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
|Thailand Country Risk Report Q3 2019|
|Published: June 29, 2018||Content info: 63 Pages||
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.
We have revised our average exchange rate forecast for 2019 to THB32.00/USD (from THB31.50/USD previously).
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.