Thailand’s economy steamed ahead in 2003 to become Southeast Asia’s top economic performer and is poised to continue its dizzying comeback from the 1997 financial crisis in the year ahead, analysts said.
Although some signs of overheating emerged towards the end of the year, the kingdom’s economic fundamentals remain solid and foreign investors are eyeing Thailand as a hot prospect for 2004, they said.
The finance ministry has tipped economic growth for this year to clock in at 6.4 percent thanks to a surging stock market, a strongly resurgent real estate sector, an appreciating baht and booming exports.
Thai Prime Minister Thaksin Shinawatra, whose stimulus policies are largely credited with driving the economy at a speed second only to China’s regionally, is aiming for 8.0 percent growth next year and double-digit expansion in 2005.
"The Thai economy has over the last 18 months shown pretty robust signs and is in a long overdue recovery from the crisis," said Brian Coulton, a Hong Kong-based senior director of international ratings agency Fitch.
Domestic demand is soaring, private investment is picking up, bank credit growth to the private sector has turned positive, the current account is in surplus and low inflation has continued, Coulton noted.
"As a result of those trends and better-than-expected export performance, Thailand has done quite well … For all those reasons we’re pretty positive on the economy."
Thaksin’s economic management and the political stability that has come with his massive control over parliament has also boosted investor confidence despite initial doubts over his government’s commitment to financial reforms.
It has also translated into feverish domestic consumer confidence, with many low-income households previously unable to access credit borrowing from state-run banks encouraged by Thaksin to loose their purse strings.
"From a macro position, this has been very effective. By targetting lower income groups who are credit constrained, the impact on spending has been quite powerful," Coulton said.
In a move aimed at sending a positive message to foreign investors, in July the government made its final repayment to the International Monetary Fund (IMF) two years ahead of schedule.
After the regional crisis hit, the fund stepped in to bail Thailand out with a financial package worth 14.5 billion dollars and it eventually drew down 12.9 billion dollars from the IMF.
Sompop Manarangsan, an economics lecturer at Bangkok’s Chulalongkorn University, agreed the outlook is rosy, pointing to an expected bounceback in the tourism industry, strategies to attract more foreign investors and planned government investment in major infrastructure projects.
"In terms of international competitiveness, Thailand’s prospects are good and better than neighbouring countries," he said.
The downside to the economy’s bounceback have been niggling fears that the sizzling property market and stock exchange have rallied too strongly from the grim depths they plunged to during the crisis years.
A multitude of mothballed property developments have been restarted while the bourse, which until recently suffered from lacklustre interest, shot up 82.93 percent over the first 11 months of 2003.
Sompop warned the government must tread carefully.
"If we cannnot manage and control the bubble areas well it may undermine the Thai economy in the longer term, particularly next year as we can see a lot of uncertainty, especially from the external sector."
Others are more relaxed about the risks of another bubble, arguing that growth in Thailand is coming off a very low base and that there is little danger of imbalances in the near term.
Coulton did, however, express a lingering concern over the snail’s pace of reform in the banking sector, which was hammered by massive non-performing loans (NPLs) when the float of the baht triggered the 1997 crisis.
"The concerns that we have are from a credit strength prespective … We’re still disappointed on progress in the banking sector, NPL rates are still too high," he said. "Creditor power is not strong enough in the Thai legal system."