The National Economic and Social Development Board (NESDB) said it now expects 2018 expansion in the range of 4.2 to 4.7 per cent – up from an earlier projection of 3.6 to 4.6 per cent – after the economy grew at the fastest pace in 20 years for the three months of the year.

NESDB deputy secretary-general Wichayayuth Boonchit said gross domestic product (GDP) rose 4.8 per cent year on year for the quarter, driven by an acceleration in spending by the public and private sectors.

Thailand had suffered GDP contraction of 0.4 per cent in the first quarter of 2014, the worst performance for a quarter for the preceding five years.

For opening quarter of 2018, total investment edged up 3.4 per cent from the year-earlier period. Public investment increased 4 per cent.

Exports expanded 9.9 per cent, while tourism-based income jumped 16.8 per cent.

With the NESDB’s revised GDP growth forecast of 4.2 to 4.7 per cent, the median estimate is 4.5 per cent.

The health of the global economy and robust product prices have been cited as factors behind the strong growth performance.

The trend of rising exports is expected to firm up and the nation’s stronger economic base is likely to spur industrial expansion – aided by expenditure flows from the government.

The NESDB expects exports to grow 8.9 per cent for 2018, with public spending likely to rise 3 per cent and private investment in the order of 3.9 per cent. Private consumption is estimated to increase 3.7 per cent. Average headline inflation is projected in a range of 0.7 to 1.7 per cent.

Thailand’s current account is forecast to enjoy a surplus that amounts to 8.4 per cent of the nation’s GDP.

However, risks to growth loom in the form of increased prices for certain products and crude oil, along with expected rises in interest rates, amid global economic and financial uncertainties

Deputy Prime Minister Somkid Jatusripitak said he drew encouragement from the 4.8 per cent GDP marking the fastest growth in five years.

Broad indicators rising

The government had spent most of the past five years driving forward the economy, he said.

All economic indicators, including private investment, exports and tourism receipts, had improved, he said, adding the prolonged pressures in the agricultural sector had eased.

Somkid said that the strong GDP expansion was likely to raise the confidence of the private sector, increasing the prospects of greater corporate income.

If the scale of investment through public-private partnership (PPP) plans proceeds as planned, businesses in a range of activities will be boosted, with infrastructure and property projects to follow, he said.

Meanwhile, a meeting of the PPP committee chaired by Somkid, yesterday resolved to accelerate the pipeline of such projects. Three big projects are expected this year with investment of about Bt446.87 billion, according to Prapas Kong-Ied, director-general of State Enterprise Policy Office.

They are the Bt80.6-billion Nakhon Pathom-Cha-am intercity motorway, the Bt128.23 billion Tao Poon-Kanchanaphisek Ring Road mass rapid transit system, and the Purple Line’s Bt238.04-billion eastern and western section MRT project.

The Siam Commercial Bank Economic Intelligence Centre forecasts the economy will grow more than 4 per cent this year, citing the 4.8 per cent expansion achieved for the first quarter.

The centre’s confidence is based on encouraging signs across all sectors of the economy, as well as a reduction in household debt. These factors will boost consumer spending throughout the rest of the year, it said.

The Bank of Thailand’s senior director for the economy and policy department, Don Nakornthab, said yesterday that the economic expansion for the year’s first three months had exceeded the central bank’s expectations.

Don also highlighted the contributions from investment by the private and state sectors, as well as increased domestic consumption. He said the Bank of Thailand would announce next month a fresh estimate of economic expansion for 2018.

However, Don cautioned that the economy faced a range of risks – both internal and external. The latter included uncertainties over global trade policies and rising oil prices. On the home front is the issue of how well domestic consumption will hold up.

The government’s National Economic and Social Development Board, releasing its quarterly economic report on Monday, said this was the highest growth rate in 20 quarters.

The surge was driven by exports (valued at US$61.78 billion, up 9.9%), consumption (3.6%), private investment (3.1%) and public investment (4%).

