By The Nation
THAI EXPERTS expect US President Donald Trump to tone down his stance on trade disputes with China, which could have a positive impact on Thai and global economies, after the US midterm elections saw the Democratic Party regain control of the House of Representatives, while the Republicans managed to hold on to the Senate.
The US poll results, however, did not come as a surprise to the market.
It is now widely believed that the US and China, the world’s two largest economies, would reach a trade agreement when Trump and Chinese President Xi Jinping meet on the sidelines of the G-20 meeting in Argentina later this month, said Prinn Panitchpakdi, managing director at CLSA Securities (Thailand) Limited.
“Should the two sides reach a trade agreement, it would have a positive impact on the Thai and global economies,” Prinn told The Nation.
He, however, was concerned about the next round of interest rate hike by the US Federal Reserve in December. If the Fed raises its policy rate again, it would be their fourth this year and that could spark capital outflows from emerging markets, including Thailand.
This could have a big impact on the local stock market, he warned.
“Some countries such as Indonesia and India, which have large current account deficits, would be hit hard by capital outflows while Thailand may be less adversely affected due to its large current account surplus and international reserves,” he added.
Anusorn Tamajai, the dean of Rangsit University’s Economics Faculty, did not think the outcome of the US midterm elections would have a significant positive impact on Thai economy, although it was possible that trade disputes may not escalate and |the US may not further increase tariffs on imports.
He believed the global economy would see a slowdown in growth next year as a result of US moves to slap higher tariffs on goods imported from trade partners.
The International Monetary Fund in October cut its global growth forecast to 3.7 per cent this year and next year, down 0.2 percentage points from an earlier forecast, citing the impact of the trade tension among major economies. Anusorn said the Thai economy would grow by about 4.4 to 4.5 per cent this year and would slow down a bit next year.
“However, our general election next year would have a significant impact on the economy,” he said. “If the election scheduled for next year is free and fair and people accept the outcome of the election, then it would boost confidence in the economy,” he said.
“However, there is a high chance that the election may not be free and fair and that could lead to another round of political confrontations, which could have a severe negative impact on the Thai economy and the country’s future in the long run,” he warned.
Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said that the concerns of investors had been eased to some extent, resulting in the rise of Asian currencies against the US dollar yesterday.
“In the short-term, the outcome of the US election would be positive for the global economy, due to an expectation of an end to trade disputes,” he said, adding investors thought the two leaders might reach a trade agreement. The baht rose by about 13-14 satang to Bt32.82 per dollar in yesterday’s trade.
Kobsidthi said the Democratic control of the House may check Trump on the trade war and economic reform fronts. “Trump may also face impeachment [for alleged collusion with Russia in the 2016 election] launched by the Democrats, then he would not have much time to concentrate on economic matters,” he told The Nation.
Inflation fears ease
“Trump may not be able to cut taxes any further or spend too much money, so investors now are less worried about rising inflation in the US from Trump’s policies,” said Kobsidthi.
“Due to less concern over inflation, the Fed may not aggressively raise interest rates next year and this will provide some room for the Bank of Thailand to maintain the current low interest rate for a while,” he added.
Kasikorn Research Centre Co predicted that Trump would continue to impose tough trade measures on China, which could have a huge negative impact on global trade next year. Thailand would suffer export losses of US$3.1 billion to $4.5 billion next year. However, the global trade tensions are expected to ease in 2020, the research centre added.