Industry Trend Analysis - Growth Surge Belies Long-Term Political Risk - OCT 2015

BMI View: Thailand's construction sector will see a strong recovery in 2015 , with the government's infrastructure plans being supported by near-term political stability and a favourable funding outlook. Beyond 20 15 , politics remains a key risk, while labour constraints will also limit long-term growth for the sector.

We forecast Thailand's construction sector to register strong growth of 14.8% in 2015, with our outlook underpinned by: growth coming off a low base, near term political stability and a favourable funding environment. Beyond 2015, the uncertain political outlook will weigh on growth, with the Bangkok bomb blasts in August 2015 possibly being a prelude to renewed political instability, while labour shortages will also weigh on long-term growth. Consequently, we expect the construction sector to expand by a moderate 4.3% in 2016, while averaging 2.7% between 2017 and 2019.

Growth over the remaining quarters of 2015 is expected to remain strong, as figures have largely been lifted by low base effects. According to the Bank of Thailand (BoT), the country's construction sector registered real growth of 17.3% y-o-y in Q215, bringing real growth for in H115 to 20.0% y-o-y. We highlight that the surge comes off the back of a significant decline in the sector between Q313 and Q314, where the economy was rocked by political turmoil which eventually escalated to a military coup in May 2014.

On Track For Recovery
Thailand - Construction Industry Value, THBbn (LHS); Real Growth, % chg y-o-y (RHS)
f=BMI forecast. Source: National Economic and Social Development Board, BMI

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