Annual public investments worth THB950b is not enough to spur growth.
Finance Secretary Somchai Sujjapongse claims that the Thai economy has the potential to grow as much as 5% next year if the government achieves its goal of attracting more private investment.
Maybank KimEng however is rather pessimistic as it believes does not seem to be spending on investments. "The 5% real GDP growth target is quite ambitious, in our view," it said.
According to the research house, public investments each year are only about THB950b. Mr Somchai said that investments next year from the government will be about THB540b, but MayBank KimEng notes that the amount is in fact a tad below Thailand’s 2016 budget of THB564b.
"If the government insists on spending only this amount, it must press the private sector to expand its investments, by THB750b. Given benign domestic demand, we would be very surprised if the private sector does so," it said.
According to MayBank KimEng, private and public investments combined would need to expand THB750b from THB3.5t this year or 20% YoY. The last time Thailand achieved this was in 2005. But that year, inflation of almost 5% helped a lot, it said.
The research house also adds that to achieve 5% real GDP growth next year, it would need nominal GDP growth of about 7% or +THB1t as inflation next year is widely projected to be about 2%.
It reiterates though that weak exports are more structural than cyclical and that rising tourism receipts should be offset by higher imports to support domestic investments. Hence, it believes that there is no growth in net exports next year.
Moreover, MayBank KimEng said that assuming that consumption expands at this year’s 3.5%, this would reduce THB250b from the THB1t needed to achieve 7% nominal GDP growth.
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