Thailand’s economic growth is expected to moderate to 2.5 per cent in 2016, from 2.8 per cent in 2015, according to the World Bank’s “East Asia and Pacific Economic Update”.

Boosting the economic outlook in 2016-2017 will be the timely implementation of public infrastructure projects, such as railway dual-tracking and upgrading.

Nevertheless, three main economic challenges are highlighted, including China’s economic condition and domestic political instability.

The World Bank said that in the case of a hard landing for the Chinese economy, accompanied by global financial turmoil, Thailand would be mostly affected through the trade and financial channels, as China represents 12 per cent of the Kingdom’s exports and 8 per cent of foreign direct investment. Ample monetary and fiscal buffers could alleviate the impacts, though.

The second risk is that of a return to the political gridlock seen in the years prior to the current military-led regime’s tenure, if ongoing political reforms do not satisfy civic society at large.

“Such a scenario could lead to renewed street protests, incapacitate key government institutions and weigh on consumer and investor confidence,” the bank said.

Finally, as the Thai population is ageing rapidly – the share of working-age population in the total population could start to decline this year – demographic dividends will no longer contribute to growth and inclusiveness in the same manner as before.

Pockets of poverty increasingly concentrate in the lagging Northeast, North and deep South, and among the households residing in remote areas and with limited means to support themselves, including elderly households.

Thailand’s economic growth rate this year is near the bottom among Southeast Asian economies. The Philippines and Vietnam are expected to show the strongest prospects this year among Southeast Asian nations, with anticipated growth of more than 6 per cent.

In Indonesia, gross domestic product is forecast to grow by 5.1 per cent in 2016 and 5.3 per cent in 2017, contingent on the success of recent reforms and implementation of an ambitious public investment programme.

According to the report, several small economies, including Laos, Mongolia and Papua New Guinea, will continue to be affected by low commodity prices and weak external demand.

Cambodia’s annual growth will be slightly below 7 per cent from 2016-18, reflecting weaker prices for agricultural commodities, constrained garment exports, and moderating growth in tourism.

The large Southeast Asian economies are expected to drive the GDP growth rate in developing countries in East Asia between this year and 2018. Compared with 4.7 per cent in 2015, the growth rate excluding China is expected to rise to 4.8 per cent in 2016 and 4.9 per cent in 2017-18.

East Asia

Including China, growth in developing East Asia is expected to ease from 6.5 per cent in 2015 to 6.3 per cent in 2016 and 6.2 per cent in 2017-18. The forecast reflects China’s gradual shift to slower, more sustainable growth, expected to be 6.7 per cent in 2016 and 6.5 per cent in 2017, compared with 6.9 per cent in 2015.

However, the outlook for individual countries varies, depending on their trade and financial relationships with high-income economies and China, as well as their dependence on commodity exports.

“Developing East Asia and Pacific continues to contribute strongly to global growth. The region accounted for almost two-fifths of global growth in 2015, more than twice the combined contribution of all other developing regions,” said Victoria Kwakwa, incoming World Bank East Asia and Pacific regional vice president.