, public expenditure, private investments and tourism.

But as of now, the benefits haven't dripped down to the majority of the population of the country who is still struggling to make their ends meet.

Chao Kengchon, Managing Director at Kasikorn Research Centre, agreed that the desired growth rate can only be achieved if the exports and the investment increases by 10 percent and 6 percent respectively.

He was among the financial experts participating in the roundtable talk hosted by Krungthep Turakij, a sister newspaper of The Nation, last Thursday.

A forecast of export growth in dollar terms of 8.9 percent, a total investment of 4.7 percent and GDP expansion by 4.5 percent is provided by the National Economic and Social Development Board.

Chao said that successfully promoting the new "S-curve" industries by the government could increase the economy by 5 percent or else at least the minimum GDP growth of 4.5 percent is anticipated by Kasikorn Research.

Somprawin Manprasert, the chief economist at Bank of Ayudhya, is optimistic about a faster economic growth than 4.7 percent as projected by his bank. "Our projection is quite conservative, so there is a possibility of further growth," he said.

But the main focus must be on the long-term growth rather than giving all the importance to an annual 5 percent increase, he added, so the main focus should on "building muscle" for future growth.

Pipat Luengnaruemitchai, assistant managing director and chief investment officer for wealth management at Phatra Securities, said his firm was expecting GDP to grow by 4.2 percent this year. The real challenge is however in maintaining the 5 percent growth for the next 10 years, he remarked.

The economy in Thailand was growing by about 7 percent annually prior to the 1997 Asian financial crisis. They fell to 5 percent in the wake of that crisis and further hurtled to 3 to 3.5 percent following the 2008 global economic crisis.

Thailand is facing economic constraints due to the aging population and labor shortages. I would be good if the economy returns back to percent, Pipat added.

He also commented on the migrant Thai laborers and their influence on the economy as their return to the home country would nosedive later into further jeopardy. The only way, he thinks, to overcome this constraint is to increase the labor productivity dramatically.

Meanwhile, questions linger over whether the development of the Eastern Economic Corridor (EEC) will deliver the substantial financial results on which the government is banking. It hopes infrastructure development in the corridor will revitalize the economy and increase per capita income from the equivalent of US$6,500 to $15,000, making Thailand a high-income country within the next 20 years.

Pipat lamented, though, that the "big and clumsy" government was sucking up limited resources and the failing education system was producing citizens with limited work skills.

Tim Leelahaphan, an economist at Standard Chartered Bank (Thailand), said it had forecast GDP growth of 4.3 percent and he too said attention should be on the longer term. "What can we do? One percent more would not make much of a difference," he remarked.

The average Bangkok resident, so far, has no sense that the economy has improved. A large population of the country is still suffering and foreign investors are showing a little interest in Thailand.

What is our strategy in the next four to five years and how can we build confidence among foreign investors? This is what really matters, Tim said. The upcoming elections are indeed positive on many levels but all the investors are waiting for some change, not too sweeping at once, but the development at EEC mustn't stop, he said.

"And at the moment it's only a 50-per-cent chance that the EEC will succeed."

Regarding interest rate policy, Chao predicted that the central bank would hike the rate beyond 1.5 percent after the election.

Pipat agreed it would come early next year, but Somprawin expects it to happen this November. Tim forecast the increase will be split in two and come at different times before the end of this year, each time 0.25 percent, resulting in a rate of 2 percent.