Domestic demand drives economic growth in Thailand
The Bank of Thailand (BoT) forecasts Thailand GDP to reach 3.9% in 2019 despite slowing exports because of strong domestic demand. This is different from the general consensus for this year’s Thailand GDP forecast at 3.6%.
Why is Thailand facing declining exports?
One of the reasons for slowing economic growth is due to stronger baht and a higher price point. For example, Thailand sees reduced rice exports in terms of value and volume in February as it loses competitiveness to neighboring countries.
According to Charoen Laothammatas, president of the Thai Rice Exporters Association, rice exports in February totaled 687,560 tons, a reduction of 27.7% from the same month in 2018. Value of rice exports for this year also declined by 23.5% year-on-year to 11.69 billion baht.
This is possible due to Thailand’s higher price of grains. Compared to Vietnam’s price of rice, Thai rice is more expensive at $40 to $50 per ton, luring buyers from Malaysia and the Philippines. For instance, white rice 5% costs $411 per ton in Thailand, $358-362 per ton in Vietnam, $373-377 per ton in India, and $350-354 per ton in Pakistan.
Other than stronger currency and higher price, trade tensions may also attribute to lower exports and economic growth.
4 Key factors to strong economic growth
The four factors for a stronger Thailand GDP and economic growth are the US-China trade war, the Chinese economy, the post-election stability, and the development of the Eastern Economic Corridor (EEC).
While there are still trade tensions between the US and China, Don Nakornthab expects this to cool down in the future. According to Don Nakornthab, senior director for macroeconomic and monetary policy at the BoT, the US and China may reach an agreement to ease trade tensions and reduce cut risk to Asia’s supply chain.
On the other hand, chief economist at S&P Global Ratings Asia-Pacific Shaun Roache recommends Thailand to capitalize on the US-China trade tensions by attracting companies with factories based in China to relocate to Thailand.
The EEC policy is also expected to be resilient to any changes in the country’s political sphere, regardless of the results from the March election. In fact, this project is predicted to drive economic growth in Thailand for the coming years. However, some EEC projects may be reviewed and altered accordingly in the future.