External headwinds lead KTB to cut GDP forecast

Bank unit puts next year’s figure at 3.2%

Krungthai Compass, KTB’s research unit, has downgraded its 2020 economic growth forecast to 3.2% from 3.6% earlier, given external headwinds next year.

“External risk remains the main negative factor pressuring the country’s GDP growth. We cut the growth forecast for next year to 3.2% from 3.6%,” said Phacharaphot Nuntramas, senior vice-president of global market development and strategy at KTB.

The unit is projecting 2.7% growth this year, mainly due to state investment.

The 3.2% growth outlook assumes that state investment will surge significantly to 6.2% growth in 2020 from the 2.6% projected for this year, Mr Phacharaphot said.

The research house’s latest economic growth forecast for 2020 is slightly below the Bank of Thailand’s recent projection of 3.3%, which was trimmed from 3.7% at the Monetary Policy Committee (MPC) meeting last month.

A raft of stimulus packages and accelerated budget disbursement, including for big-ticket infrastructure investment, should contribute to strong public investment growth, Mr Phacharaphot said.

Public investment and the lowinterest-rate environment will also support private investment to grow 3.5% next year, up from 2.9% this year.

But the country’s swelling household debt and the central bank’s responsible lending policies will dampen domestic consumption growth to 3.4% in 2020 from 3.8% this year.

Mr Phacharaphot forecasts exports to turn around next year, growing 0.3% after a 1.8% contraction predicted for this year. But the US-China trade dispute is the key drag on Thai economic growth.

Thailand’s economic slowdown during 2013-15 also coincided with export contractions.

With the improving outlook of the country’s economy and investment next year, KTB Compass predicts the central bank’s MPC to leave its policy rate on hold at 1.50% until next year, Mr Phacharaphot said.

The research house forecasts the baht to continue to strengthen against the US dollar to 30.25 at year-end and 29-30 next year, given the US economic slowdown.

The US Federal Reserve is expected to cut its policy rate once more this year and again next year to bolster economic momentum, Mr Phacharaphot said. US economic growth next year is estimated to come in below its mean over the past 10 years, and the US could enter a recession, he said.