The FPO forecasts a minimum growth of 3%

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The FPO forecasts a minimum growth of 3%

Rising production costs limit the increase

A tourist walks past a massage parlor in Pattaya, Chon Buri province. Tourism is one of the sectors that has not yet recovered. (Photo: Somchai Poomlard)

Fiscal Policy Office (FPO) Director-General Pornchai Thiraveja estimates Thailand’s economy will grow at least 3% this year despite soaring energy and household commodity prices caused by the war Russian-Ukrainian.

The sharp spike in retail oil prices has raised production costs in Thailand, meaning the FPO’s previous growth forecast of 3.5-4.5% is unlikely to be met, he said. , but he remains convinced that it will not be less than 3% this year.

The Bank of Thailand recently lowered its GDP growth forecast for 2022 from 3.4% to 3.2%.

Mr Pornchai said Moody’s Investors Service had affirmed Thailand’s credit rating and kept its outlook at stable.

Last week, the rating agency affirmed the ratings of Baa1 issuers and local currency unsecured securities from the Thai government.

This assertion reflects Moody’s expectation that Thailand will continue to demonstrate economic resilience to future shocks, underpinned by its large and diversified economy and strong macroeconomic policy effectiveness.

Moody’s predicts Thailand’s economy will grow 3.4% in 2022 and 4.8% in 2023.

– Deep –

Mr Pornchai said Thailand’s economy had bottomed out. The economy in the fourth quarter of 2021 grew by 1.9% year-on-year, compared to a contraction of 12.3% year-on-year in the second quarter of 2020 when the economy was flattened by the outbreak of the Covid-19 pandemic .

In 2020, the economy shrank by 6.2%, mainly due to the impact of the pandemic.

In response to the pandemic, the government has launched a series of relief measures to mitigate its impact. As a result, the economy grew by 1.6% in 2021.

He said economic recovery is likely to occur on an uneven basis.

The export sector has seen a strong rebound with a growth in the value of shipments of 17.1% year-on-year in 2021. Among the sectors that have yet to recover are tourism and related sectors.

Thailand welcomed around 40 million foreign visitors in 2019, accounting for 12% of the country’s GDP, before dropping to 6.7 million arrivals in 2020 and around 400,000 in 2021 amid the pandemic.

Pornchai expects the tourism outlook to gradually improve as the Covid-19 situation improves and more countries have reopened their borders.

– Solid tax status –

He said Thailand has fiscal stability. The country has a cash balance of over 418 billion baht as of February 2022, reflecting sufficient fiscal space to incur the necessary expenditures to sustain investments and mitigate any impact.

The country’s public debt-to-GDP ratio stood at 60.2% in February 2022. It is expected to reach 62.7% at the end of the 2022 financial year, still below the ceiling of 70% of GDP.

The government has also injected money into the economic system to revive growth, including an annual budget for fiscal year 2022 of 3.1 trillion baht, of which 600 billion is allocated for investment.

During the first five months of the fiscal year, 42.5% of the annual budget was disbursed.

The government has a remaining budget of 74 billion baht under the second emergency loan decree, which allows it to borrow 500 billion baht to mitigate the impact of the pandemic.

Pornchai said the government needed to run a budget deficit in the short to medium term to support the economic recovery and allow for the possible launch of additional measures to deal with the impact of the pandemic in the future.

The government has set itself a long-term goal of balanced budgets when the economy returns to normal.

In the medium term, the government aims to keep the deficit-to-GDP ratio at an appropriate level, he said.

The deficit for fiscal year 2023 is estimated at 695 billion baht or 3.9% of GDP, compared to 700 billion for fiscal year 2022 or 4.1% of GDP.

In fiscal 2023, the government expects revenue of 2.49 trillion baht, 90 billion more than in fiscal 2022, Pornchai said.

Spending in fiscal year 2023 is set at 3.18 trillion baht, which is 85 billion more than in fiscal year 2022.

The deficit-to-GDP ratio is expected to decline gradually from 3.9% in fiscal year 2023 to 3.8% in 2024, 3.7% in 2025 and 3.6% in 2026, he said.

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