Thai government’s public expenditure programme will have a significant bearing on the economy this year says the World Bank. The Secretary-General for Thailand’s Eastern Economic Corridor project in the eastern provinces this week revealed that industrial development land involved in the zone will be doubled to 1 million rai. Kanit Sangsubhan said that his office was currently targeting 5,000 Chinese companies to attract to the region. There is also substantial interest from the US and Europe.
Although it represents a downgrade, the prediction of 3.5% growth for Thailand’s economy looks optimistic with the possibility of a contraction in exports and a weakening consumer sentiment. The World Bank and its country manager for Thailand, Birgit Hansl, particularly warn in the latest bulletin about the negative effect of political instability on public confidence and private consumption. The impetus of the government’s public expenditure programme will help but it will take time for the incoming government to find its feet. The Eastern Economic Corridor project in Chonburi, Rayong and Chachoengsao province is emerging as a signature project of the government and was referenced by Ms Hansl. It involves an investment of ฿650 million, a new high-speed rail connection with Bangkok and the development of Thailand’s third international airport.
Despite the bad news on exports as Thailand struggles with a highly valued baht and US Chinese tensions with industry predictions that exports will, in fact, contract for 2019, the World Bank is still predicting a 3.5% growth rate for the Thai economy this year. This in the face of many economists already lowering expectations down to 2% when many are even suggesting that things could be even worse than that. The World Bank in its Thailand Economic Monitor report did reduce their growth outlook from 4.5% and suggested that Thailand’s growth rate began to weaken in 2019 directly linked with a deterioration of world trading conditions and most significantly, declining consumer sentiment.
Fall in the growth of Thai exports coincides with Trump’s tariffs on Chinese imports last year
Thailand’s Ministry of Commerce own export figures showed a marked deterioration in export growth for Thailand from July of last year. This coincided with the imposition of 25% tariffs on a range of 818 different types of Chinese products in early July 2018 following a series of other moves from the US administration towards Chinese imports from the beginning of 2018.
World Bank predicts and an uptick in 2020 and 2021
The World Bank is also predicting an uptick in Thailand’s growth rate in 2020 and 2021 with projected figures of 3.6% and 3.7%. The forecasts assume that private consumption in Thailand remains stable and that Thailand’s planned public expenditure programmes go ahead. These are thought to be linked to the ability of incoming ministers in the new government finding their feet quickly.
Concern about the stability of the incoming Thai government and dropping consumer sentiment
However, the economic heads at The World Bank have expressed concern about the cohesion of the incoming Thai government which is comprised of 19 different parties and which despite assurances from the Thai prime minister last week that disunity and bickering at been left behind, is still understood to be riven by division with the exception of a small but powerful cadre at the top working closely with the prime minister. The bank is also concerned about Thai consumer sentiment declaring that it may be impacted by political upheaval. There is already some evidence that this may be happening. Consumer sentiment in Thailand has now dropped for four months in a row.
Public expenditure programme is of critical importance right now as trade war continues
It is clear from the latest statement, that the World Bank is urging the Thai government to push ahead with its ambitious public expenditure programme and do whatever possible to maintain unity within the government in the face of uncertain global conditions. The bank foresees that the ongoing US-China trade war will continue to hamper Thailand’s export trade with consequent negative effects for investment and consumer confidence.
The World Bank report particularly identifies the pursuit and implementation of Eastern Economic Corridor development plan as a critical project for Thailand’s incoming government. The country manager at the Word bank, Birgit Hansl, has been in her post since November last. ‘Policy continuity and the implementation of planned public infrastructure projects in the Eastern Economic Corridor will be of vital importance to sustain growth,’ she said in the bank’s Thailand Economic Monitor. ‘Increased regional integration and making better use of Thailand’s strategic location could support trade in goods and services.’
Increased access to financial services is a success
The World Bank praised the progress made by the Thai government in improving access to financial services among the public. Figures now show that 82% of adults in Thailand have their own bank account. The bank also noted that there is a small gender gap.
