The Fiscal Policy Office (FPO) has painted a brighter outlook for the economy this year, raising its GDP growth forecast to 3.6% but marginally cutting its estimate for last year to 3.2%.

Contributing to this year’s better economic growth will be an acceleration in state spending, higher farm income in line with rising commodity prices, improving private consumption, the still-solid tourism sector and an export rebound, said FPO director-general Krisada Chinavicharana.

The latest 2017 economic growth forecast has already taken into account the impact of deadly floods in Thailand’s South. The Finance Ministry said recently that the economic damage from the southern floods would be minimal.

The ministry’s think tank earlier predicted GDP growth of 3.4% this year and estimated 3.3% for last year.

The country’s economic growth is gaining speed from 0.8% in 2014, when Thailand was cramped by political tensions, and 2.8% in 2015.

The FPO’s upwardly revised forecast for 2017’s economic growth is deemed to be optimistic when compared with the Monetary Policy Office’s forecast.

The Bank of Thailand’s rate-setting committee in late December maintained its economic growth forecast of 3.2% in 2016 and 2017, but said that it saw upside risks to the 2017 economic growth forecast.

Public investment, a mainstay of the country’s economic growth, is expected to expand by 9% this year, compared with 8% in 2016, Mr Krisada said, adding that public debt is also expected to increase to 3.52 trillion baht in 2017 from 3.31 trillion baht last year.

The FPO conservatively estimates that 65-70% of the 190-billion-baht supplementary budget will be taken out this fiscal year and the economy will grow at a faster pace if the government manages better-than-expected disbursement, he said.

The government forecast that 92.9% of the 2017 budget expenditure will be doled out, 78.8% of the annual investment will be drawn down and state enterprises are expected to disburse 77.8% of their investment budget.

The FPO projects that private investment will marginally improve to 2.7% growth this year from zero last year, triggered by the government’s hefty spending coupled with the still-low interest rate environment.

Exports are expected to expand by 2.5% in terms of US dollar value this year, assuming that the economic growth of Thailand’s 15 major trade partners will be 3.4% in 2017, Mr Krisada said.

The US, Japan, Hong Kong, Taiwan, Vietnam, Singapore, Indonesia and Malaysia are among Thailand’s trade counterparts whose economies are expected to improve this year, while China, the euro-zone bloc, the Philippines and India are expected to see a slower pace of growth, he said.

The Commerce Ministry recently said outbound shipments eked out marginal growth of 0.45% in 2016, ending three years of contraction.

The number of foreign tourist arrivals is expected to increase to 35 million this year from 32.6 million last year and tourist income is estimated to surge 12% to 1.84 trillion baht in 2017.

The FPO forecast that inflation will accelerate to 1.8% this year from a mere 0.2% last year, largely due to increasing energy prices and higher demand pressure.

Global economic uncertainties and the oil price are the major risks to Thailand’s economic growth in 2017, Mr Krisada said.

Meanwhile, TRIS Rating forecasts that the country’s economic growth will expand by 3-3.5% this year, underpinned by government investment in new infrastructure projects, continuous growth in the tourism industry and expanding household consumption.

Private consumption has positive momentum amid the recovery of farm incomes, thanks to higher agricultural prices spanning rubber, sugar and tuna, TRIS said in a release.

Furthermore, TRIS expects the government to continue using stimulus measures to encourage domestic consumption.

For instance, the adjusted and increased allowances related to the personal income tax structure should be enforced in the 2017 tax year, plus the cabinet’s approval of daily minimum wage increases of 5-10 baht nationwide except in eight provinces starting from the beginning of 2017.

“Anyhow, we still have worries about the high level of household debt and the rebound of oil prices in 2017, which could affect the cost of living,” TRIS said.

Private investment may remain tepid, even though the government has launched supportive measures such as tax incentives. This is because exports have only gradually grown and the uncertainties plaguing major trading economies have affected business confidence.

Other risk factors include weak private investment, the high level of household debt and the rise in non-performing loans among financial institutions.

The local credit rating agency is still concerned about external risk factors such as the uncertain global economic recovery.

“We foresee uncertainty in the US economy amid fears of protectionist trade policy after Donald Trump took office,” TRIS said.

“The slower-than-expected economic growth of China will directly affect exporters because Thai exports to China account for about 11% of total export value. The other potential risk factors involved are the Brexit issue and international terrorism.”

The credit rating agency projects that Thailand’s economic growth in 2016 will come in at 3%, up from 2.8% in the previous year.