Sagging growth spurs stimulus call

Kasikorn Research Centre’s (KResearch) rethink on the health of the economy puts expansion at 3.1 per cent in 2019, down from the 3.7 per cent it estimated in February.
The research unit is urging the incoming government to push out immediate economic stimulus measures in order to boost domestic spending and keep growth in gross domestic product from slipping below 3 per cent for the year.
“The key factor negatively affecting the Thai economy is the consecutive contraction in exports in the first five months of this year,” Nattaporn Triratanasirikul, the research unit’s assistant managing director, said yesterday at a press conference. 
Exports in May declined 5.8 per cent to Bt648 billion (US$21 billion), according to the Commerce Ministry. 
“We expect exports to grow at zero per cent in 2019 compared to 6.7 per cent growth last year, due to the ongoing US-China trade tensions and the uncertain global trade conditions,” she said. 
Thailand has been hurt by the trade war between the United States and China as the Kingdom is in the supply chain of goods, such as machinery parts and computer circuits, that China exports to the US. If the US imposes further tariffs on these goods, Thai exports to China will also falter, Nattaporn said.
KResearch will closely observe the outcome of the G20 meeting where US President Donald Trump and China’s Xi Jinping are set to meet.
The unit believes that if Trump maintains the tariff hikes from 0-10 per cent to 25 per cent on $250 billion worth of Chinese goods and products, Thailand will lose $2.1 billion - or 0.4 per cent - of its GDP as a direct impact of the trade conflict. 
If the trade war escalates and Trump further increases tariffs on $300 billion worth of Chinese goods, as he has threatened, Thailand will lose $3.1 billion, or 0.6 per cent of its GDP. 
On the home front, public investment is predicted to grow by 1.5 per cent this year compared with the 3.3 per cent growth in 2018. 
“Public investment in the first quarter of this year has been lower than expected due to various government project delays,” Nattaporn said. “Meanwhile, as the process of government formation has been slow, there will also be a delay in the incoming government’s budget, leading to a low level of public investment in the fourth quarter of this year.” 
To boost domestic spending in the second half of 2019, the incoming government should implement immediate measures to stimulate the economy, she said. 
Nattaporn expects Bt100 billion to be injected into the economy after the new government is established, through measures such as agricultural price guarantees.
“The policies that will be most effective in stimulating the economy are those targeting consumer spending directly,” she suggested in an interview. “These [include] cashless welfare cards that will encourage consumers to start spending and, in turn, stimulate growth in the economy.”
Regarding the interest rate trend, the Bank of Thailand’s Monetary Policy Committee is expected to maintain the policy rate at 1.75 per cent for the rest of this year, prioritising stability while also closely monitoring several risks to the economy. Meanwhile, the US Federal Reserve is expected to cut its Fed Funds rate once or twice this year in light of signs of weakening in the US economy. 
As well, although non-performing loans (NPL) may increase slightly due to NPL re-entries, the national NPL level is predicted to remain under 3 per cent in 2019.