FRIDAY, March 29, 2024
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TMB Bank expects only slight increase in GDP expansion

TMB Bank expects only slight increase in GDP expansion

OVER-DEPENDENCE ON tourism and state spending as economic drivers means growth this year will not be robust, according to TMB’s head of capital markets, Saranya Phuphatana.

This is because tourism and public spending together account for only 24 per cent of gross domestic product, while private consumption and investment – both of which remain sluggish – account for 71 per cent of GDP.
Last year’s GDP growth has not been officially announced yet, but TMB expects it to come in at 3.3 per cent. Even though the economy is on an upward trend, the bank does not expect 2017 growth to be much better, at 3.5 per cent, Saranya said.
If domestic investment remains at a low level, the Bank of Thailand’s Monetary Policy Committee is not expected to raise the benchmark interest rate this year even though the US Federal Reserve is expected to do so twice, he said.
Geopolitical affairs will influence the financial markets this year and Thailand cannot avoid this, he said.
Before the recent US election, 10-year government bonds in Thailand were yielding 1.6 per cent, but after the election, the yield climbed to 2.7 per cent. That increase will have an impact on the preference of Thai corporates to raise funds from the debenture market, and bank loans will become their choice once again.
Minimum lending rates are expected to increase in line with loan demand, so the business sector might be under pressure from rising financial costs, he warned.
Liquidity in Thailand is at a high level but will drop this year as the current-account surplus will decline from previous years, as the country is a net oil importer and crude-oil prices are rising.
Last year, outstanding BOT bonds stood at Bt8.7 trillion to absorb excess liquidity, up from Bt7 trillion during the previous three years, but TMB believes bond issuance by the central bank this year will not be higher than in 2016.
Given strong fundamentals including the current-account surplus and sufficient liquidity, the baht will strengthen against the US dollar by the end of this year, at about 35.50, despite some possible midyear depreciation.
The exchange rate at the end of last year was Bt35.80 per dollar.
The Thai currency will remain volatile this year but probably not to the same extent as the year, because the market now has acknowledged the United Kingdom’s intention to leave the European Union and accepted the result of the US presidential election, Saranya said. Both of those outcomes were unexpected last year. Still, the results of upcoming elections in several European countries could make the currency market highly volatile again, he said.

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