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KResearch lowers Thai GDP growth forecast to 3.1%

Jun 26. 2019
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By The Nation

Kasikorn Research Centre (KResearch) has lowered its forecast for Thai GDP growth to 3.1 per cent from its initial projection of 3.7 per cent.

The reduction is due to the lacklustre performance of the export sector, which has been hit by slowing global trade in the wake of a simmering trade war between the US and China.

KResearch assistant managing director Nattaporn Triratanasirikul said that global trade for the remainder of 2019 will continue to face challenges from the possibility of the Trump administration imposing tariffs on an additional US$325 billion worth of Chinese goods.

Hence, KResearch had revised its export growth forecast sharply downward, to zero per cent, from the original projection of 3.2 per cent. Speaking at a seminar titled “Thailand’s Economic Outlook in 2H19”, he added that attention should be paid to the outcome of the G20 summit and any possible resolution to the political skirmish between the US and China, as well as to the strong baht. If positive signs emerge from the trade talks, Thai outbound shipments may move back into positive territory and drive Thai GDP to the upper end of the KResearch revised projection, between 2.9 and 3.3 per cent.

Even though GDP growth for all of 2019 may slow, KResearch forecasts that the outlook for Thailand’s economy in the second half of the year will likely brighten due to the lower base of last year and stimulus measures likely to be implemented by the new government in line with campaign pledges for the March election. These include the so-called “Pracharat” policy, price guarantees for agricultural products, and other pressing policies to cushion the impacts of the looming global economic slowdown. These initiatives are forecast to offset the expected delay in 2020 budget disbursement.

Regarding interest rate trends, the Bank of Thailand’s Monetary Policy Committee is seen as keeping the policy rate intact at 1.75 per cent for the rest of this year, prioritising stability while also closely monitoring several risks to the Thai economy. Meanwhile, the US Fed is expected to cut the Fed Funds rate once or twice this year in light of signs of weakening in the US economy. 

Scrutinising domestic commercial banks, Nattaporn views that loan growth for 2019 may stand at 4.5 per cent, down from the previous projection of 5 per cent due to reduced business loans in line with slower economic growth and housing loans during the rest of this year, given the surge of demand before implementation of the loan-to-value (LTV) measure. 

Meanwhile, although non-performing loans (NPLs) may increase during the year due mainly to NPL re-entry, the figures are still set to be in line with each bank's respective targets, she said.

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