The Bank of Thailand is forecasting the country to grow at around 4.8 percent next year after experiencing contraction, buoyed by the easing of political uncertainty and adoption of government reforms, said BOT Governor Dr. Prasarn Trairatvorakul.
“Thailand’s immediate challenge is to restore growth to its potential. For much of the past seven years, we have been experiencing sub-par growth rates. As the economy now wakes up from its third contraction since 2008, it is time to focus on Thailand’s avenues for restoring normal growth again,” he said in a recent speech in New York City.
Noting that Thailand’s average growth was near zero in the past three quarters, and is currently still “well below the long-term trend,” Dr. Prasarn said the Bank is working harder to reverse the trend. It has implemented “an accommodative monetary policy since the beginning of the year, while price and financial stability were also carefully monitored to ensure they were not compromised.”
He added that on the external front, the steady recovery of the world economy, especially the U.S, will help bolster the export sector.
But he also mentioned “some notable risks” over next year, including the expected U.S. interest rate normalization after recovery of the U.S. economy, which could lead to capital flow volatility in Thailand, and household debt, currently at 83 percent of GDP.
The central bank will also work on “facilitating an expansion of the growth frontier,” he said, through optimizing opportunities in the integration of the Association of Southeast Asian Nations (ASEAN).
He said that the country is looking to “further develop trade prospects” as the ASEAN economic community further liberalizes and integrates trade in 2015.
“Seeing these chances, the government has given priority to infrastructure by endorsing investment plans, especially in railways and roads, to reduce transportation costs, and setting up Special Economic Zones at five locations along our border to reap the benefit from our strategic location as a gateway to other ASEAN countries,” Dr. Prasarn said.
The BOT will also facilitate ease of doing business through a capital account liberalization plan so that businesses can benefit from this opportunity.
“The progress can be observed by both trade with CLMV [Cambodia, Laos, Myanmar, and Vietnam], which has been growing annually with double digits over the past 4 years, and more efficient allocations of capital and resources as seen in an increasing number of Thai companies doing outward Foreign Direct Investment,” he continued.
In addition, the country will continue to provide greater financial access to small and medium-size enterprises (SMEs), which Dr. Prasarn said account for about 95 percent of total businesses in Thailand, and which “play an essential role in driving the economy and will continue to do so going forward.”
He said the bank’s strategy will be aimed at improving Thailand’s financial infrastructure by reducing the cost of raising funds for commercial banks so that more players are allowed to offer SMEs a variety of financial products.
In another project to ease SMEs’ access to funds, the Bank of Thailand has set up an SME database “to reduce asymmetric information in the market and provide a more favorable business environment.”
Photo: JJ Harrison
