Kasikorn Research Centre predicts that there is enough capital in the financial system to meet short-term debt repayments, imports for 3 months and demand for local currency even as the baht is projected to depreciate past ฿36 to the US dollar in the coming months, a 15 year low while the Thai currency has held its own or even gained against other currencies such as the Pound Sterling and Euro.

The impact of rising foreign tourist numbers which look set to rise to well over 9 million arrivals this year is helping to offset damage and loss of confidence in the domestic economy from rising prices and disruptions to Thailand’s manufacturing sector which saw a surprising decline in May according to figures just released. On Tuesday, Kasikorn Research Centre, the research arm of Kasikorn Bank, raised the country’s GDP growth projection from 2.5% to 2.9%, all on good news from Thailand’s increasingly busy airports.

Deputy Managing Director of Kasikorn Research Centre Nattaporn Triratanasiriku (left) along with her fellow Deputy Managing Director Kewalin Wangphichanasuk (right) gave a presentation on Tuesday in which they reviewed the current state of Thailand’s economy which according to a revised GDP projection from the unit, the research arm of Kasikorn Bank, is now due to grow by 2.9% this year with more robust foreign tourist arrivals and resilient exports leading the way even while the kingdom is suffering from supply chain disruption, inflation and, in the short term, a depreciating baht against the US dollar.

A Deputy Managing Director of Kasikorn Research Centre, the research arm of Kasikorn Bank, Ms Nattaporn Triratanasirikul disclosed that the firm believes that growth prospects for Thailand this year have improved despite problems, both in the domestic and export sector, due to a growing contribution from the rising tide of the foreign tourism industry as income from arrivals at Thai airports is beginning to have an impact within the economy.

The research unit noted a cut back in government expenditure in recent months and a rising trade deficit due to the spiralling cost of energy imports but still projected GDP growth in Thailand to rise from a previous estimate of 2.5% to 2.9% this year.

Inflation set to peak in the third quarter and is then expected to fall back, according to Kasikorn Bank

The bank is forecasting, however, that inflation in Thailand will continue to rise before peaking in the third quarter of the year when it is expected to fall.

Thailand’s inflation rate skyrocketed to 7.1% in May although the Bank of Thailand estimates that the annual figure for 2022 as a whole, will only come in at 6.2%.

That will coincide with a rise in interest rates with the Bank of Thailand’s Monetary Policy Committee expected to raise rates to 1% by the end of 2022.

K Bank predicts a recovery of the baht to ฿33.50 by the end of the year mainly based on higher tourist arrivals

There is some suggestion in banking and financial circles that Thai banks may not immediately pass on the rise in rates by adjusting interest rates on deposit or for borrowers or at least delay such moves as long as possible.

Bank research unit insists that the baht will be driven back to ฿33.50 against the dollar at the end of the year based on stronger tourist inflows

Last week, K Bank suggested that the Thai baht would return to a level of ฿33.50 to the US dollar at the end of the year while it is expected to break through the ฿36 to the US currency over the coming two months.

At the same time, the Thai currency is still well within its trading range against the Euro, Australian Dollar and Pound Sterling.

Indeed, since the end of last year, the baht has gained against both the European Union tender and the British one, a situation which highlights weaknesses in the European and UK economies as well as the challenges being faced.

The baht, in recent days, hit a 15-year low against the US currency trading at a rate not seen since early 2007 when it breached the ฿36 to the dollar value in the other direction.

Kingdom’s financial system has adequate liquidity even with a depreciating baht against the US dollar

In its briefing on Tuesday the 28th of June, Kasikorn Research Centre suggested that there was currently adequate liquidity even as it forecast the baht to depreciate further against the US dollar in the coming months.

It said that, despite capital outflows, there is still a relatively large level of fluidity in the system to support short-term foreign debt as well as imports for 3 months while allowing for banknotes or a quoted circulation of currency with a potential for 1.2 times demand.

Stronger foreign tourism numbers reported by the government in response to easing since May 1st

The bank revised its estimate for foreign tourist arrivals to Thailand this year to 7.5 million.

This came at the same time as the government’s detailed forecast, just published in the last 24 hours, suggested that 9.3 million international arrivals into Thailand in 2022 is looking like a probability due to easing measures which began on May 1st and will culminate on July 1st when the Thailand Pass application is withdrawn from service.

Ms Kewalin Wangphichanasuk, also a Deputy Managing Director of Kasikorn Research Centre, while confirming the revised foreign tourism numbers and a potential income flow of ฿1.1 trillion, said it was still 66.75% behind the figures seen in 2019.

Record levels of household debt and ageing weighing down the economy well before the current crisis

That was the year before the pandemic and a year when Thailand’s economy still only grew by a disappointing 2.1%.

Global food shortage to impact Thailand with rising prices driven by increased costs and market demand

Ms Kewalin addressed the threat posed to Thailand by a growing worldwide food shortage which promises to reach crisis proportions later in the year with leading supply chains already warning western governments of the potential impact of the Ukraine war on the day-to-day life of consumers.

Inflation a bigger threat to business and the less well off than higher interest rates says bank chief

She noted that Thai farmers and producers for the industry are already facing higher prices driven by a shortage of key supplies such as fertiliser.

They are also responding to increased demand worldwide which will drive market prices for their produce up.

Ms Kewalin expects that this scenario will remain in place until at least the middle half of 2023.

This is causing extreme disruption within the business sector as small entrepreneurs struggle to meet rising prices for palm oil, rice and pork while at the same time, householders throughout the kingdom, on limited incomes, are being forced to tighten their belts.

Manufacturing sector recorded a surprise drop in output in May although exports grew to $25.5 billion

The news of falling consumer confidence in the second quarter of the year is due to these pressures, which spring essentially from the Russian-Ukraine war.

This is also thought to have contributed to the surprise drop in manufacturing output in May according to figures just released.

Output fell back by 2.11% and ran counter to a Reuters prediction, based on expert opinion, that it would grow by 1.5%.

Sectors in the economy where output fell included car production, computer parts and hard drives as well as plastics, areas of activity dependent on Chinese supply chains, again highlighting the links between Thailand’s manufacturing sector and the currently troubled Chinese economy.

At the same time, Thailand still managed to increase its exports from May last year by 10.5% coming in at $25.5 billion for May 2022. This was also an 8.4% rise on April’s export figure.

Thailand’s exports and manufacturing industry account for 59.49% of technical GDP with the industrial sector accounting for no less than 80% of this or 48% of the country’s annual output. 

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World inflation crisis may lead Bank of Thailand to act before August and raise interest rates more sharply

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