Monday, September 16, 2019

Poll feeds into spending tonic 

Jan 24. 2019
Tim
Tim
Facebook Twitter

By   WICHIT CHAITRONG
THE NATION

5,414 Viewed

A SPENDING spree accompanying the national elections will add to the stimulus from increased public investment to boost the economy this year, an analyst said.

However, this upbeat view contrasts with a warning from the United Nations that Thailand and other East Asian countries are vulnerable to the impact of superpower trade disputes and a tightening of global financial conditions.

Spending on the election is likely to increase consumption, especially in upcountry areas, said Tim Leelahaphan, an economist at Standard Chartered Bank (Thai). These benefits would show up as a boost for the economy in the first half of the year.

Tim remains optimistic despite external risks, and estimates economic growth to come in at more than 4 per cent for the year.

“This year is to bring policy continuity, but no new growth catalyst. Thailand’s main focus in 2019 will be the long-delayed elections,” he said.

 “While political noise is likely to increase leading up to the elections, we expect a smooth electoral process and a transition of power to boost sentiment.”

His comments came after the junta-led government and the Election Commission announced on Wednesday that the elections would be held on March 24. The government has scheduled and, then postponed, the poll repeatedly over the four years the junta has been in power. Tim said that implemented public investment is expected accelerate in the second half of the year and this would contribute to economic growth.

However, the local economy would face external risks in the form of a global economic slowdown caused by the trade war between the United States and China. 

A slowdown in China’s economy is another cause for concern, Tim said.

These forces could hurt Thailand’s exports, which are estimated to expand 5 per cent this year, against the 6.7 per cent growth for last year. 

The International Monetary Fund recently cut its projection of global growth to 3.5 per cent from the 3.7 per cent estimated earlier.

 Standard Chartered expects global growth will be a bit higher, at 3.6 per cent. 

However, since the trade war presents both negatives and positives, 

Thailand, Vietnam, Mexico, Malaysia and Canada might benefit from the conflict, Tim said.

The Chinese slowdown may lead to fewer visitors from that country this year, following sharp drop in their ranks in the latter months of last year.

Others factors may also play a role, such as the concerns for safety in Thailand after a boat accident last year killed dozens of mostly Chinese tourists, in addition to the road accidents that have caused many Chinese casualties, Tim said.

The baht’s strength against the Chinese yuan may also make travel in Thailand more expensive than before.

The baht is moving around 31.70 to the US dollar. Tim predicts the baht will weaken to Bt33 and 33.50 in the middle and end of this year, respectively. The major factor behind the expected weakening of the baht is the trend of rising US interest rates, he said.

The US Federal Reserve is expected to increase its policy rate three times this year to 3 per cent by the end of the year, he said. 

In contrast, the Bank of Thailand is expected to raise its policy rate twice, each time by 25 basis points, to reach 2.25 per cent by the end of this year.

The wide gap between the US and Thai rates may cause capital outflows this year, Tim said.

The current account surplus is expected to slow to 5 per cent of GDP this year, from 8 per cent last year, due to the projected slower export growth, uncertainty on the tourism outlook and the large public investments.

As for the United Nations’ projections for this year, the world body said in a report that that growth in Thailand and other large East Asian economies - including Indonesia, South Korea, Malaysia and the Philippines - is likely to remain robust given resilient domestic demand. 

Growth in East Asia is projected to moderate from 5.8 per cent in 2018 to 5.6 per cent in 2019 and 5.5 per cent in 2020.

The report, titled the World Economic Situation and Prospects 2019 and released at a media conference yesterday, warns that downside risks are high due to possibility of an escalation in the trade disputes, and the sharp tightening of global financial conditions. 

Countries with high debts would be vulnerable.

The UN predicts global growth will be steady at 3 per cent in 2019 and 2020, after expansion of 3.1 per cent in 2018.

It also warns that a transition towards sustainable production and consumption is not happening fast enough as growth in carbon dioxide emissions remains high. It also cited the economic losses from severe weather.

 

Tags:
Facebook Twitter
More in Business
Editor’s Picks
Top News