4/10  Given these outlooks, we expect the growth momentum to be more balanced with a stronger contribution from domestic demand. In our March forecast, the GDP growth for both 2018 and 2019 was projected at 4.1 percent. These figures are likely to be revised up given better-than-expected growth outturns in the first quarter this year. Headline inflation in April and May has turned up above the lower bound of our target, which is set at 2.5±1.5%, mainly due to the recent pickup in energy prices. Yet inflationary pressure remains soft overall and we must continue to closely monitor inflation developments once these supply-driven fluctuations fade. Over time, improvement in domestic demand and rising energy prices are expected to bring about higher inflation, although it is likely that headline inflation would still remain below the midpoint of the target over the year. For now, an accommodative monetary policy stance would be maintained to foster a strong economic growth and facilitate the return of inflation to the target. Going forward, the Monetary Policy Committee will closely monitor the strength of growth momentum, inflationary pressure as well as underpricing of risks in the financial system that could lead to financial fragility and financial stability concerns. Ladies and gentlemen, So far, I have given you an overall near-term summary of the Thai economy. Let me now move on to the second part of my talk which looks further into the backbone of Thailand’s economic growth engine over a longer horizon.
Thus, larger and productive firms are able to reap the benefits of economic recovery and adapt to changes in the new business environment. Indeed, the difference in business performance between medium-sized and large firms in the stock market has been widening. This is evidenced by several financial indicators including the return on assets and the net profit margin. These developments partly explains why the NPL situation has yet to improve for SMEs across the board, while we see improvement in loan quality among large corporates in the same sectors. The third reason for the uneven economic recovery is the impaired function of the spending multiplier. Usually, when recovery starts to emerge in certain segments of the economy, the multiplier effect of spending should create positive spillovers to the other parts of the economy, thereby securing a more broad-based recovery over time. However, export-oriented firms which currently spearhead the ongoing economic recovery are capital-intensive. They utilize more machinery rather than relying on labor. Thus, positive spillovers to employment are less prevailing. This partly explains why the manufacturing employment growth has been rather moderate despite strong export growth and pickup in the manufacturing production index. Furthermore, having a high level of household debt, especially during the debt deleveraging period, dampens this multiplier mechanism. This is because households have to use additional income to service their debt obligations rather than spending on goods and services.