Thai Economy Continues to Be Stable

(02/05/2012)

The Thai economy continues to enjoy stability after its economic performance in the first quarter of 2012, especially in March, showed positive signs. Director-General of the Fiscal Policy Office, Somchai Sujjapongse, said that despite positive signs, Thailand needed to monitor the risk situation closely, as a consequence of the European debt crisis and the slowdown of the Chinese economy. Although the situation was starting to affect Thai exports, he believed that the Thai economy would continue to show an upward trend. Another supporting factor is that the Government has implemented several measures to stimulate investments and build confidence among both investors and consumers. In this regard, the Fiscal Policy Office expects that the Thai economy in 2012 will expand by 5-6 percent, as earlier predicted. According to an economic report, prepared by the Fiscal Policy Office, private consumption expenditure in the first quarter of 2012 was on the rise, showing recovery after the flood crisis in 2011. However, consumers remain concerned about higher cost of living due to rising oil prices and global economic uncertainties. Private investment in March and the first quarter continued to grow, especially investment in machinery and equipment, which reflects an increase in the volume of imported capital goods. During the period, the Government was able to collect more revenue and its spending was on the rise because it was accelerating the disbursement of the national budget. Industrial production was picking up gradually, especially in the production of automobiles. Sales of cars, trucks, and motorcycles have increased in accordance with rising industrial confidence. Meanwhile, Director of the Public Debt Management Office, Chakkrit Parapuntakul, quoted the latest report on the Thai economy, released by Moody's Investors Service, which said that the outlook for Thailand's local and foreign government bond ratings is stable. The ratings are now at "Baa1," and they are based on moderate levels of economic and institutional strength, a high degree of government financial strength, and a low-to-moderate susceptibility to event risk. According to the report, Thailand's relatively large size and the diversification of its economy is balanced against a per capita income that is lower than the income of its peers. The floods that persisted throughout the second half of 2011 represented a mere cyclical shock, rather than a structural one, and a rapid V-shaped recovery is currently under way. The country is bulking up its defenses against flooding in the future, while the Government has actively sought to restore confidence in its ability to manage such crises in order to retain onshore investments. Measures of the Government's effectiveness have slipped in recent years, but the relatively high quality of core economic institutions has been maintained and has enabled the country to manage recent shocks. While fiscal discipline has been tested by successive crises, Thailand's fiscal and debt ratios have weakened somewhat from their strong positions before the global financial crisis, but they continue to be in line with rating peers. Thailand has a robust external payments position which has enabled favorable financing conditions for the government and the economy at large.