Thailand - Economic Monitor

Abstract

Thailand is poised to record the fastest growth rate since the crisis. Rapid expansion in private consumption has been the chief driver, but private investment and exports have also grown faster than before. Policies to promote consumption and certain types of investment have been successful, as has macroeconomic adjustment to reduce external vulnerability. While private investment has continued its rise, private investment's contribution to growth has been weaker than in previous Thai recoveries. The challenge is now to convert this strengthening recovery into sustained high growth over the medium-term and for structural reforms to gain greater momentum. Growth in 2003 is expected to reach an impressive 5.8 percent. This follows a growth rate of 5.2 percent in 2002 and 6.2 percent in the first half of 2003. The adverse impact of Severe Acute Respiratory Syndrome (SARS) on growth in the second quarter was much less than was originally feared. Increase in real farm incomes was a key driver of poverty reduction in the Northeast, though other factors had a role. Sustained macroeconomic adjustment reduced external vulnerability further. Higher growth and poverty reduction has been accompanied by a current account surplus of around US$7 billion a year.

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