Expansion of internet access and internet financial services another key priority
Kiatipong Ariyapruchya is the senior economist for the World Bank on Thailand. ‘Expansion of digital services to the under-served would bring about new economic opportunities and support a reduction of inequality as envisaged in Thailand’s national strategy,’ he said. He was referring to internet access to services including financial platforms but also to the Thailand 4.0 strategy which now sees the Thai government working gradually towards all government data and information being made available online. The ambitious plan, into the future, would allow the Thai public access to information not only for their own personal services but to participate in government decision making as citizens.
Thai internet usage among the heaviest in the world
The World Bank economist highlighted the need for the Thai government to support moves to improve financial services online available to the Thai public. The bank also called for the government to work to improve further broadband and internet access in Thailand. It is projected that 65% of Thai people will have internet access in 2019 and this is predicted to grow to 82% in 2023. Thailand’s existing internet users are among the world’s heaviest users of the internet coming in at 8th in the wold. A 2018 survey showed that Thai internet users spent 9.38 hours a day online while mobile users ticked up 4.6 hours.
Easter Economic Corridor boss announces a doubling of industrial land to 1 million rai
The Secretary-General of the Eastern Economic Corridor Office has, this week, told The Nation newspaper in Bangkok that the Thai government now plans to double the amount of industrial land in the three provinces of Chachoengsao, Rayong and Chonburi dedicated to the project. In an exclusive interview with that newspaper, he stressed that the move to increase industrial development land to a massive 1 million rai will not come at the expense of designated green areas or agricultural land. The land used is essentially wasteland unsuitable for agriculture.
Office now targets 5,000 Chinese companies
‘It sounds very large, but the increase comes from a small base,’ said Kanit Sangsubhan. He confirmed that his office was now targeting up to 5,000 companies in China to set up within the region. His office was working with leading Thai firms to prepare for several Chinese firms to set up shortly in the zone.
PM last week met the head of the Chinese sovereign wealth fund and highlighted the EEC’s potential
Last week, Thai Prime Minister Prayut Chan-ocha met Peng Chun who is the President of the Chinese Investment Corporation (CIC), the Chinese sovereign wealth fund with assets of $800 billion. The wealth fund is reportedly preparing to back Chinese firms investing in the development zone in partnership with Thai companies. The online retailer and internet commercial giant, Ali Baba is one of the firms establishing in the area with a state of the art automated warehouse. The company also provides financial services to Chinese tourists. It is reported the Huawei, the technology company under fire from US sanctions against it, is also looking at the zone as well as electric vehicle company BYD.
Investment plans now estimated at ฿650 billion
The huge investment in the zone involves a range of mega projects with over ฿650 billion being spent. The Thai government is funding ฿200 billion with the rest coming from private sources in public-private partnerships. The cabinet has already approved a ฿182.5 billion project for a high-speed rail link connecting Don Mueang, Suvarnabhumi and the new U-Tapao airport. The contract was awarded to well known Thai conglomerate Charoen Pokphand Holdings. The parties are currently awaiting the signing of contracts with the State Railway of Thailand.
Third international airport in Rayong near Pattaya
The U-Tapao Airport itself is a ฿290 million project in Rayong province. Located at Ban Chan district, also near Pattaya, it will become Thailand’s third international airport. The development of the airport will be 94% privately funded in a Public-private partnership. Other developments in the eastern economic corridor include the development of the deep seaport at Laem Chabang which will cost ฿84.4 billion. Another seaport and aircraft maintenance project will involve ฿66 billion and will be 60% funded by the Thai government.
Making the Eastern Economic Corridor work now a key goal for the incoming government
The implementation of these projects and the attraction of commercial activity and companies to the zone will be a key priority for the government when it is expected to be sworn in during the course of the next week or so. The Thai prime minister last week, highlighted the opportunity for Chinese firms to move to the new facility. There is also reported to be interest from US and European companies in what the Thai government hopes will become a new industrial and distribution hub in southeast Asia.
The challenge of the Thai government as it takes office will be to assiduously work towards progress economically while striving to prevent political instability which is now emerging again as the chief threat to Thailand’s economic prospects.