led
- Public investment-led growth will materialize
- Continued support from public spending given another budget deficit of THB 390bn (2.9% of GDP)
- Private investment will likely recover to take advantage of investment stimulus measures
- Private consumption will improve given easing household debt burdens
- Export will continue to underperform
- Tourism is still a bright spot, supporting the economy and the current account surplus
Public investment led-growth will materialise
Transportation Investment Action Plan
- There are 20 transportation projects worth THB 1.78tn (11.9% of GDP) under the Transport Investrment Action Plan
- The government aims to complete the bidding of all 20 transportation projects by end of 2017
Transport projects under PPP program
Transportation projects THB bn
Bangkok Mass Rapid Transit
(1) Pink Line 56,7
(2) Yellow Line 54.8
(3) Blue Line 82.5
Highway network
(4) Bang Yai to Kanchanaburi 55.6
(5) Bang Pa-ln to Nakhon Ratchasima 84.6
High-speed rail
(6) Bangkok to Rayong 153
(7) Bangkok to Hua Hin 94.7
Total 581.9
We expect private investment to recover
A slow recovery in private investment (% y/y)
Private investment will likely pick up to take advantage of investment stimulus measures
- Notable progress on public investment should induce more private investment
- Tax measures have been introduced to boost private investment:
o Permanent corporate income tax cut to 20%
o Double tax deduction for expenses on new investment
- Pent-up investment applications for Bol privileges worth a combined THB 1.8tn since 2014 will steadily translate into real investment
Positive signs for the consumption outlook
Growth in household debt has decelerated
Consumption has gradually recovered
Export sector to continue to underperform
Export growth %,in USD terms.
Tourism sector should continue to support growth
Rising foreign tourist arrivals
2014 2015 2016E
Foreign tourist arrivals (million persons) 24.8 29.9 33.5
(%growth) -6.7 20.5 12.0
Foreign tourism revenues (THB tn) 1.15 1.43 1.72
(%growth) -4.9 25.0 20.4
Growing consumption by non-residents (% of domestic consumption)
Real policy rate likely to drop further as inflation increases
1-day policy repo rate adjusted for inflation
Key takeaways
- Thailand's economic structure is changing towards a service-based economy
- Further re-positioning business strategy is needed to align with Thailand's new economy
- We expect GDP growth to pick up further in 2017; backed by
o Notably progress in public transportation projects
o Strong tourism receipts
o Improving private investment and consumption
- We expect for a mild rate-hiking trajectory, with one 25bps hike in Q4-2017