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Thailand's economic drivers for 2015

The return of international tourists, exports and public investment projects are set to spur growth next year.

Siam Commercial Bank’s Economic Intelligence Center (EIC) estimates Thailand’s GDP will grow 3.0%-3.5% in 2015.

Key drivers for the Thai economy next year are:

  • the return of international tourists
  • exports, which will expand by 3%
  • multiple public investment projects in the pipeline. Despite being higher than the past two years, this level of growth is considered disappointing given a low base in 2014.

EIC projects that the disbursement of the government investment budget will be lower than previously expected because up to now it has fallen short of almost all announced targets in the second half of 2014. Additionally, private consumption is likely to recover slowly because of the pressure from a high level of household debt. EIC estimates that 2014 growth will conclude at 0.8%.

EIC expects that the number of international visitors will increase by 10% in 2015.

The adverse effect from recent political events has begun to dissipate as evidenced by the positive growth in the tourist number for the first time this year in October. Policies such as visa-fee exemption for Chinese tourists have shown a significant impact on boosting this growth as well. EIC believes that the tourism industry, which accounts for almost 10% of the Thai economy, will be a key driver next year.

The most important upside risk for the economy in 2015 lies in the government’s stimulus package.

The disappointing level of public fund disbursement in the second half of 2014 has hurt investor confidence. Nonetheless, growth next year can still exceed market expectations, if the disbursement of the 2015 budget progresses according to target, especially for infrastructure projects that may add as much as 68 billion baht to the economy as well as other stimulus programs such as farming subsidy and credit for SMEs. On the other hand, there still exist some downside risks, particularly, in exports that may remain sluggish due to slow global growth and volatile commodity prices.

EIC forecasts that the Thai baht will weaken to 33.5 baht per US dollar in 2015.

The depreciation is likely to start in the second quarter due to:

  • capital outflows from emerging markets in anticipation of a rate hike by the Fed in the second half of the year,
  • an accommodative monetary policy by BOT to support growth. EIC expects that BOT will maintain its policy rate at 2% in 2015 with room for further easing if domestic demand shows weakening signs and inflation remains low.

Click here to view an infographic outlining the issues facing Thailand's economy.

Economic Intelligence Center (EIC)
EIC Online:  

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