Krungsri Research forecast domestic demand to boost Thai economy in 2019

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Dr. Somprawin Manprasert

Krungsri Research forecasts the Thai economy would continue to grow by 4.1% in 2019, close to 4.3% in 2018 and exceeding post-crisis average of 3.8%. The major catalysts would be stronger growth in private consumption and private investment, which would help offset the slowdown of external demand, while an expectation of clearer economic policies after Thailand’s general election should help build confidence among domestic and foreign investors.

Dr. Somprawin Manprasert, Krungsri Head of Research and Chief Economist, said, “Domestic spending will play a more important role in driving the economy next year. Private consumption is likely to enter the upcycle after the capacity utilization rate of several industries hit multi-year highs. Driven by the acceleration of Public Private Partnership (PPP fast track), the investment in mega infrastructure projects is expected to 281 billion baht in 2019 from 98 billion baht in 2018. In addition, Thailand will benefit from an increase in foreign direct investments, partly due to the relocation to avoid negative impact from the U.S.-China trade war.”

Private consumption is expected to continue growth momentum, driven by rise in both farm and non-farm incomes, and increase in non-farm employment. In addition, Accerarating investment in Mega project, increasing budget for welfare card holders, and several supporting projects to help specific group including farmers, the olders, and SMEs, will encourage domestic consumption and investment.

After strong growth during the past two consecutive years, the growth of Thai exports is likely to be moderate at 4.5% in 2019, reflecting the slowdown of global economy and impacts of trade protectionism between the U.S. and China. However, Thailand could benefit from trade with high-growth countries in Asia.

The Thai tourism is also likely to recover from late 2018 after the government exempted Visa on Arrival fee to tourists from 21 countries including China and India. Moreover, the sector is expected to benefit from rising middle class in Asia and the capacity expansion of major airports to serve rising number of tourists.

“The overall positive economic momentum has resulted in a gradual increase in inflation, which is expected to be at 1.5% in 2019 from 1.1% in 2018. Krungsri Research expects the Monetary Policy Committee will need to normalize the monetary policy by raising the policy rate to 2.00% in March 2019 after the latest raise to 1.75% in December 2018 to reduce risks to financial and economic stability in the long term.” Dr. Somprawin added.


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