TRADE conflicts initiated by the United States could last for up to four years, says a research house, which has penciled in a potential hit on Thai exports of as much as US$4.5 billion for next year.
Siwat Luangsomboon, assistant managing director at Kasikorn Research Centre (Kresearch), said the confrontational US trade policy has run into retaliations from the country’s main trading partners and these ructions will shake up the trading order and the global economy. Export-driven countries, such as Thailand and other members of Asean, as well as China, stand to be affected.
Siwat said US President Donald Trump is motivated by domestic politics in his trade actions.
“Trump is hoping for political advantages, rather than economic gains, and is looking towards the presidential election in 2020,” he said. “So, it's possible for the US to go ahead with the trade wars for two to four years, depending on the political popularity of such actions, and this will determine whether the aggressive stance picks up or whether there will be an easing.”
This year, Thailand could encounter some impact, though this would be largely limited. Although some exporters would likely make some gains, he said.
Based on forecasts of the tariff collections to be made by China and the US, Thailand is expected to see US$280 million to $420 million wiped off the value of its exports this year and as much as $4 billion to $4.5 billion in 2019.
However, on the back of an 11.6 per cent year-on-year increase in exports for the first five months of this year, KResearch has raised its forecast for this year's growth in shipments from 4.5 per cent to 8.8 per cent, said Nattaporn Triratanasirikul, head of research at KResearch.
The research centre revised up its forecast of economic growth from 4 per cent to 4.5 per cent for this year, with the gains expected to be driven by the international sector and domestic spending.
“In the latter half of 2018, farm income will likely turn around and move into positive territory due to the high expansion in agricultural production and a decreasing contraction in prices, particularly of Hom Mali rice. Rubber prices are expected to have hit their bottom levels,” Nattaporn said.
Kangana Chockpisansin, another head of research at KResearch, said that the research unit is revising its forecast for the baht in 2018,. The currency will likely depreciate for the rest of this year in light of a forecast of two US interest rate rises and concerns over the trade wars, Kangana said. The previous estimate was for 32.5 per to the US dollar at the end of this year.
The baht is projected to move in a range of 32.5-33.5 to the US dollar.
Thailand has suffered capital outflows to a lesser extent than some other countries, given its trade surplus and sufficient foreign reserves.
"Local interest rates' direction has ended, even though the Monetary Policy Committee has not yet raised the policy rate,” Kangana said.
“Market rates have already risen. The three-year bond yield has edged up 25 basis points.”
KResearch estimates the Bank of Thailand’s MPC will maintain the policy rate at its current level for the rest of this year.
The research house also revised up Thailand's loan growth from 4.8 per cent to 5 per cent on expectation of new loans reaching Bt313 billion in the latter half of this year. New loans totalled Bt287 billion in the first six month of this year.