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Thailand: K-Research cuts 2020 growth view to 0.5% on virus impact
Kasikorn Research Center (K-Research) has emerged as the most pessimistic among research houses, slashing its forecast for the country’s GDP growth this year to 0.5% on the expectation that the coronavirus epidemic will wipe 410 billion baht off tourism receipts.
The downgrade is based on assumptions that the number of infection cases in China will peak in the next 1-2 months; that the spread outside China, particularly in Italy and South Korea, can be contained in the second quarter; and that the number of infected patients in Thailand won’t spike in the near term.
While Thailand has so far managed to contain the spread, the country’s tourism sector will bear the brunt of the epidemic, said K-Research assistant managing director Nattaporn Triratanasirikul.
K-Research earlier predicted GDP growth of 2.7% for 2020.
The research unit under Kasikornbank said foreign tourists this year will decline by 8.3 million or 20.8% from the previous year, shaving 410 billion baht off tourism income.
Ms Nattaporn said the estimated forgone income accounts for 2.4% of GDP.
“The economy will contract by less than 1% in the first quarter and go even further in the second quarter, slipping into a technical recession, but this doesn’t stem from the economic structure,” she said.
K-Research also downgraded its projection for exports this year, to a 5.6% contraction instead of 1%, with imports to decline 7.8% instead of 5.2%.
Ms Nattaporn predicts a gradual pickup in economic activity in the third quarter and a return to normal conditions in the final three months of the year.
K-Research forecasts the Thai economy to turn around with 1% year-on-year growth in the third quarter and 3% in the fourth. But the economy is expected to contract in 2020 in the event that the epidemic lasts longer than K-Research’s assumption.
Both fiscal and monetary policies are needed to support economic growth while collaboration to contain the outbreak is also required from all parties.
Ms Nattaporn said the Bank of Thailand is expected to cut its policy rate by 25 basis points to 0.75% at its March 25 meeting.
The Finance Ministry’s 100-billion-baht relief package for those ravaged by coronavirus outbreak would help ease the financial burden of the impacted business operators and employees.
“We need to offer relief money quickly to avoid business closures and a higher unemployment rate,” she said.
Thanyalak Vacharachaisurapol, deputy managing director, said K-Research also lowered its total loan growth projection for the year to less than 1% from 3% previously, in line with the downward revision of GDP growth.
Amid heightening uncertainties, non-performing loans (NPLs) in the banking sector are expected to climb.
The banking sector’s NPL ratio is seen rising to 3.1-3.2% of total loans at the end of March from 2.98% at the end of December 2019.
Analysts need to wait for clarity regarding the outbreak and new financial reporting standards before forecasting bad-loan levels for the full year, Ms Thanyalak said.
Bank of Thailand assistant governor Titanun Mallikamas said the central bank is set to release a reviewed economic outlook for the year on March 25.
In December, the central bank cut its 2020 economic growth forecast to 2.8% from 3.3%.
The central bank is closely monitoring the situation and the impact from the epidemic as this year’s economic growth takes a significant blow, Mr Titanun said.
Source: https://www.bangkokpost.com/business/1872679/k-research-cuts-2020-growth-view-to-0-5-on-virus-impact