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Market Research Report

Thailand Country Risk Report Q3 2019

Published by Fitch Solutions, Inc. Product code 203091
Published Content info 63 Pages
Delivery time: 1-2 business days
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Thailand Country Risk Report Q3 2019
Published: June 29, 2018 Content info: 63 Pages
Description

Key View:

We maintain our 2019 real GDP growth forecast at 3.5%, which reflects our view for a slowdown from 4.1% in 2018 amid broad-based headwinds to the Thai economy. Investment growth will likely be curtailed by a heavy build-up of inventories in 2018 and slowing regional growth will act as a headwind to export growth. Private consumption will remain a key growth driver and cushion the slowdown.

We expect the Bank of Thailand (BoT) to hold its policy rate at 1.75% through 2019 due to a likely slowing of economic growth and subdued inflation, which we forecast to average near the lower bound of the central bank's 1.0-4.0% inflation target range. Downside risks to our rate forecast persist in the form of a possible negative outcome from trade talks between the US and China, which would slow the Thai economy further and could see the BoT cut rates to support growth.

Thailand's fiscal deficit will likely widen regardless of which camp eventually forms the government after the March 24 general elections. Both the pro-democracy and pro-military camps ran on manifestos that promised more spending on subsidies and social security. The long-term fiscal outlook remains poor, with political instability likely to hamper the implementation of reforms to counteract the negative effects of the ageing population on economic growth and government finances.

We are marginally revising our 2019 average exchange rate forecast to THB32.00/USD from THB31.50/USD previously, to account for our expectations for the unit to remain range-bound between THB31.00/USD and THB33.50/USD over the coming months. While we maintain our constructive view of the baht over the long term, we are also revising our 2020 forecast weaker to THB31.25/USD from THB30.75/USD previously to account for our weaker 2019 forecast.

Political uncertainty remains the key downside risk to our forecast.

Forecast Changes

We have revised our average exchange rate forecast for 2019 to THB32.00/USD (from THB31.50/USD previously).

Key Risks

Thailand faces considerable political risk after the March 24 elections, after which both the pro-democracy camp and the pro-military camp claimed the right to form the government. The uncertainty and acrimonious atmosphere risk sparking another round of disruptive demonstrations.

On the economic front, Thailand's tourism boom has been largely driven by rapid growth in mainland Chinese arrivals, which could slow sharply should the Chinese economy undergo a slowdown.

Table of Contents
Product Code: CFTH_20190701

Table of Contents

Executive Summary

  • Core Views
  • Forecast Changes
  • Key Risks
  • Country Risk Summary
  • Economic Risk Index
  • Political Risk Index
  • SWOT
  • Economic - SWOT Analysis
  • Political - SWOT Analysis
  • Economic Outlook
  • Economic Growth Outlook
  • 2019 Growth To Be Capped By 2018 Inventory Buildup
  • GDP By Expenditure Outlook
    • TABLE: GDP GROWTH FORECASTS
    • TABLE: PRIVATE CONSUMPTION FORECASTS
    • TABLE: GOVERNMENT CONSUMPTION FORECASTS
    • TABLE: FIXED INVESTMENT FORECASTS
    • TABLE: NET EXPORTS FORECASTS
  • Outlook On External Position
    • TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
    • TABLE: CURRENT ACCOUNT BALANCE FORECASTS
    • TABLE: MAIN EXPORTS AND IMPORTS IN 2017
    • TABLE: MAIN EXPORT AND IMPORT PARTNERS IN 2017
  • Monetary Policy
  • Growing Economic Uncertainty To See Bank Of Thailand Remain On Hold
  • Monetary Policy Framework
    • TABLE: MONETARY POLICY FORECASTS
  • Fiscal Policy And Public Debt Outlook
  • Populist Shift Negative For Fiscal Consolidation
    • TABLE: ELECTIONS SAW ALL MAJOR PARTIES PROMISE MORE WELFARE SPENDING
  • Structural Fiscal Position
    • TABLE: FISCAL AND PUBLIC DEBT FORECASTS
  • Thailand Country Risk Q3 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings' Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings' analysts do not share data or information with Fitch Solutions Macro Research.ContentsCurrency Forecast
  • Turning Neutral On The Baht
    • TABLE: CURRENCY FORECAST
  • 10-Year Forecast
  • The Thai Economy To 2028
  • Political Uncertainty The Main Growth Obstacle
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
  • Political Outlook
  • Domestic Politics
  • 2019 General Elections Q&A: Implications Of Competing Claims To Power
    • TABLE: POLITICAL OVERVIEW
  • Long-Term Political Outlook
  • Uncertainty Ahead Despite Tight Military Grip
  • Operational Risk
    • TABLE: OPERATIONAL RISK SCORES
  • Business Crime
    • TABLE: BUSINESS RESPONSE TO WHITE COLLAR CRIME AND ORGANISED CRIME RISKS
  • Education
    • TABLE: THAILAND AND OECD AVERAGE PISA STUDENT PERFORMANCE SCORES
  • Global Macro Outlook
  • Headwinds To Growth Moderate, But Risks Remain
    • TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
    • TABLE: DEVELOPED MARKETS - REAL GDP GROWTH, % y-o-y
    • TABLE: EMERGING MARKETS - REAL GDP GROWTH, % y-o-y
  • Index Tables
    • TABLE: THAILAND - MACROECONOMIC DATA AND FORECASTS
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