Thailand’s Government Spending Bolsters Economic Growth

[Jacob Maslow]

Thailand’s increase in government spending is helping to accelerate economic growth in 2015. The country saw poor growth in 2014 amidst political turmoil.

Government spending is accelerating in Thailand, but its efforts are paying off. The country’s economy is picking up as urban consumption improves. The improvement comes after political turmoil slowed economic growth in 2014.

If the economy continues to improve, the Thai government plans to raise VAT to 8 percent by September to give state finances a boost.

Thailand’s economy was sluggish in the first half of 2014 as protests hurt tourism and consumers lost confidence. And while efforts have been made to overturn political turmoil in the country, reviving the economy has been a challenge.

Economic growth is expected to increase 2-3% in the first quarter of 2015. The increase is welcome news, but still below the government’s target of 4% growth, which would be difficult to meet.

January saw a rise in tax revenue, which indicates that consumers are spending. VAT revenue was up almost 10% compared to last January. Thailand’s Finance Minister says the VAT should ideally be at 10%, but that could only happen gradually and if the economy improves.

The government’s spending on infrastructure is expected to accelerate growth in 2015, but a delay on fund disbursement may pose a risk to these projections. The government is under pressure now to speed up infrastructure projects to accelerate growth.

According to the finance minister, fiscal spending will be more effective at stimulating the economy than monetary policy changes. Cutting interest rates would likely not have much of an impact on the economy. That being said, some economists do expect the central bank to reduce its benchmark interest rate in March.

Thailand’s economy grew just 0.2% from January – September 2014 when compared to one year earlier. Growth for the entire year is expected to be under 1%. This is the weakest the economy has been since the severe floors of 2011. Official data on economic growth will be released on February 16.

-- 2015-02-15

[recycler]

The printing business with the paper and ink suppliers in tow benefits the most of this government spending...

[Eric Loh]

January is a normal high consuming month in every year and every country due to bonuses. Really desperate to claim credit just about anything.

[rickirs]

“Government spending is accelerating in Thailand, but its efforts are paying off….Economic growth is expected to increase 2-3% in the first quarter of 2015.”

Success? Efforts paying off? This is a disaster!

Compare to sampling of the government’s previous predictions:

- Commerce Minister General Chatchai Sarikulya said: "The government is confident that the Thai economy will grow by 4 per cent this year” - The Nation 2015-01-13

- Gen Prayut said, “the Thai economy should grow by 3.5-4.5 per cent next year,” - 2014-12-15

Then compare to independent predictions:

- TMB Bank's research institute TMB Analytics has revised its GDP growth forecast for year 2015 down to 3.5%, after determining that the economy was recovering more slowly than earlier expected. -2014-12-24

- Don Nakornthab, director of the Bank of Thailand (BoT) Macroeconomic Policy Office says, “Recovery of domestic consumption and private investment in Thailand is still slow as the private sector is still waiting for global economic recovery and massive government investment on basic infrastructure projects,” - 2015-02-02

- “Reports state that the investment in infrastructure is due to abysmal economic growth in 2014. Estimates peg the country’s growth to be only 3 percent in 2015.” - thaivisa.com 2015-02-11

The Government has failed to meet its commitment for making SUBSTANTIAL investments in the Thai economy and that is directly weakening economic growth. But it “takes a bow” for now expecting only 2-3%? Anything below 2% is deflation.

It’s going to take a lot more than a floating market at the Government House and hopes to save the Thai economy for 2015.