The NESDB is now forecasting full year growth for 2018 of between 4.2 and 4.7%.

Vinaroj Supsongsuk, OAE director-general, said that the multiplier effect of the government spending on 15 key agriculture-related policies could drive the flow of money to 2.65 times the actual amount budgeted and generate additional farm income.

Of these 15 policies a total of Bt42.87 billion is focused on five areas: upgrading agricultural standards for sustainability extending across water resource management, fishery standardisation, development of a rice seed centre, assistance on debts to agricultural cooperative members and the Pracha Rath farm development institute.

Others key areas include promotion to add product value, use of agricultural machines to replace workers, the organic agricultural product bank, a promotion system for large-scale farming, a learning centre to boost production efficiency for agricultural products, development of smart farming, agricultural area management under proactive agricultural plans, promotion of new agricultural theory, developing agricultural product markets and development of good agricultural practices (GAP).

Of the total money flow of Bt113.52 billion, about Bt79.65 billion comes from production of materials and related products in supply chains, as a result of equipment procurement in construction projects including water distribution systems and improvement of water sources for greenhouses.

About Bt33.87 billion came from wages in projects for farmers, such as the fees for instructors and travel allowances. Those wages are spent on household consumption, thus contributing to the income of shops and businesses in communities.

Another Bt9.36 billion is additional income for farmers from the Bt4.17-billion water resource management project.

The agricultural sector has seen higher potential through fishery standardisation, which has allowed the country to export more Thai fishery products to the European Union (EU) and non-EU markets.

As the programmes help reduce the production costs of farmers and food producers, increase promotion of products, or increase use of agricultural machines, sector incomes and profits are increased by 0.5-1.0 times.

Learning centres help boost the efficiency of producing agricultural products, while the smart farmers programme helps farmers become more self-reliant through learning about efficient production planning and making choices based on Agri-Map zones.

Activities or projects under the scheme aiming to raise capabilities of the agricultural sector and farmers are expected to raise future farm incomes through improved quality of products, value-added products, and increased knowledge of production and distribution channels for export.

The licence will allow it to provide credit reporting services. Within a year of licensing, the bureau should be in operation.

Zayar Nyunt, chief executive officer at Small and Medium Industrial Development Bank, said the bureau would help a great deal in building trust between bankers and businesses.

“Trust is really important. Many SMEs in Myanmar lack capacity, skilled labour, technology and finance. Policymakers are trying to address these issues, and the credit bureau is an outstanding outcome from that,” he said.

“We urgently need to raise awareness about the credit bureau. The more people know about the credit bureau, the more they will make good use of that.”

Yet, he warned that improving access to finance alone could not make a small business successful.

“We also need to educate them on effective planning by making good use of the loan,” he said.

The banker admitted the current interest rate could be a burden for small businesses. He urged the government to set a special interest rate for SMEs depending on the macroeconomic statistics.

“Our bank is providing as many non-collateral loans to SMEs as possible. We provide short-term loans with a payback period of either six or nine months, depending on our field observations. But we still have the deposit issues,” he said, stressing the need for more budget allocations to support SMEs.

Vikram Kumar, International Finance Corporation’s country manager for Myanmar, said a good credit bureau could make borrowers more transparent, give confidence to lenders, and prevent individuals and enterprises from getting into too much debt, thus enabling greater financing to SMEs.

“Cross-country studies have showed that economies with better credit reporting tend to have higher availability of funding for the private sector,” he said.

He said it would take time for the credit bureau to acquire members and be ready with relevant and reliable data. Once the credit reporting services are available, lenders will have information on at least three aspects of a borrower: total indebtedness level, full borrowing history and complete repayment history.

“These will significantly help creditors in risk management, reduce information asymmetry, and control multiple borrowings. It will be good for both increasing funding to SMEs and for maintaining financial stability in the country,” he said.

According to Kumar, all other economies in the Asia Pacific region have made substantial efforts to build up their credit reporting system in the past decade, which subsequently has increasing SME lending significantly.

