10-07-2025
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.
