AN ESCALATION of global trade tensions pose the biggest risk for the Thai economy, while the summit between US President Donald Trump and North Korea leader Kim Jong-un will likely boost confidence in the region, says the Asean+3 Macroeconomic Research Office (AMRO).
“If the summit goes well, it will boost confidence in the region because it will eliminate geopolitical risks,” said Hoe Ee Khor, chief economist of AMRO.
The economy is resilient to capital outflows from emerging market as the Kingdom now possesses high international reserves amid low inflation, said Hoe, who visited Thailand yesterday for the annual economic assessment.
Thailand’s international reserves currently stand at US$205billion, one of the highest in the region.
Several emerging economies in the region are facing large capital outflows, causing their currencies to weaken against the US dollar, largely due to investors’ fear about rate hike in the US.
However, Thailand’s economy remains intact with supportive factors including a large current account surplus, thanks to continued expansion of exports and rising number of tourists.
The US Federal Reserve is expected to raise the policy rates again this week by 0.25 per cent to 1.75-2 per cent in its meeting this week.
The expected US rate hike is expected to encourage more capital outflows from emerging economies as investors pull their money back.
In Thailand, foreign investors have so far sold Bt140 billion worth of Thai shares this year. The Bank of Thailand has kept its policy rate at 1.5 per cent for three years.
Some countries in the region, such as Indonesia, have begun to raise rates in a bid to slow down capital outflows.
“Thailand, however, may be able to keep lower interest rate longer, “he said. Yet, the threat of trade war is still a challenge to Thailand. The US has recently imposed tariffs on steel and aluminum imports, triggering vow of retaliation from its trading partners, including Canada.
The trade tension between US and China remains the biggest threat to Thailand as the country is part of production chains in the region.
“If a trade war hits China, it will affect every country, including Thailand,” he said.
The National Economic and Social Development Board has projected economic growth would be 4.2-4.7 per cent this year after the unexpected growth rate of 4.8 per cent in the first quarter this year.
The AMRO projected GDP growth in the Asean +3 region at 5.4 per cent this year, strongest when compared with other regions. The GDP growth rate in the Asean +3 region was 5.6 per cent last year.