“A similar implication proportionate to the size of the financial sector and economy could also be achievable in Myanmar,” he said.

The credit market in Myanmar could be significantly strengthened if other areas of reforms progressed. And secured transactions will enable lenders to take movable assets as collateral conveniently and safely, he added.

Kumar hopes for the gradual liberalisation of Myanmar’s credit market, including risk-based pricing of loans, relaxation of interest rate controls, and greater entry of non-deposit-taking lenders.

In a bid to improve SME lending in the agriculture sector, state-owned Myanmar Insurance recently partnered with RGK+Z&A Group and Singapore’s InfoCorp Technologies.

The agreement, which was signed last week, will involve identification of cows and buffaloes by enabling the use of livestock as collateral in the loan application process.

Directorate of Investment and Company Administration (DICA) also reduced company registration fees from 500,000 kyat (Bt11.9 million) to 250,000 kyat (Bt5.95 million), with effect from April 1, to reduce the cost of doing business for SMEs and encourage increased company incorporations.

Aung Naing Oo, director general of DICA, said preparations are underway for new regulatory notifications and forms, public education and the establishment of a new electronic companies registry system. The new system will enable fast and efficient company registrations, submission of company filings and communications with the company registration office.

He said the DICA had prepared for the implementation of the new Myanmar Companies Law, which would take effect on August 1.

Minn Naing Oo, managing director of Allen & Gledhill (Myanmar) Co, said Myanmar’s regulatory framework has been improved a lot, leading to tangible benefits for local and foreign businesses.

“Having a good regulatory framework is critical, but implementation of these new laws is more important. We need to raise awareness about these laws so that local businesses ensure benefits from that,” he said.

He also stressed the importance of capacity building in the judicial sector, particularly to improve judges’ and lawyers’ knowledge on commercial laws in Myanmar.

Khine Khine Nwe, joint secretary general at the Union of Myanmar Federation of Chamber of Commerce and Industry, said the chamber prioritised building capacity of SMEs by holding a number of workshops and training sessions every month.

Somkid announced the goal as he presided over the opening of a three-day event to promote the development of small and medium-sized enterprises (SMEs).

The event, held by the Industry Ministry’s Department of Industrial Promotion at the Impact Muangthong Thani convention centre in Bangkok, is aimed at showcasing the government’s support for SMEs, which the government says comprise one of the nation’s economic pillars.

Somkid has urged state agencies in the economic sphere and the private sector to join forces to clear the obstacles in the path of Thailand becoming a startup hub.

He has ordered the Industry Ministry to work more closely with other state agencies and state and private banks to drive forward the policies required to strengthen the competitiveness of the country’s SMEs.

Thailand has more than three million SMEs, which employ around 10 million.

Somkid also urged Krungthai Bank and the Small and Medium Enterprise Development Bank of Thailand (SME Bank) to develop their Big Data systems and use artificial intelligence (AI) to more efficiently target their lending to smaller ventures. He also urged SMEs to adopt digital technology to enhance their competitiveness.

The government of Prime Minister General Prayut Chan-o-cha has given to priority to support for SMEs by launching a number of regulatory and financial measures.

The Industry Ministry has joined with state agencies to develop a Big Data resource base for SMEs, enabling the government to better design policies that fit with what these ventures need, Industry Minister Uttama Savanayana said yesterday at the same event.

Somchai Harnhirun, Deputy Minister of the Industry Ministry, said that in order to create more opportunities for SMEs, and aid their digital transformation, the ministry will set up 76 Industry Transformation Centres (ITCs) nationwide. These centres will help the owners of SMEs to improve their products and reach more customers through online channels. This would enable value creation, the minister said.

Somchai said that under the first stage of the plan, the ministry had already set up more than 10 ITCs in a number of provinces, underpinning the goal for the 76 centres to open by the end of this year.

The ministry will also create the concept of an industry village in order to develop value-creation activities in villages and help to provide sales channels to the domestic and international markets, Somchai said at the event.

