Business confidence is returning, and so are the foreign investors. Add that to the strong rebound of the Thai stock market (SET) and its current political stability, Thailand seems to be on track for a strong recovery, says our local expert.

A lot has happened in Thailand since the  military coup d'état in May. A new cabinet was formed shortly after the election of General Prayuth Chan-ocha (the former Commander in Chief of the Royal Thai Army) as Prime Minister. As the aftermath of the six months political unrest starts to wear off, investors' confidence seems to be returning. Thailand's economy has successfully avoided a recession in the second quarter and it is now showing signs of recovery.

Southeast Asia's second largest economy grew 0.9% in April-June from the previous quarter as government spending and exports improved. Year-on-year, Thailand grew 0.4% in the second quarter but a contraction of 0.1% in the first six months was inevitable due to the political turmoil that damaged domestic consumption, investor confidence and the tourism industry.

Thailand's central bank is keeping its 2014 economic growth forecast unchanged as it anticipates a significant improvement in the local economy in the last quarter. This is because the Thai government is expected to announce an economic stimulus package that includes a US$74bn infrastructure investment plan and government budget disbursement to stimulate domestic consumption and public spending. The central bank expects a strong V-shaped rebound from the country's recent rough patch while predicting a growth of 4.8% in 2015.

On the stock market, the Stock Exchange of Thailand Index (SETI) is trading at a 14-month high, having jumped 10% since the military takeover. Overall, the sentiment has become far more conducive to a rise in funds as investor confidence is slowly restored. The stock exchange is experiencing a wave of initial public offerings (IPOs), with the listing of Thailand's first  real estate investment trust (REIT) by Bangkok Land and Bangkok Airways coming in October. In total, 13 firms and four property funds have entered the final stages of listing and are now negotiating with the authority on the listing dates. The swift recovery of Thailand's capital market can further be illustrated by more than 30 companies, property funds, infrastructure fund and REIT which have all filed for IPO approvals.

Since June, Thailand's Board of Investments (BoI) has approved 121 projects worth US$9.39bn ranging from energy production (steam, wind, ethanol and electrical power) to auto-parts and fabric production. Also, for the first nine months of the year, the Business Development Department (under the Ministry of Commerce) has approved 313 applications worth more than US$1.79bn under the Foreign Business Act that allows foreign investors to  set up their Thai operation. The objective of the act is to encourage knowledge transfer by opening up the services industry (particularly the finance sector) to foreign firms that will eventually create more jobs for locals. The numbers of approval have increased 11% while the value of initial capital investment is US$1.36bn more than the same corresponding period in 2013.

The figures indicate that foreign investors are buying into the Thai economy recovery story as political stability has been restored by the military. The Thai government's effort in restoring foreign investors' confidence has begun to bear fruits as Volkswagen is planning to invest US$1.27bn to build its first manufacturing plant in Thailand, capitalising on the tax break policies that had already attracted investments from Ford and General Motors.

Thailand's economy is well known for its ability to withstand domestic political turmoil, global economic crisis and even natural disasters - thus earning the moniker "Teflon Thailand". Despite the devastating tsunami (2004), military coup (2006), global financial crisis (2008), political unrest (2010) and severe flood (2011) of the past decade, Thailand's GDP grew at an average rate of 4.2% in the same corresponding period. Thailand's ability to rebound swiftly without fail is largely due to its sound macroeconomic management, stable banking system and strong economic fundamentals.

According to the Global Competitiveness Report 2014-2015 (World Economic Forum, 2014), Thailand is ranked 31st globally (which is up six places on 2013's list) and third among ASEAN countries. Thailand's consistent improvement in competiveness (third year in a row) has proven that its fundamentals are still intact, and it's ready to move towards becoming a high-income economy.

In short, with the return of confidence from the business community and FDI returning back to Thailand - coupled with the strong rebound of the Thai stock market (SET) and current political stability - Thailand seems to be on track for a strong recovery.

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