Thai economy likley to pick up in the second half of 2013.

Posted on 31 July 2013 by ABPC

The Thai economy in the second half of 2013 is likely to pick up, as the employment rate remains high and the export situation is expected to improve.

The Governor of the Bank of Thailand, Mr. Prasarn Trairatvorakul, said that the second half of 2013 would see the recovery of the economies of the United States and Japan, which are Thailand’s major trading partners.

Thai economy, alan bolton property consultants pattaya

In the first half, the growth of the Thai economy decelerated because of a slowdown in exports and a decline in private sector spending. The termination of most government stimulus programs was another reason.

Investment in the second half was expected to increase after the deceleration of growth in the first half. Mr. Prasarn believed that the Thai economy in 2013 would grow by 4.2 percent and the global financial market would remain volatile. He cited household debt, which is still relatively high, as one of the domestic risks, which is likely to reduce private sector spending.

In its July 2013 issue of the Monetary Policy Report, the Bank of Thailand’s Monetary Policy Committee stated that Thailand’s economic growth has been revised downward in line with delayed global recovery and moderated domestic demand. Global economic outlook has softened because of weakened growth prospects in China and Asia. On the other hand, recovery in the United States continues to gain traction on the back of improving domestic fundamentals, while the Japanese economy is benefiting from the unprecedented stimulus policies, and the euro zone economy appears to stabilize.

The Monetary Policy Committee was of the view that Thailand’s long-term outlook still faced key structural impediments, including logistics, water resource management, and constraints in the labor market. The latter arose from persistently slow growth both in the total workforce and labor productivity. Addressing these issues would require macroeconomic policies that put an emphasis on resolving production bottlenecks along with demand management.

Concerning the labor market issue, the Central Bank Governor said that the problem of labor shortage has been deep rooted in Thailand for many years, but has not received much attention until recently. This could be partly owing to favorable economic expansion during the past years that has masked this problem and also because of the ability on the part of firms to employ immigrant workers.

But now, he said, with protracted external demand slowdown coinciding with recent weakening in domestic demand, the long-standing weakness of the labor market has emerged as an important bottleneck hampering potential growth. Pervasive skills mismatch has been identified as a major cause of the labor shortage.

However, he said, Thailand’s economic fundamentals remain solid, with strong international reserves. Its monetary policy has become more relaxed, which is favorable to economic growth.

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