Furthermore, the ministry will serve as a facilitator behind an online-based business-matching scheme that will connect around 1,600 Thai SMEs with 17,000 of their Japanese peers.

This initiative will help achieve a cluster effect and open up more opportunities for SMEs in both countries, Somchai said.

As part of this plan, the ministry will provide online business matching online between local SMEs and those in up to five other Asean countries. This exercise would create opportunities for SMEs in the global market.

Elsewhere, Somchai said the Industry Promotion Department and International Trade Promotion Department, under the Industry Ministry, would join with Alibaba Business School to train some 500,000 people over the next five years with the skills required for a technology-based workforce. The collaboration will see the development of a digital technology curriculum required for the workers in these new industries.

The ministry expects that in the first year some 10,000 people will be trained. This boost in education would strengthen SMEs in their efforts to provide their products and services on e-commerce platforms, Somchai said. This initiative would help drive the whole economy forward, the deputy minister said.

She said at the launch of the latest Myanmar Economic Monitor on Thursday that the medium term outlook for Myanmar remains positive despite some risks. She expects a surge in foreign investment flows to drive further growth.

“The report shows that Myanmar’s economy is doing better this year, and we hope the country to maintain the momentum,” she said.

“The government needs to ensure the growth is sustainable and inclusive. They need to find ways stimulate growth and investments to ensure financial inclusion.”

Goldstein stressed an urgent need to address the emerging risks that could affect business sentiment and weaken future performance.

“The pick-up in growth and improvement in the macroeconomic situation are encouraging,” she said.

Despite growing global and domestic uncertainty, the growth is estimated to have increased to 6.4 per cent last year from 5.9 per cent in 2016-17 fiscal year. This growth was driven by a recovery in agriculture and especially crop production, improved manufacturing performance, and strong services growth despite a slight slowdown likely due to tourism and banking sector uncertainties, according to the report.

Inflation,which moderated to 5.5 per cent last year from 7 per cent in FY2016-17, is expected to ease further to 4.9 per cent next year.

Goldstein hailed the government’s bid to finalise Myanmar Sustainable Development Plan, which could serve as a platform to make progress in resolving conflicts that jeopardise inclusive and sustained growth.

She warned not to underestimate the value of the plan, as it is a clear direction and motivation for Myanmar people, investors and the international community.

Goldstein urged focusing on two key areas: providing an enabling environment for private sector growth and using fiscal space wisely by spending more effectively to meet urgent needs through investing in infrastructure such as energy and transport, as well as investing in Myanmar people by increasing government expenditures in the education sector.

Hans Anand Beck, the World Bank’s lead economist for Myanmar, said a stable macroeconomic environment and policy certainty would encourage private sector activities. He also stressed the need of well- targeted public investments for the economy to sustain its positive momentum amid intensifying risks.

“Providing and pricing electricity well, implementing the companies act, servicing tax payers, and securing the environment for financial transactions, can help in this regard,” he said.

Domestic downside risks to the baseline outlook have intensified due to the ongoing uncertainty related to the crisis in Rakhine State.

While growing global trade policy uncertainties may affect the recovery in global trade, impacts on Myanmar are likely to be modest, he said.

U Myint, former chief economic adviser to the President, believes the report has dealt with major economic and social issues in Myanmar.

He suggested the World Bank to study on income distribution in Myanmar in the upcoming reports.

“GDP [gross domestic product] could be rising, but if income distribution is unfair and uneven, then benefits of the increase go mostly to a small group of people,” he said.

The report also states that problems with finding skilled labour persist, which U Myint considers brain drain as a challenge that urgently needs to be addressed.

“Our young smart and skilled people are leaving the country because together with old folks like us we are not clear what is going on in the economy and where it is heading,” he said.

He said millions of Myanmar nationals went abroad to make ends meet not only for themselves but more importantly to meet daily living expenses of their family members left back home.

Only economic and social progress would bring them back to the country, he warned.