Thai economy may grow at less than 3.0% in 2020

KASIKORN RESEARCH CENTER (KResearch) has revised downward its Thai economic growth forecast for 2019 from 3.1 percent to 2.8 percent, while projecting that the economy may grow at less than 3.0 percent next year amid numerous negative factors.

Ms. Nattaporn Triratanasirikul, KResearch Assistant Managing Director, said that the downgrade in GDP growth was in line with the global economic slowdown, which caused the country’s exports during the first eight months of 2019 to see a worse-than-expected contraction, as seen in various product categories and in most major markets.

KResearch has therefore cut our export projection to a range of -2.0 to zero percent, from zero percent previously.
For the 2020 outlook, several ongoing global challenges will weigh on Thailand’s exports, which will be a crucial factor in shrinking the growth of Thailand’s GDP to less than 3 percent. This projection is based on an estimate of present conditions, and excludes the government’s economic stimulus measures.

The government’s 1,000-Baht “Eat, Shop, Spend” handout program may lift the country’s GDP by 0.02 percent this year. It remains to be seen whether the government will launch additional fiscal measures to boost the economy next year. Any such measures should focus on workers lacking a social safety net, such as freelancers or small and medium enterprise entrepreneurs who may see a drop in sales after customers become more cautious in their spending.

As for monetary policy, the Bank of Thailand’s Monetary Policy Committee may further cut the policy rate in the near future. Nonetheless, monetary measures would only gradually produce any positive effect on the economy.

Dr. Siwat Luangsomboon, KResearch Assistant Managing Director, expressed his view that the protracted US-China trade dispute may trim Thai exports by an additional USD1.0-2.5 billion in 2020 after the US imposed tariffs on Chinese imports, compared to USD2.1-3.0 billion projected for 2019. Although Thailand would likely see some benefit from the relocation of production bases to here, such relocation may primarily be seen in industries among which foreign companies already have production bases in Thailand.

Regarding Brexit, it is highly likely that the UK will leave the European Union (EU) without a deal. The next step is that the UK and the EU would have to negotiate on the format of their free trade agreement and the border issue with Northern Ireland. These developments may affect global financial markets, while the impact of Brexit on the Thai economy should be limited.