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Thailand: K-Research lowers growth to 1.5%
Bank of Ayudhya’s (BAY) research house Krungsri Research (K-Research) has lowered its forecast for economic growth this year to 1.5% from 2.5% because of the damage from the Covid-19 outbreak, the delayed fiscal budget and the drought.
The novel coronavirus, expected to peak during February to March, is predicted to shave 0.44 percentage points off GDP growth this year, while the drought and the delayed fiscal budget will respectively wipe off 0.3 and 0.1 percentage points, said K-Research’s chief economist Somprawin Manprasert.
When the multiplier effect is taken into account, one percentage point in total is wiped out, he said.
Don Nakornthab, the Bank of Thailand’s senior director for economics and policy, recently said GDP growth will likely be lower than 2% this year, while first-quarter economic growth could sink below 1% if the country loses 250 billion baht in tourism income as estimated by the Tourism and Sports Ministry.
The National Economic and Social Development Council last week slashed its forecast for 2020 economic growth to 1.5-2.5% from 2.7%-3.7% made on Nov 18 last year, while the Bank of Thailand is poised to review its growth estimate of 2.8% in March.
K-Research estimated the impact of the deadly virus on Thailand’s economy would be seen through a subdued tourism sector, supply chain disruption and income effects.
The research unit forecast the outbreak would peak in March, but the contagion will likely last until May. During its peak, the number of new infections could rise to nearly 20,000 a week before declining to 12,000 between April and May.
“During February to March, the situation will become ‘very severe’ as both the mortality and transmission rates are high.
From April to May, the outbreak condition will decline to ‘severe’ as the mortality rate drops significantly,” Mr Somprawin predicted.
K-Research projected the country’s economy would shrink 0.7% year-on-year and 1.5% quarter-on-quarter for the three months through March, before reversing course to growth of 0.2% year-on-year and 1.3% quarter-on-quarter in the second quarter.
Based on the assumption the coronavirus situation would gradually improve from April, Thailand’s tourism sector and the economy are expected to pick up in the second half, he said.
The government and the Bank of Thailand are expected to use both fiscal and monetary policies to support the country’s economic momentum.
Mr Somprawin forecasts the central bank will further cut its policy rate by another 25 basis points at the next Monetary Policy Committee meeting slated for March 15.
“We forecast the policy rate will reach a historic low of 0.75% next month before standing pat until the end of this year,” he said.
BAY’s latest forecast has already factored in the policy rate cut and fiscal measure implementation.
The central bank’s rate setters early this month cut its policy rate by 25 basis points to a 1% to curb the impact of the novel coronavirus outbreak, the delayed fiscal budget and severe drought conditions.
Source: https://www.bangkokpost.com/business/1865069/k-research-lowers-growth-to-1-5-