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Finance Ministry raises growth outlook to 3.6%

Domestic consumption is expected to rebound in 2017 on growing farm income and exports. (Photo by Thanarak Khunton)

The economy is expected to grow 3.6% this year, up from the 3.4% previously projected, thanks to higher public spending and improved exports, the Finance Ministry said on Monday.

The economy struggled to grow and lagged regional peers since a 2014 army coup ended months of political unrest. Exports and domestic demand have been weak, putting pressure on the junta to lift domestic activity.

On Friday, the government approved an additional 190 billion baht in spending this fiscal year, which ends in September. It will mainly be spent in rural areas.

Economic growth in 2016 is now estimated at 3.2%, compared with 3.3% predicted three months ago, Krisada Chinavicharana, a ministry official, told reporters.

He said the ministry now expects exports to increase 2.5% this year, rather than the 1.8% predicted three months ago.

Exports, a key driver of the economy, rose 0.45% in 2016, their first increase in four years.

The ministry is more optimistic than the central bank, which forecasts 2017 GDP growth of 3.2% and flat exports.

Official 2016 gross domestic product (GDP) data is due Feb 20. In 2015, the economy expanded 2.8%.

The ministry forecasts the central bank's policy rate to remain unchanged at 1.5% throughout this year.

Also on Monday, Tris Rating Co Ltd projected the GDP in a range of 3% and 3.5% this year, driven public infrastructure projects, thriving tourism and growing household consumption.

In its latest report, the company identified uncertainty of the global economic recovery as a major risk going forward. Other risk factors include persistently weak private investment, high household debts, and rising non-performing loans.

Among the supporting factors is growing private consumption driven by higher farm prices and stimulus measures.

However, high household debts and rebounding oil prices may affect the cost of living, Tris said.  

It foresaw the tourism industry would continue to grow despite a crackdown on the so-called zero-dollar tours, sustained by arrivals from Asean and Europe, which accounted for around 26.3% and 18.3% of total foreign tourists, respectively.

The Bank of Thailand forecast that the number of foreign tourists in 2017 will reach 34.1 million. 

Tris expects exports to expand more than the previous year because of rebounding farm prices and the positive growth momentum of the US economy. Nevertheless, it believes that the Thai export structure and uncertain Chinese economy will continue to be the negative factors.

The weak investment by private sectors despite supportive measures from the government such as tax incentives because Thai exports have only gradually grown and the uncertainties plaguing major trading economies have affected entrepreneurial confidence.

NPLs will increase while another key negative factor is the floods in the South which should affect production this year.

For 2016, Tris expects that the economy will expand at 3%, compared with the rate at 2.8% in 2015. 

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