THIS is turning out to be a very challenging and continuously turbulent year for the world due to risks arising from US President Donald Trump’s America First policies with global trade rocked by his move to impose trade barriers against China by hiking import tax to 45%, Thai News Agency quoted Kasikornbank’s research head Kobsidthi Silpachai as saying today (Feb.7).
Should US reduce Thai imports by 1% this will lead to Thai exports dropping by 0.9%, he added.
The Thai economy will likely grow by around 3.3% this year, close to the level in 2016, and while exports will expand slightly by 0.8% and imports rise by 2%, it is tourism which is the key growth engine together with state investment and other steps to spur the economy.
Meanwhile Thai household debts are still high at 82% of gross national product (GDP), with this continuing to pressure consumption but this could rise after the installment payments of vehicles purchased under the first-car program end. It is likely that the Thai policy rate will stay at 1.50% throughout the year to support the recovery of the Thai economy which is moving along gradually.
Mr Kobsidthi added that inflation will likely be 1.8% because of higher energy prices while the Monetary Policy Committee meeting tomorrow is expected to maintain interest rates at 1.50% because the panel is still following changes US President Trump is bringing in.
Meanwhile the dollar is expected to strengthen against the Thai baht because the US Federal Reserve will be increasing interest rates which will narrow the gap between Thai and US rates. This will likely lead to money flowing out of Thailand but the baht-dollar rate at the end of this year should be 36.50, weakening less than other Asian currencies because the Thai current account has a high surplus of 43 billion dollars this year.
Mr Kobsidthi explained that the Thai baht has strengthened right now because exporters holding US dollars at 34.50 baht are selling as they fear further strengthening of the Thai currency amid uncertainty over US President Trump’s policies.
However the Thai baht should not climb higher than 34.50 to the dollar because the Bank of Thailand is watching and intervening.
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