Baht is predicted to fall due to tightening monetary policy in the United States to ward off inflation. A key economic forecasting unit in Bangkok is only predicting 4 to 5 million foreign tourists in 2022 with a sparse 350,000 visitors for this year. The week saw positive news for the automotive sector with a massive investment by Ford and news of a surge in IT expenditure as the wider economy in Thailand shifts online. 

The Bank of Thailand governor warned on Wednesday that it will be the first quarter of 2023 before the Thai economy returns to pre-pandemic levels and predicted a growth rate next year at between 2.8% and 3.5% because of the damage inflicted on the country’s foreign tourism sector. It comes in a week when Thailand’s automotive sector was boosted by the announcement of a $900 million investment by Ford and a projected record expenditure in the IT sector in 2021 following a surprisingly successful year. On Friday, a spokesman for the prime minister told reporters that General Prayut was pleased with the country’s ongoing economic recovery led by the wider reopening of the country to foreign tourists since November 1st and suggested that GDP growth could reach as much as 4.5% in 2022.

As Thailand’s economic base received a boost this week with a $900 million investment announced by the Ford Motor Company, the Bank of Thailand Governor Sethaput Suthiwartnarueput (left) has warned that next year may see a cautious recovery of Thailand’s economy which he predicted will not return to a pre-pandemic level of activity until 2023. He attributed this to the damage inflicted on the country’s foreign tourism industry, a key engine in Thailand’s economy which has been kept going by a robust export performance in 2021 which is expected to continue. Meanwhile, Prime Minister Prayut Chan ocha (right) was more upbeat as he predicted growth of up to 4.5% for 2022 and said he saw no reason, at this point, why another lockdown should be announced as the country’s gradual reopening was progressing while the COVID-19 situation remained stable despite the Omicron threat.

On Friday, a spokesman for the Prime Minister’s Office spoke of the PM’s satisfaction with the country’s economic recovery since October although with continuing uncertainty over the possible impact of the Omicron virus strain.

It comes in a week when the Ford Motor Company, in what is seen as a vote of confidence by American industry in Thailand and its automotive sector, announced plans to invest $900 million in the kingdom in association with its Auto Alliance venture with the Japanese motor company Mazda.

Rise in confidence according to Federation of Thai Industries index for three months in a row recorded

Mr Thanakorn Wangboonkongchana of the Prime Minister’s Office, on Friday, pointed to a rise in confidence according to the latest Federation of Thai Industries index survey which rose from October to November to 85.4 from 82.1.

It was the third consecutive rise in a row and has been attributed to the relative success of the country’s reopening since November 1st even though the numbers are considerably lower than expectations. This followed a boost from October 11th when the initiative was announced by the prime minister.

The process has seen nearly the entire economy, except for the nightlife and entertainment industry, being reopened with many restrictions lifted and curfews rescinded nationwide.

Resurgence in Thai exports to world markets to continue into 2022 with a growth rate of 5 to 8%

This, said Mr Thanathorn, has been accompanied by a resurgence in export demand as Thailand’s export markets also picked up with growing output to the United States, China, ASEAN and India.

He predicted that the kingdom could see a GDP increase of up to 4.5% in 2022 although this is ahead of market expectations at this time. 

He pointed to bullish forecasts by the Thai National Shippers’ Council which has said it expects exports to grow by between 5% and 8% next year.

Announcement of $900 million investment by Ford is a vote of confidence in Thailand’s automotive sector

The announcement by Ford on Wednesday is particularly positive for Thailand as the government seeks to endorse the country’s credentials as a base for new electric vehicle technology.

The $900 million investment is linked to the popular Ford Ranger pickup and Everest SUV. Both models have EV versions which have been developed using Ford’s own technology.

Car assembly and production currently accounts for 10% of all employment in the country’s manufacturing and export sector which was hit severely at the end of the summer by supply chain issues.

The new investment by Ford will see $400 million of the overall investment injected into its supply chain network.

US auto giant GM is pulling out of Thailand to focus on more profitable markets. 1,500 jobs lost for now

Warning signal from Nissan as it tells agents it is halting production of key car models in Thailand immediately

The industry faced question marks in 2020 when General Motors announced its withdrawal from Thailand and Honda signalled it was reviewing its operations in the kingdom.

Government’s 2019 electric vehicles vision is paying off with stronger investment into the growth sector

The determination of the government to make Thailand a hub for electric vehicles does however appear to be paying off.

The General Motors plants were purchased by Chinese automaker Great Wall Motor Co. which has already commenced production of its own branded SUVs and electric vehicles.

The country’s own indigenous research and development and indeed the production of electric vehicles is also paying off with a range of Thai firms such as Bangkok-based Energy Absolute, a biodiesel vehicle manufacturer which has moved into EV vehicles, also making strides with consistent profitability.

Thailand faces an economic test as change becomes a reality in cars, farming and business

It’s all part of a government initiative pushed from 2019 for Thai firms to be capable of producing 1 million EV classified vehicles per annum including hybrids by 2025.

Then there is the state-owned and Stock Exchange of Thailand (SET) listed PTT Public Company Limited which announced this year that it is investing $1 to $2 billion in a joint venture with the huge Taiwanese multinational electronic manufacturer Foxconn.

In May this year, the two firms signed a Memorandum of Understanding to build electric vehicles in Thailand and key components for the sector.

The deal was highlighted as a key part of Thailand’s new goal of producing 725,000 zero-emission passenger cars by 2030. 

Bank of Thailand Governor Sethaput predicts next year to be a cautious and transitory one to recovery

On Thursday, Mr Sethaput Suthiwartnarueput, the Bank of Thailand Governor, predicted that 2022 will be a year of cautious transition for Thailand leading to its recovery to pre-pandemic levels of economic activity in the first quarter of 2023.

