Thai economy growing too fast says Nomura Research

Thailand’s economy is rapidly gaining momentum on loose monetary and fiscal policies, but it may be growing too quickly for its own good, according to Nomura Research. Thai authorities have insisted that they remain conscious of not compromising fiscal sustain -ability. The medium-term fiscal plan, which incorporates large-scale infrastructure spending, is to keep public debt below 50% of gross domestic product, allowing a 10-percentage-point buffer against external shocks given the legal limit of 60% of GDP. Authorities envisage a balanced budget by 2017, which implies that short-term measures that were criticised as populist are likely to be allowed to expire.

Nomura maintains its economic growth forecast 5.5% versus 6.4% last year for Thailand, but is biased towards an upward revision. At this level, Thailand will outperform all countries in South East Asia except Indonesia, which is expected to expand by 6.1% this year. Given the robust outlook, No-mura is comfortable with its forecast that the Bank of Thailand (BOT) will keep its policy rate unchanged through 2013.This assumed that inflation would not breach the target. While inflation is still low, domestic demand is very strong.