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Surge in imported capital goods buoys FPO forecast
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Surge in imported capital goods buoys FPO forecast

BANGKOK: An upsurge in imported capital goods in the second quarter bodes well for future private investment — the main engine that will drive and sustain economic growth — says the Fiscal Policy Office’s chief.

Thailand’s imported capital goods jumped by 11.6% year-on-year during the three months to June, compared with the first quarter’s 3.4% reading, said Krisada Chinavicharana, director-general of the FPO.

Most of imported capital good items in the second quarter were machinery and wares to produce for export, he said.

According to the FPO data, imported capital goods growth stood at 8.8% year-on-year last month, compared with 15.8% in May, 8.5% in April and 9.7% in March.

The Finance Ministry has long been waiting for strong, steady growth in imported capital goods as an indicator that private investment is gaining traction. The government has put great effort into jump-starting private investment through big-ticket infrastructure projects and investment incentives to help Thailand escape from subpar economic growth.

Imported capital goods fell by 2.7% in 2015 when the economy expanded 2.9%, and by 4.8% in 2014, when economic growth stood at 0.7%.

Sorapol Tulayasatien, director of the FPO’s Bureau of Macroeconomic Policy, said a double-digit percentage growth in imported capital goods several months ago has served as the leading indicator for the country’s economy.

When the economy is in trouble, imports typically decline at a faster pace than exports. Imports accelerate at a faster clip than exports during the booming economic growth cycle, he said.

Despite the upbeat outlook and its revised projection for exports to 4.7% from 3.3% predicted in April, the Finance Ministry’s think tank is maintaining its forecast for Thailand’s economic growth at 3.6% this year, as it was offset by imports growth, whose forecast was raised to 9.7% from 7.5%.

Moreover, the FPO cut its state investment outlook to 9.8% this year from the 10.9% forecast three months ago. The office also scaled back its private investment growth forecast to 2.6% from 2.7%. All of these factors have encouraged the office to maintain its economic growth estimate, said Mr Sorapol.

The public consumption forecast was raised to 3.4% in 2017 from 3% projected in April, and the private consumption outlook was upgraded to 3.3% from 3%.