SCB raises forecast for Thai economy this year despite inflation woes
Siam Commercial Bank (SCB) on Tuesday upped its forecast for Thailand’s economic growth from 2.7 per cent to 2.9 per cent, citing recovery in the tourism and service sectors.
Somprawin Manprasert, chief economist of SCB's Economic Intelligence Centre, said Thailand was among many countries that had reopened to foreign tourists. He expects 7.4 million foreign tourists to visit Thailand this year.
Meanwhile, recovery in the service sector should accelerate after the government eased Covid-19 restrictions, he said.
However, SCB expects inflation to hit 5.9 per cent this year, the highest in 24 years.
Meanwhile, the government's move to reduce aid to soften the impact of rising living costs would affect people's purchasing power and consumption, as well as delaying business investment, he added.
The decline in household income amid delayed recovery of the labour market would exacerbate problems from living-cost inflation.
He also urged the government to launch fresh measures to control energy prices and reduce living costs.
On monetary policy, he expected the Bank of Thailand’s Monetary Policy Committee to raise the interest rate to 0.75 per cent in the third quarter this year to combat rising inflation.
He said the baht would strengthen slightly in the latter part of this year in response to economic recovery and improvement in the country's current account. He expected the baht to strengthen to between 33.5 and 34.5 to the dollar by the end of this year. The rate stood at 34.98 as of Tuesday.
Tourism and the service sector would be the main economic engines of economic recovery in the next phase as Thailand reopened and eased Covid-19 restrictions.
However, economic recovery would be hampered by inflation's impact on domestic spending and limitations in the government's economic stimulus measures.
GDP will not reach pre-pandemic levels until the third quarter next year, he said.
He added that Thailand's economy would be pressured by five factors:
- Rising energy and consumer-produce prices due to Russia-Ukraine war.
- Supply disruption in manufacturing and export sectors due to China's zero-Covid policy.
- Rising production costs in manufacturing from supply chain disruption due to geopolitical factors.
- Impact of rising living costs on economy and debt repayment ability.
- Decline in government measures to stimulate the economy and control cost of living.