Thai economy to grow slightly stronger in 2016, inflation to hover around 0 pct

Prolonged political uncertainty in Thailand impacted the economic growth in 2012 and 2013. The tensed political climate alleviated slightly after the military coup in May 2014. But consumer and investor confidence continue to be subdued that are impacting growth outlook. The Thai economic growth continued to be weak at about 2.8% in 2015.

This is mainly due to four factors: excess production capacity and subdued external demand, weak private investment because of poor confidence, postponement of government disbursements due to improved anti-corruption measures and red tape, and slowdown in private consumption.

Domestic investment is expected to mainly drive the Thai economic growth this year rather than foreign demand or private consumption. It is quite essential that the promised infrastructure projects start in order for the economy to fare well in 2016. The economy is expected to expand a bit stronger this year by 2.8%, noted Commerzbank in a research report.

Meanwhile, the Thai economy faces disinflationary pressures. Last year, the economy recorded -0.9% of inflation. It is expected to hover around 0% this year, noted Commerzbank. This shows that inflation faces downside risks given the modest rebound in economic growth and subdued oil prices. According to the Bank of Thailand, the core inflation, excluding raw food and energy prices, remains around 1%.