THE WORLD Bank believes Thailand should be able to achieve long-term annual economic growth of 4-5 per cent if the government can successfully push through its “Thailand 4.0” model. The new economic model would help draw private investment, the Bank’s economist for Thailand, Kiatipong Ariyapruchya, said yesterday.
The World Bank is the latest major global institution to revise upward its forecast for Thailand's economic growth for this year, now predicting 3.1 per cent, up from its forecast of 2.5 per cent in June. Last month, the Asian Development Bank revised up its growth forecast slightly to 3.2 per cent from 3 per cent previously, praising the country's investment in infrastructure. The Bank of Thailand last month also issued a slightly more optimistic forecast, predicting that gross domestic product would grow by 3.2 per cent, compared with the previous target of 3.1 per cent. The Thai economy in the first half of this year expanded by 3.4 per cent, which the World Bank yesterday attributed largely to a rise in consumption and the surge in tourist arrivals in the first half.
The Bank also projected Thai GDP growth next year at 3.1 per cent on a timely implementation of public infrastructure projects (including on the rail system), which would enhance private investment. However, Kiatipong said the new 2016 growth forecast of 3.1 per cent was still lower than Thailand's real potential, as it should be at least 3.5 per cent. He added that the Kingdom's annual GDP growth in the last decade averaged 5 per cent. He said Thailand's GDP was capable of growing by 4-5 per cent a year, and Thailand 4.0 and private investment would be the key drivers rather than exports. In the past decade, exports accounted for 70-80 per cent of GDP. World Bank will issue an outlook for Thailand's exports next month, he said, but the export sector this year is likely to decline further. Earlier, the Bank projected flat export growth for 2016.
The Bank believes financial instability in the Chinese economy will affect Thailand's trade and capital flows, as China accounts for 12 per cent of total exports and 8 per cent of total foreign direct investment. Another risk is a rise in political uncertainty if the military-led regime's political reforms do not satisfy civil society at large or get postponed. In such a scenario, political uncertainty would delay public expenditure and weigh on consumer and investor confidence. However, the recent passing of the referendum on the draft constitution and the government's reaffirmation that it would hold elections in 2017 help migrate this risk, the Bank said.