Thai economy continues to grow in 2018 Growth of 4.0% is expected (Business Brief No.3727)

- The Thai economy in 4Q17 was buoyed by high growth in exports and tourism, while household consumption started to improve compared to the previous quarter. Nevertheless, 4Q17 GDP (seasonally adjusted) slowed from 3Q17, due mainly to contraction in agricultural produce following flooding and unfavorable weather conditions.

- KResearch maintains our view that the Thai economy will likely grow 4.0 percent YoY (or within a range of 3.5-4.5 percent YoY) in 2018, to be driven by exports and tourism. Public and private investments, which have begun to improve, will play a more important role in supporting the economy. In addition, it is hoped that government measures under the 2018 central budget amounting to THB150 billion will help sustain the economy amid weak farm income, which is still pressured by low prices of various key agricultural products.

- Issues to be followed closely include disbursement of public investment funds, Thai Baht volatility and an interest rate uptrend that may affect economic growth over the remainder of the year. Whereas the USD continues in depreciation from last year and thus results in a stronger THB, stimulus measures in the US will shore up their economic expansion. In this scenario, inflation in the US will heighten, followed by interest rate hikes. If the Federal Reserve implements three rate increases in 2018 as it has has already signaled, US rates will be higher than those in Thailand, which may lead to a reverse trend in the THB and higher Thai government bond yields in line with the US, thus reflecting rising financial costs here in Thailand.