Thailand’s creaky political situation only adds to the gloom of a global economy labouring under tensions and doubt
Thailand’s March 24 general election has added uncertainty to the country's economic outlook, which is already hampered by global negative factors ranging from the so-called trade wars between the US and China and the US and European Union to the far from settled Brexit issue.
According to the Economic Intelligence Centre at Siam Commercial Bank, Thailand’s GDP growth projection for 2019 has been revised downwards from 3.8 to 3.6 per cent to reflect the growing risks. The country’s exports, which account for a big chunk of GDP, have slowed since the start of the year, while private investment growth began retreating even earlier.
However, the tourism sector’s recovery remains on track, with this year’s foreign tourist arrivals forecast to increase a further 6.3 per cent, to 40.7 million in the wake of last year’s Phuket boat tragedy and continuing air-pollution issues. Another growth engine has been the public sector’s continued implementation of infrastructure mega-projects.
Due to rising domestic and global risks, the Bank of Thailand’s Monetary Policy Committee is expected to keep the policy interest rate unchanged at 1.75 per cent this year so that economic activity is not affected by monetary policy. On the other hand, inflation is still relatively low, so a higher rate may not be necessary at this stage. However, other measures, especially prudential macro-regulations on financial institutions have been enforced to stem imprudent lending in real estate and other sectors.
Externally, the trade conflicts between the US and its major trading partners, namely China and the 28-country EU, have been brewing for an extended period, threatening the global economic outlook, with the International Monetary Fund calling it a “delicate” moment.
The IMF has already revised downward the global economic growth forecast from 3.7 to 3.3 per cent this year, with 2020 growth forecast at 3.6 per cent. In addition, the Brexit uncertainty has served as another negative factor in global economic terms, even though the EU has again extended the deadline for Britain’s decision by another year.
These factors have contributed to slower economic growth in developed economies, down to a combined average of only 1.8 per cent this year compared to the previous year’s 2.2 per cent. The outlook for 2020 is no more favourable, with growth forecast at only 1.7 per cent for the developed economies. In other words, major markets – in the US and the EU – are likely to remain unfavourable for exporting countries such as Thailand.
In the latest development, Washington has threatened to slap import tariffs on European goods worth a combined $11 billion following a ruling that the EU provided subsidies for European aircraft maker Airbus, causing damage to the American aircraft industry.
And of course Thailand’s political stability remains another key factor in its economic outlook, especially after the long-awaited election resulted in two major political camps winning comparable numbers of House seats. The outcome makes it unlikely we will see a strong-majority government in Parliament. Yet the worst-case scenario would be a return to political chaos and violence. We can only hope that won’t be the case.