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Bangkok Post
10-07-2025
- Business
- Bangkok Post
Are GDP forecasts reliable? An examination of models
As Thailand's economic outlook continues to be scrutinised, a growing debate has emerged over the reliability of GDP projections, particularly whether they reflect genuine domestic growth or are inflated by temporary trade flows. At the heart of the discussion is how Thailand calculates its GDP. Several private sector forecasting houses predict GDP growth for this year to tally less than 2%, more pessimistic than the Bank of Thailand's outlook. The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) recently voiced its disagreement with the central bank's forecast, which projects 2.3% growth this year, with the committee arguing it does not see a clear growth driver to support such optimism. The JSCCIB forecasts growth of 1.5-2.0% this year, with exports expected to contract between 0.3% and 0.5%, and inflation of 0.5-1.0%. In addition, the panel expressed concern over the appreciation of the baht, which has strengthened to 32.5 per US dollar, a level that is stronger than most other currencies in the region. The Federation of Thai Industries (FTI) called the 14.9% year-on-year surge in exports during the first five months of the year "inconsistent with reality", given that the Manufacturing Production Index has increased only marginally. Such export growth is likely to stem from transshipment, with Thailand used as a transit point for goods exported to third countries, especially exports to the US, which surged by 27% for the period, according to the FTI. During the first five months, imports from China increased by 29%. In light of these trends, the FTI has called for stronger measures to protect domestic producers and urged a reassessment of investment promotion policies. VARYING APPROACHES Youthapoom Charusreni, director of the macroeconomic modelling and forecasting division at the Fiscal Policy Office (FPO), said Thailand's GDP calculation follows international standards, with deductions made for imports and the subrogation of import rights of Thai-made products for export to third countries. According to Mr Youthapoom, both the Bank of Thailand and the FPO take a broader perspective in GDP calculation, using the expenditure approach, which analyses the economy based on overall spending in the system, including household and government consumption, domestic investment, tourism and services, and net export income, among other factors. In other words, even though the manufacturing sector has not fully recovered, the rebound in the services and tourism sectors could potentially serve as alternative drivers of economic growth, he said. Regarding the practice of importing goods and re-exporting them without undergoing any production process in Thailand, these transactions are recorded as export value, which may make export figures appear inflated, acknowledged Mr Youthapoom. An example is simply changing the label or repackaging the product without adding any real value while in Thailand. However, in GDP calculation only the "value added" within Thailand is counted. For instance, if an imported product is valued at 95 baht and is then re-exported to a third country for 100 baht, only the 5 baht of added value would be included in Thailand's GDP to reflect the actual economic activity occurring within the country. Therefore, even though export figures may rise based on the re-export of goods, the actual impact on GDP is "very limited" and remains controlled by precise calculation methods, he said. Mr Youthapoom said his comments reflect his personal opinion, not the official position of the FPO. UNCERTAIN FIGURES Adding further context, Nonarit Bisonyabut, a research fellow at Thailand Development Research Institute, said there is not much transshipment based on the empirical evidence. Mr Nonarit said for every 100 baht worth of exports, only about 1-5 baht is actually counted in GDP. However, when factoring in the re-export of goods, he said it raises questions about how extensive misrepresentations of Thailand as the country of origin might be. There are no concrete figures, but the Commerce Ministry has placed around 40 product groups on a watch list due to the likelihood of transshipment. The ministry has tens of thousands of Thai export product groups. The number of product types is relatively small compared with total exports, making it unlikely transshipment exports are significantly inflating Thailand's GDP, said Mr Nonarit.
Bangkok Post
02-07-2025
- Business
- Bangkok Post
Firms call for calm amid political tumult
Three major private sector groups have expressed growing concern over political instability, urging the government to ramp up efforts to rebuild trust and confidence among the public and businesses. Speaking after a meeting of the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) on Wednesday, Payong Srivanich, chairman of the Thai Bankers' Association, said a key element in rebuilding trust and confidence is emphasising the rule of law. According to Mr Payong, the JSCCIB is preparing to hold discussions with the Bank of Thailand, the National Economic and Social Development Council (NESDC), the Finance Ministry and the Commerce Ministry to realign economic priorities given the limited available resources, with a focus on the next 6-12 months. "The objective of the meetings is to reprioritise in line with global transformations and the intense challenges we're facing," he said. Political uncertainty could impact government disbursements and the formulation of the 2026 budget, said Mr Payong. If budget disbursements are delayed, this will affect the national economy, he said. Poj Aramwattananont, chairman of the Thai Chamber of Commerce, said the private sector is worried about the government's stability. Political processes must be concluded as quickly as possible so the country can function normally again, he said. In addition, a special taskforce is needed to restore confidence both domestically and internationally, said Mr Poj. "We are in a vulnerable position, facing economic challenges stemming from both domestic and international issues. We urge the government to act swiftly to address these problems," he said. "We are not involved in politics. Whichever group forms the government is fine, but it needs to get to work on solving problems promptly and listening to the views of the private sector." The JSCCIB expects Thailand's economy to grow by 1.5-2.0% this year, unchanged from a previous forecast, with exports shrinking by 0.5-0.3% and headline inflation ranging between 0.5-1.0%. However, if the US imposes a reciprocal tariff rate of 18% on Thai exports, this could lower Thai GDP growth to 1.5% this year, said Mr Payong. The JSCCIB is also concerned about the baht's appreciation to 32.5 per US dollar, which it views as stronger than other regional currencies. Meanwhile, he said Thailand needs more protective measures to support both the domestic manufacturing and service sectors in a balanced and standardised way, including addressing the subrogation of import rights of Thai-made products by third countries and improving the Board of Investment's (BoI) incentives. Companies receiving BoI investment privileges should be required to use designated levels of local content, employ domestic labour, and support Thailand's supply chain, said Mr Payong. The JSCCIB predicts Thai exports grew 15% year-on-year in the first half of 2025, though a contraction of 10% is anticipated in the second half, putting full-year export growth close to 0%. Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, said in the first five months of this year, Thai exports expanded by 14.9%, with a gain of 18% in May. However, this level of export growth contrasts with the weak performance of Thailand's Manufacturing Production Index. He suggested the high export figures may be due to transshipments -- using Thailand as a pass-through hub for goods bound for third countries, notably to the US, which surged 27% for the period. Imports from China in the first five months also rose 29% year-on-year. Mr Kriengkrai recommended protective measures for domestic producers and a review of investment promotion policies. He also addressed the Thailand-Cambodia border trade dispute, noting total trade between the two countries totals 180 billion baht, with 170 billion coming from border trade. Border checkpoint closures have affected trade by about 500 million baht per day, with Thailand losing about 390 million baht in exports and Cambodia about 100 million baht in exports to Thailand.
