The economic growth experienced by Thailand in 2010 was remarkable and at 7.8% hit near record setting levels. In its recently released Economic Outlook, Thai Economic Performance in Q4 and Outlook for 2011, the National Economic and Social Development Board (NESDB) informs that fourth quarter growth came in at 3.8%, partly due to expansion in the tourism sector. Overall, growth during 2010 is attributed to both the global economic recovery and strong domestic demand. The recovery of the tourism sector bodes well for continued economic growth and is anecdotal evidence that confidence in Thailand as a safe and secure destination remains strong. There were 4.6 million inbound tourists in Q4, which represents an increase of 7.8% over the previous quarter. According to NESDB, the increase in arrivals was due to surges of 46.2% in the number of tourists from India, 41.1% from South Korea, and a 26.6% increase in arrivals from China.
As a consequence of the high numbers on tourist arrivals in 2010, the hotel and restaurants sector expanded by 8.4%. For the full year, there were 15.8 million tourists coming to Thailand, which represents an increase of 12.0% over 2009. Looking ahead to another successful year, the NESDB notes that “It is expected that, in 2011, the tourism sector will continue to grow steadily with an approximated foreign tourists of 16.8 – 17.0 million persons. Thus, the related businesses in production and services sectors are likely to improve.”
In 2011, the NESDB forecasts that the overall economy will also continue to grow, within a range of 3.5 to 4.5%, with exports expanding by 12.5%, private investment by 8.5% and consumption by 4.0%. Reporting on Q4 2010, exports expanded by 21.2% over the same quarter in 2009, reaching US$51,850 million. Breaking this down, the key drivers in the export sector in the final quarter of 2010 were vehicles and parts (23.8%), electrical appliances (17.3%), rubber (49.0%), rubber products (27.6%) and jewelry (77.5%). The major export markets during this period were the US, the EU (15) and Japan, markets which grew by 12.0%, 14.6% and 24.4%, respectively. For the full year of 2010, the export value was US$193,663 million, representing a 28.5% expansion.
As for the factors that will support growth, the NESDB said they will include a “(i) strong global economic rebound, and (ii) increase of income in many sectors such as government, private sector and farm income. However, there are risks and uncertainties especially the heightening of inflationary pressure from high oil price, labor shortage in various industries, and volatility in capital flow that would have a vast impact on Thai baht, stock market and real estate sector.
The NESDB made other economic projections for 2011 such as headline inflation is expected to be in the range of 2 .8 -3 .8 percent, private consumption projected to expanded by 4 .0 percent, private investment forecasted to grew by 8.5 percent, export value in us dollar term is projected to expanded by 12.5 percent, and current account surplus of 3.2 percent of GDP, down from 4.6 percent of GDP in 2010.
In this regard, the Economic Outlook notes that the expected average Dubai crude oil price in 2011 is in the range of US$85- 95, although it also points out that Morgan Stanley sees oil above US$100 and Goldman Sachs above US$105.
The report notes that the world economy is improving but still fragile, especially with regard to the economic recovery in the EU and Japan, and that the ASEAN economy too will slow down as governments try to contain inflation and monitor exchange rates. The US economy is expected to grow by 3.0% in 2011, China by 9.0%.
The Thai economy in 2011 is seen to likely improve, and as noted previously reach GDP growth of between 3.5% and 4.5%, particularly if the world economy maintains its recovery. Also supporting economic growth will be the increased salaries of both government workers and private employment, as well as in farm income. One additional factor is the stability of financial institutions in Thailand, with NPLs at 1.9% and good liquidity. The excess liquidity in commercial banking, which was at 1.24 trillion baht in Q4 2010, should ease credit and also support economic expansion.
During the year, under the current projection, total consumption is to grow by 3.9%. investment by 7.3%, export value by 12.5% and import value by 14.6%. The trade balance is to have a surplus of US$11.2 billion, and inflation should be in the range of 2.8 – 3.8%.
On an even more positive note, the NESDB believes that the Thai economy could grow by more than 4.5% if world economic growth exceeds 4.2%, there are no serious political disruptions to affect confidence and tourism, the Dubai crude oil price remains below US$95 per barrel, stimulus funding under Thai Kem Khang is not delayed and the average disbursement rate of the current budget is more than 94% of the total budget, the policy interest rate is less than 3.5% and there are no severe natural disasters that affect agricultural production.
While there are many variables that ultimately determine the economic growth of a country, it is certain that Thailand remains on a positive trajectory and that 2011 will see further strengthening of the economy and better opportunities for investors in many sectors of industry.
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