Thailand's economic growth is anticipated to expand by 4.2% next year, driven by domestic economic engines such as public investment and consumer spending, says Bank of Ayudhya (BAY).
Despite being reduced from 4.7% projected for this year, economic growth prospects in 2019 will shift towards domestic demand-led growth rather than the export-led growth seen this year, said Somprawin Manprasert, BAY's research chief economist, during a seminar titled "Krungsri Business Forum 2018: Blue Ocean Shift: New Approaches in Digital Economy."
Public investment is forecast to expand by 9% next year, up from this year's estimate of 7%, and this will help shore up private investment momentum by 4.8% in 2019 from this year's 4.3% projection, said Mr Somprawin.
Government spending for infrastructure investment projects is expected to increase by four times over the next two years as there are numerous projects in the pipeline, he said.
Consumer demand is expected to strengthen on the back of Thailand's economic recovery, resulting in solid consumer spending, said Mr Somprawin.
Although the tourism industry is projected to expand by 9% next year, down from this year's estimate of 11%, the number of tourist arrivals should be higher than 40 million, he said.
Unwinding monetary policy is another factor poised to affect the economy as a hike in the policy interest rates of several countries and lower supply of monetary stimulus programmes will induce capital outflows and foreign exchange rate volatility, said Mr Somprawin.
The Bank of Thailand's Monetary Policy Committee is expected to raise the benchmark interest rate by 25 basis points this year, with another quarter-basis-point hike expected in next year's first quarter, he said.
"The fundamentals of the economy are ready to deal with rising interest rates," said Mr Somprawin.
"The rate hike will not have a negative effect on the economy, but rather points towards an economic recovery and growth momentum. In addition, the rate hike will help support medium and long-term stability in the financial sector."
If the policy interest rate remains low, there could be further speculation in some sectors as people partake in search-for-yield behaviour, he said.