He attributed this to the damage inflicted on Thailand’s foreign tourism industry which many economic analysts see only making a limited recovery in 2022 when only 4 to 5 million foreign tourists are expected to fly in.

That is just 10% to 12.5% of pre-pandemic levels.

This will see a potential loss of up to ฿1.8 trillion in income nationally as that sector accounts, in both direct and indirect terms, for 20% of the kingdom’s economy.

‘Recovery will be slow and uneven because Covid hit us in the soft underbelly in the tourism sector,’ said Mr Sethaput who was speaking at a Bangkok business forum.

He predicted a GDP growth range of 2.8% to 3.7% for 2022.

Key condition is no further lockdowns

All this analysis, however, is predicated on the country being able to avoid a national lockdown which the Prime Minister, in recent days, said was unnecessary at this moment.

‘Hopefully, this coming New Year will be a happy time. We haven’t had that festive happiness for two years because of Covid-19,’ General Prayut told reporters, on Wednesday even after the first case of the Omicron virus was confirmed in Thailand on Monday. ‘After all, everything now depends on how effective the Covid Free Setting and other measures are. If there is no new spread of the virus, who would ever close or lockdown again? No one would.’

Kasikorn presentation this week also highlighted the Omicron factor as critical to all economic predictions

During the week, Kasikorn Research Centre made a presentation on the outlook for the Thai economy. The subject was addressed by three deputy managing directors of the research arm of Kasikorn Bank.

Ms Nattaporn Treeratsirikul highlighted the potential impact of the Omicron virus which is known to be more transmissible and also with a reported ability to more easily evade vaccines but which is, at least according to initial reports, thought to be less severe as far as clinical outcomes are concerned.

She said the government was left with ฿260 billion from the second tranche of emergency of borrowing this year of ฿500 billion.

There is concern about the ability of the government to respond to another severe wave of the virus and the possibility of another lockdown.

Bank research arm predicts 3.7% growth for 2022 and the Thai baht to fall to ฿34.25 to the US dollar

Ms Nattaporn suggested that if a lockdown can be avoided in 2022 and the currently controlled reopening of the kingdom to foreign tourists moves forward unimpeded then the economy could see a growth rate of 3.7% in the course of the next year.

She expressed confidence in the export sector which underpinned the country’s challenged economy in 2021 but said a continued recovery in household spending from the foreign tourism reopening may be fettered by rising inflationary pressures.

The United States is forecast to tighten its monetary policy next year by tapering off bond purchases and possibly raising interest rates.

This could see the Thai baht depreciating to a level of ฿34.25 to the US dollar making the kingdom’s foreign tourism sector and exports more competitive but also contributing to inflation.

Only 350,000 foreign tourists predicted for 2021

The prospects for foreign tourism were addressed by Ms Kaewalin Wangpichayasuk, another deputy managing director.

She predicted that 2021 may only see 350,000 visitors arriving in Thailand. Certainly, this would be a disappointment as expectations at the outset of the wider reopening from November 1st were anything from 700,000 to 1 million visitors.

The current Tourism Authority of Thailand (TAT) estimate is for 500,000 visitors.

Ms Kaewalin projected only 4 million visitors for 2022 or roughly 10% of what was seen in 2019 making a more permanent downturn in the foreign tourism industry a distinct and disturbing possibility right now.

Banking industry has seen its profits eroded with more lending at lower margins in the course of 2021

Ms Thanyalak Watcharachai Suraphon, also a deputy managing director, was the third top executive to address the briefing and looked at Thailand’s banking sector.

September this year saw Thailand at its lowest point during the pandemic with a sinking economy

She predicted a slow down in loan growth which rose surprisingly in 2021 although the profitability of Thailand’s retail banks is reported as having declined this year on tightening margins. 

In November, Kasikorn Research Centre predicted net profits for Thai banks to decline by 42.5% this year.

Ms Thanyalak predicted that the US federal reserve will raise rates at least two times in 2022 in a cautious banking environment with loan growth forecasted to be between 4 and 5.5% from an estimated 6% in 2021.

Reopening to foreign tourism to improve liquidity

At the same time, the reopening of the country will improve the country’s liquidity although a marginal rise in non-performing loans from 3.2% at the end of 2021 to 3.3% at the end of 2022 is expected.

Firms have been reportinga liquidity crunch since October as efforts are being made to kickstart dormant economic activity with the reopening.

With Omicron hovering, firms already suffering a cash flow crunch with the economy again in peril

She predicted that the profitability of Thai banks in 2022 will not recover to anything like the level seen in 2019.

While the Thai economy adjusts to the long term impact of what may yet prove to be a more permanent change to its foreign tourism market, there are indicators that Thailand’s transition to a digital economy is showing real results.

Boost for the economy with a surge in IT expenditure as Thailand shifts to an online digital economy

Gartner, a Connecticut-based firm and world leader in technology research and consulting has predicted that expenditure on IT within the Thai economy will grow to $819 billion, a 7.4% jump for this year.

Figures for 2021, despite a lacklustre year overall for the economy which reached a point of crisis in September, overall, show a 6.4% growth in expenditure as firms adjusted to a new online economy.

This has also been accompanied by more specific software development as firms increasingly seek to build their own tailored solutions for their business operations.

There was also strong growth in new hardware as more workers adjusted to working outside the office just as we have seen all over the world.

‘Enterprises will increasingly build new technologies and software, rather than buy and implement them, leading to overall slower spending levels in 2022 compared to 2021,’ disclosed John-David Lovelock, a vice-president at Gartner’s research arm. ‘What changed in 2020 and 2021 was not really the technology itself, but people’s willingness and eagerness to adopt it and use it in different ways.’

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