Slow global recovery to affect Thailand in 2015: KResearch
Kasikorn Research Center expects the fragile recovery of the global economy to hamper Thailand's economic expansion next year.
The recovery is being affected by the slower-than-expected recovery of major economies, especially the European Union and Japan, as well as slow growth in China due to Beijing’s policy of qualitative growth.
KResearch has forecast Thailand’s economic growth next year at 3.5-4.5 per cent, while it expects export growth of 2-4.5 per cent.
It predicted the country’s current account next year to be around US$8.8 billion (Bt286 billion) or in the range of $7.2 billion to $10.7 billion.
“The biggest concern for the Thai economy right now is the slower-than-expected recovery of the world economy. Three major economies – the EU, China and Japan – have the potential to slow down next year and will only be slightly better than this year. Everyone might have to continue, or even increase, their stimulation policies to accommodate their fragile economic recovery,” KResearch managing director Charl Kengchon said.
“Our 3.5-per-cent export-growth projection for next year is far below the country’s standard of around 10 per cent during a normal economic situation. This reflected the view that we are still wary of the global economy, while the expected increase in the US [benchmark] interest rate will also be harder to predict because of this uncertainty in global economic recovery,” he said.
Funding woes
Charl said the European Central Bank’s room to manage its fiscal policy was limited by its funding, and its quantitative-easing policy could only buy some time against the current low level of inflation, which was expected to recede even further next year.
He said the euro zone’s economic recovery in the next period would largely depend on structural changes that were currently not progressing as well as they should be.
The probability that the US economy will be the only one that can be depended on next year would also contribute to the strengthening of the US dollar. KResearch forecast that the baht would be weaker next year, going from 33 per dollar at the end of 2014 to around 34.
Charl said the economic growth of Asean countries next year would continue to flourish on the continuous increase in domestic demand.
He expects the US Federal Reserve and the Bank of Thailand gradually to increase their interest rates in the second half of next year, with hikes of around 50 basis points in both countries. However, the BOT’s reasons for its increase of the policy rate would not be the result of pressure from the US hike, since the US increase was expected to be done gradually. The Thai increase would be determined by the recovery of the Kingdom’s economy.
As for Japan, Charl said the increase in the country’s value-added tax this year had constrained domestic consumption and had negatively affected the economy more than expected, while the potential of another VAT increase next year would continue to hamper demand.
He expects the Bank of Japan to inject more capital into the economy next year and keep its monetary policy relaxed like the EU.
