KResearch spots 4% GDP growth in 2019

The Bank of Thailand’s rate-setting committee is expected to lift the policy rate for the first time in more than seven years at this year’s final meeting on Dec 19, while the Thai economy is projected to grow at a slower pace of 4% next year, down from 4.3% predicted for 2018, says Kasikorn Research Center (KResearch).

The policy rate will probably be hiked further in the second half of next year after the general election, said Kangana Chockpisansin, research head of KResearch. The unit forecasts that local banks will pass on the policy rate hike for some deposits and lending products.

“The interest rate hike will likely be seen in some special fixed deposits, and longterm home and car loans during the first half of 2019, while interest rates overall may remain unchanged, given relatively high liquidity in the banking system,” she said.

Given the central bank’s repeated signals of a rate rise and the Monetary Policy Committee’s close vote of 4-3 at its November meeting, the possibility of a rate hike at this month’s meeting is increased, Ms Kangana said.

She said banks’ savings and prime lending rates will likely be increased in the second half of next year.

Loan growth is expected to gather pace during the second half of 2019, but full-year lending growth would slow to 5% from the 6% projected for this year, given the weaker momentum of the country’s economy, Ms Kangana said.

Non-performing loans (NPL) at Thai and international banks may hit a fresh record high around mid-2019 before finishing at 2.98% of loans outstanding at the end of 2019, she said without revealing the new record figure.

The research house estimates the NPL ratio will be 2.91% at the end of this year.

Special attention must be paid to small-business and home loans, Ms Kangana said.

The Thai economy is predicted to expand 4% in 2019, with domestic investment cushioning the faltering momentum of the external sector, said Nattaporn Triratanasirikul, assistant managing director of KResearch.

“Regarding the upcoming general election, if everything goes smoothly, the country’s spending and investment atmosphere may be improved,” she said. “Moreover, the continuity of budget disbursement for fiscal 2020 will help government spending and investment be the main economic growth engine throughout the second half of next year.

“A global trade war will be a key variable for Thai exports next year. Including the base effect, exports are projected to grow 4.5% in 2019 versus 7.7% in 2018.”

The US and China may not come up with a tariff agreement within the expected timeline, which would weigh on the international trade atmosphere over the whole year, said Siwat Luangsomboon, another assistant managing director at KResearch. If that is the case, it would affect Thailand’s trade value by US$3.1 billion (102 billion baht), he said.

Impacts from a trade war would be more serious than this year, Mr Siwat said.

Brexit, Italy’s fiscal fiasco and currency fluctuations in emerging markets such as Turkey, Indonesia, India and the Philippines are other external threats. Many central banks in those countries are left with limited tools after already raising interest rates considerably.

Kevalin Wangpichayasuk, another assistant managing director at KResearch, said online retail, private hospitals and public investment are likely to enjoy solid growth.

Although the e-commerce tax may affect the margins of sellers after related systems are in place, online transactions are poised to jump in line with changing consumer behaviour, she said.

Agriculture, automotive and real estate could see growth moderate as the property market next year is affected by higher interest rates, Ms Kevalin said.