World Bank says domestic demand can cushion Thai GDP growth

[BANGKOK] Domestic demand can help Thailand weather a weaker global economic environment this year, according to the World Bank.

Rising private consumption and investment in Southeast Asia's second-largest economy are filling much of the gap from easing exports, the lender's Country Manager for Thailand Birgit Hansl said in an interview.

"Domestic demand is in a good position here to cushion the effect from the external downturn," Ms Hansl said on Monday in Bangkok. "Private consumption ticked up quite a bit last year. That is related to very low inflation compared to neighbouring countries. Public and private investment also increased."

The US-China trade war is a challenge for Thailand as exports of goods and services are equivalent to about two-thirds of gross domestic product. Goods shipments fell in recent months, and the military government has expressed concern about the domestic outlook. Thailand is also absorbing the first benchmark interest-rate increase since 2011.

Ms Hansl said 2019 will be tougher for the global economy given the risks from the trade environment, while adding that Thailand for now seems to have suffered less of an impact than some other nations.

The World Bank's outlook for comparatively resilient domestic expansion, together with strong interest in a government bond auction Wednesday, contributed to a climb of as much as 0.8 per cent in the Thai baht against the dollar, to the strongest level since May.

Aside from swings in trade, another risk stems from the general election expected in the Southeast Asian nation this year and the possible impact on private investment.

"You could see - as is normal in such periods - that some decide to sit on the fence for a few months until there is less uncertainty about the outcome," Ms Hansl said.

BLOOMBERG