KResearch revises Thailand 2023 GDP forecast to 3.2 % amid global economic recession 

Nattaporn Triratanasirikul, KResearch Deputy Managing Director, viewed that the global economy will see a significant slowdown in 2023 – presenting an obstacle for the Thai economic recovery. The US and Eurozone are set to show no growth given their policy rate hikes to tame inflation and the impact of an energy crisis in Europe. 

Meanwhile, it is more likely that China will reopen its borders in the second quarter of 2023. However, close attention should be paid to the situation there, especially the number of infected cases and deaths, as well as the adequacy of China's public healthcare system. China may face a new wave of COVID-19 which would affect its economic activity. Under these circumstances, KResearch holds a cautious view towards China's reopening and therefore maintains its 2023 projection of international tourist arrivals at 22 million. Meanwhile, the Thai economy is projected to grow at 3.2 % next year.  

As for the interest rate outlook, we at KResearch are of the view that the US Federal Reserve (Fed) may continue to raise its policy rate to 5.0 % or even higher during the first quarter of 2023. The Fed Funds rate will likely stay at an elevated level throughout 2023. Meanwhile, Thailand's Monetary Policy Committee is expected to hike its policy rate at its two upcoming meetings by 0.25 % each, reflecting that domestic interest rates are also on an upward trajectory. Regarding the Baht's outlook during the first quarter of 2023, it is expected that the Thai currency will strengthen even as the Fed presses ahead with its planned policy rate hikes because markets have already priced in such a likelihood. 

For the financial sector, it is expected that loans of commercial banks registered in Thailand will grow within a limited range of 4.2-5.2 % YoY (median rate of 4.7 %) in 2023 versus the 5.0 % growth projected for 2022, in line with economic conditions facing numerous risks and an uneven recovery expected in the business sector. The cautious trend will also be reflected in asset quality within the commercial banking system, as the NPL to total loan ratio in 2023 may not improve from that seen in 2022. NPLs are projected to stay within a range of 2.55-2.80 % at the end of 2023, compared to the 2.65-2.75 % expected at the end of 2022.  

Kevalin Wangpichayasuk, KResearch Deputy Managing Director, said, "Regarding the Thai business outlook for 2023, KResearch views that most industries are still dealing with numerous challenges. In terms of operating costs, electricity prices, labour costs and interest rates are rising. Meanwhile, business income would be affected by major economies falling into a recession and the Baht's appreciation, thus causing a decrease in Thai exports. Additionally, as the impacts of such factors on each industry vary, business income in 2023 will likely see an uneven or "K-shaped" recovery. Hotels and restaurants, private hospitals and the retail sector may lead the recovery. Meanwhile, industries which will see their recovery take longer or even see a contraction are real estate and exports of electronic devices and electrical appliances." 

In addition, Thai businesses will increasingly be challenged by environmental, social, and governance (ESG) issues in 2023. Thailand's trading partners will likely adopt more stringent rules and regulations, especially the EU's Carbon Border Adjustment Mechanism (CBAM). Meanwhile, Thailand will focus more on developing definitions and a practical green taxonomy to move towards a green economy. Given this, Thai business operators need to study and make adjustments in order to enhance their long-term competitiveness.