Global issues and inflation put a damper on Thai economic recovery
The Thai economy is entering a "parallel universe" marked by deglobalisation, geopolitical conflict, high inflation, and rising interest rates, KKP Research said on Wednesday.
KKP Research chief economist Pipat Luengnaruemitchai said these factors are a challenge to the global and Thai economies both in the short and long terms.
He said the economy will gradually recover from a low base, adding that the global gross domestic product is expected to grow at 3.3 per cent as domestic consumption and investment start to return to normal.
However, inflationary pressures and rising cost of living are worries for recovery of the Thai economy, he said.
"Interest rates are on the way up as a result of inflationary pressures, and central banks around the world are raising interest rates," he said.
"A possible global economic slowdown or recession in the near future may also affect the pace of recovery of the Thai economy,” he warned.
He expected the Bank of Thailand's Monetary Policy Committee to raise the interest rate by 25 to 50 basis points during its meeting on August 10.
He pointed out that many sectors were yet to return to their pre-Covid levels, as households and businesses are still affected and have trouble paying back their debts.
In addition to short-term factors, he said the Thai economy is facing several structural challenges that hold back economic growth and place the country at risk of losing competitiveness.
He added that environmental factors such as technological development are changing rapidly.
"Therefore, a solution for the Thai economy in this new world is economic restructuring to increase competitiveness," he said.
He added that the country will also need to support investments, promote research and development, upgrade the quality of education and labour skills, liberalise labour and services, reduce monopoly, and improve economic and political institutions to reduce the opportunity gap.
