Thai economy to enjoy positive growth, economists say

Somprawin Manprasert, head of Siam Commercial Bank's Economic Intelligence Centre, said that while the US Federal Reserve (Fed) did not hike interest rates at its meeting last week, as it wanted to send a signal that such hikes need not be constant, it was anticipated that there would be two further increases from the current rate of 5.25% this year, mainly to mitigate the impacts of rising fuel costs.

"If the Fed can predict the inflation, the central bank will probably raise the interest rate just once more,” he said.

Referring to the domestic situation, Somprawin said the Thai economy is moving in a positive trajectory and is expected to expand by 3.9% this year.

He explained that economic growth depends on three factors – that the global economy is not recovering at the same pace, differences in economic driver growth (tourism and consumption have increased but exports have declined), and uncertainties.

He advised the government to prepare a plan to prevent any economic slowdown, noting that big loans had been taken out to mitigate the impacts of Covid-19.

More households would be vulnerable to any such economic slowdown, he said, adding that the government would face limitations in launching economic stimulus measures.

Meanwhile, Pipat Luangnarumitchai, managing director of Kiatnakin Phatra Financial Business Group, noted that the global economy is not recovering at the same pace.

The US Manufacturing Production Index has been in a recession for several months, he said, but the US economy was still strong, thanks to the service and labour sectors.

He expects a global economic recession to occur in the latter part of this year or the beginning of next year.

Pipat said the global debt is worrisome, noting that US public debt now accounted for 120% of its gross domestic product (GDP) compared to 70-80% before the Covid-19 crisis. Japan’s public debt had increased too, and now stood at 260% of GDP.

Even though developed countries have debt issues, similar issues in developing countries would be more severe due to rising interest rates, he said.

He added that Thailand's private and household debts are factors that should be monitored.

Pipat said that the Thai economy is recovering at a slow pace as the country's tourism has not diversified, while other sectors still faced problems. The only operational Thai economic driver is tourism, he added.

Director of Thailand Development Research Institute's Economic Intelligence Service, Kirida Bhaopichitr, agreed that the global economy is growing at a slow pace.

The World Bank expects the US and Europe economies to grow by 1.1% and 0.5% respectively, she said.

Europe’s economy was particularly concerning as inflation there was due to hard-to-control rising costs resulting in a decline in people's purchasing power. She added that Thai exports were being negatively affected by European inflation.

The International Monetary Fund expects that one-third of developing countries would face problems due to higher inflation and debt burdens, she said.

However, Asean countries are still able to drive the economy, she noted. “Asean became stronger after the financial crisis as it collected foreign exchange reserves," she said, adding that the best hope for Thailand’s economy was trade with China, not least because the World Bank expects the Chinese economy to expand by 5.6% this year.

Even though Chinese economic recovery has not risen to pre-pandemic levels, it is still better than Thailand's other trade partners, she said.

She added that China is working to expand its economy by paying attention to small and medium enterprises and domestic consumption.