Strong domestic demand kept the wheels of the Thai economy turning in 2012 while also helping to cushion the impact of global uncertainty on exports.
Most observers expect Thailand’s 2012 GDP to have topped 5%, with the Bank of Thailand (BOT) forecasting 5.7%. The IMF predicted GDP growth of 5.6%, and the official National Economic and Social Development Board (NESDB) gave an estimate of between 4.5% and 5.5%. Thailand’s large internal market is expected to help maintain economic momentum through 2013, aided by public and private investment.
Thailand performed strongly in 2012 despite having to battle turbulence generated by the eurozone crisis, the US debt situation and slowdowns in key emerging markets, including China. The NESDB said Thailand’s economy grew 3% in the third quarter, in line with analysts’ expectations. Although exports fell by 2.8% and manufacturing shrank by 1.1%, private consumption growth reached 6% in a year-on-year (y-o-y) comparison, up from 5.3% in the second quarter. Government consumption also rose, up from 7.4%, to 9%, while overall investment hit 15.5%.
Leif Lybecker Eskesen, the chief economist for India and the ASEAN at HSBC, said the figures confirmed that Thailand’s domestic demand engine was still running at a decent speed, “providing some counter-weight against the firming external headwinds”.
Healthy domestic demand is the result of considerable efforts made by Thailand to rebalance its economy and reduce its vulnerability to global fluctuations. The shift will earn Thailand praise from economists who have long been urging emerging economies to increase internal consumption against exports as a means of addressing international current account imbalances.
Akhom Tempittayapaisit, the secretary-general of the NESDB, said that while 2013 will be characterised by similar economic trends, Thailand will receive an added boost from higher exports. “The Thai economy [in 2013] will resume the normal growth path, mainly thanks to domestic consumption which should further increase on investment from the public and private sectors,” he told the local press. “Global economic recovery would also boost the export sector.”
Analysts expect government spending at home to once again head Thailand’s efforts to keep the economy moving forward. The draft 2013 budget, passed in October, anticipates total spending of BT2.4tn ($78.bn), the highest spend in Thailand’s history.
Significantly, the budget allocates BT254.95bn ($8.3bn), or 10.6%, to public health and BT493.89bn ($16.1bn), or 20.6%, to education, two sectors that have been targeted for development and investment. Thailand has focused its efforts in recent years on building a reputation as a regional centre for education and health care, leading to the establishment of many highly regarded private schools, universities, clinics and hospitals.
Investment in the education system has been supported by a wave of reforms that have placed an emphasis on enhancing skills training and lifelong learning, securing equal access to resources and boosting the application of technology. Since taking up his post in January 2012, the minister of education, Suchart Thada-Thamrongvech has made clear his intention to push through key initiatives, including the “One Tablet Per Child” programme, which aims to distribute free tablet computers to school children.
While government spending will continue to act as an important economic driver, private sector participation in Thailand is also on the rise, particularly in strong growth sectors where businesses are keen to capitalise on new opportunities.
In mid-October, three telecoms companies paid a total of BT41.6bn ($1.36bn) for nine licences to operate 3G mobile technology. The industry players are expected to extend 3G services to 50% of the population within a 48-month timeframe, rising to 80% in four years, according to the contract terms. While 3G roll-out in Thailand has been comparatively slow, take-up of data services is expected to be high, driven largely by the population’s enthusiasm for new technology, especially internet services such as social networking.
Thailand’s important tourism industry is also earmarked for another strong performance this year, having rallied in 2012 to leave political instability and disruption caused by severe flooding in its wake. International visitor numbers reached almost 10.5m in the first six months of 2012, up 7.6% on 2011. Significantly, the number of visitors from China shot up by almost 29%, surpassing the 1m landmark for the first time.
Tourism generated BT776bn ($25.4bn) in 2011, well above the BT716bn ($23.4) target and up 31% y-o-y. In 2012, the government unveiled a range of plans to promote the sector and build revenue to BT2tn ($65.4bn) by 2015, including initiatives to improve marketing, develop tourist attractions, and strengthen the meetings, incentives, conferences and exhibitions segment. While domestic demand will be an important factor for Thailand’s economic growth in 2013, the country remains vulnerable to global conditions. Further deterioration of the world economy would weigh down on growth, particularly in sectors such as electronic manufacturing and tourism. However, a better-than-expected recovery would boost exports and strengthen Thailand’s efforts to keep GDP expanding at 2012 levels.