EIC Analysis / Outlook
Outlook Quarter 4/2016
13 October 2016

(Update!) Thailand's exports rose by 3.4% in September. EIC forecasts a drop of only 0.5%YOY in 2016. read more


  • Thai economic outlook for the rest of 2016 and 2017
    • The 2016 U.S. presidential election - a spirited race with a great policy divide
    • Italian NPLs – a spark for the next crisis?
    • Thailand and the transition towards a cashless society and e-Payment
  • Bull - Bear: Oil Prices
  • In focus: Exploring SMEs’ opportunities in the service sector
    • Example of SMEs’ service business activities
  • In focus: Themes for the Global Economy in 2017
  • Summary of main forecasts


Thai economic outlook for the rest of 2016 and 2017


EIC revised the forecast for Thailand’s GDP growth in 2016 upward to 3.0% from the previous 2.8% due to one-off positive factors in the first half of the year. These factors include reduced real-estate transfer fees that led to accelerated private construction in the first quarter, frontloaded economic stimulus measures, and upward pressures on automotive sales. However, economic growth for the rest of this year might stall as the effects of the supporting factors in the first half were short-lived. The economy will still be affected by subdued household incomes from a stagnant labor market and private investment continues to be sluggish due to contracting exports and excess production capacity.


In 2017, EIC sees the Thai economy expanding by 3.3% driven mainly by private demand recovery. Pressure on household purchasing power will be lifted partially after loans from the first-car rebate scheme are paid off and higher household incomes due to additional deductions on personal income tax. Private investment is also likely to recover thanks to an expansion in service sector investment and clearer signals regarding public infrastructure megaprojects. The public investment and tourism sectors that have been supporting the Thai economy are also projected to continue their high growth rates. Exports will improve only slightly as exports of consumer goods pick up and export prices rise with global oil prices.


External factors continue to be the major concern for the Thai economy for the rest of the year and into 2017. The recovery of the Thai export sector is still limited by the recent pattern of global economic recovery that depends heavily on domestic consumption, while the manufacturing sector remains stagnant. Moreover, accumulating debt issues and heightened political uncertainty in leading economies continue to put downward pressure on a recovery, while monetary policy is starting to become less effective. Regarding global interest rates, EIC predicts that the Fed will raise the policy rate 2-4 times starting at the end of 2016 until the end of 2017, about a 0.5%-1% increase. Despite these external risks, Thailand’s high current account surplus and international reserves will help maintain stability against global financial volatility. EIC forecasts the Bank of Thailand will keep the policy rate at 1.5% until the end of 2017 due to gradual economic recovery and low pressure on inflation, leaving policy space in case of any future need. EIC predicts that the Thai baht will gradually depreciate to 35.5 THB/USD at the end of 2016 and 37.0 THB/USD at the end of 2017.



Bull - Bear: Oil Prices


EIC’s view: BEAR
Crude oil prices in the fourth quarter of 2016 will increase slightly but remain low due to an excess supply of around 0.8 million barrels per day. Despite the agreement reached by OPEC to cut production, some countries may be exempted, such as Iran. As a result, the agreement will not have a significant impact on reducing the oil supply. Moreover, a possible rate hike by the Fed in late 2016 may be another factor in pressing oil prices downward. However, higher demand for oil in winter should push prices up in the fourth quarter.


In focus: Exploring SMEs’ opportunities in the service sector


As the global economy has increasingly shifted away from the manufacturing sector towards the service sector, Thailand too is experiencing such transition in recent years. The impact of such structural change will be inevitable especially for Small and Medium Enterprises (SMEs). Therefore, businesses in Thailand should gear up to embrace the trend. But, given a wide variety of businesses in the service sector, what are segments with high growth potentials for SMEs, taking into account advantages of each region in Thailand?



In focus: Themes for the Global Economy in 2017


The global economy is likely to continue its slow recovery in 2017 against a backdrop of increased uncertainty. The volatility of financial markets and unexpected turns of events, such as Brexit, whose fullest implications remain to be seen, continue to pose risks. EIC recommends keeping an eye on the following: risks due to accumulated debts in the aftermath of the global financial crisis, escalating geopolitical conflicts, and global fiscal policy pushes, an increasingly attractive option for many governments dealing with economic uncertainties. All of these factors will affect the dynamics of economic growth, and it is possible that the global economic outlook for 2017 may deviate from the baseline scenario.