Thailand: KResearch upgrades 2021 growth forecast
Kasikorn Research Center (KResearch) has upgraded its 2021 economic growth projection to an expansion of 0.2% from the previously forecast 0.5% contraction, and with the projection of next year’s growth at 3.7%.
Possible risk factors next year include high oil prices and inflation.
KResearch holds the view that the economy in 2021 should post higher growth than it previously estimated, in light of the recent easing of lockdown restrictions and the government’s sooner-than-expected reopening of the country after the vaccination rollout has seen faster progress.
Nattaporn Triratanasirikul, KResearch assistant managing director, said the relaxation of lockdown restrictions and the country’s reopening — launching sooner than previously projected – has also prompted KResearch to raise its projection of international tourist arrivals this year to 180,000, slightly higher than the prior estimate of 150,000.
However, the recent flooding and soaring cost of living amid a spike in oil prices, as well as the risk of a Covid-19 resurgence after the country’s reopening on Nov 1, all continue to inhibit the economic growth projection for 2021, Ms Nattaporn added.
Kevalin Wangpichayasuk, another KResearch assistant managing director, said the impact of floods on the economy will primarily be felt in 2021. Flooding during September-October is expected to damage approximately 6-7 million rai of farmland.
Non-agricultural sectors, particularly the service sector, plus daily wage workers, have also been affected by the suspension of business due to the flooding, which impacted areas in over 30 provinces across the country.
Given these factors, related economic losses are projected to reach roughly 25 billion baht, amounting to 0.16% of GDP. This estimate has been factored into KResearch’s 2021 economic growth forecast.
For 2022, Ms Nattaporn views that the economy may grow 3.7% as the vaccination rate is projected to exceed 70% of the total population, allowing the government to lift lockdown measures while more businesses can resume activities. The economic recovery next year is still limited by the impact of the prolonged pandemic.
Strong exports represent another positive factor for the economy next year, while household spending will likely rebound, thanks to the low base of 2021. Households may be ready to release their pent-up demand, following the lockdown, despite possible risks stemming from high energy costs and inflation.
The centre has projected the number of international tourists at 2 million next year.
It expects inflation for 2022 to be 1.6%, provided that global oil prices do not surge above US$100 per barrel for a prolonged period.
Regarding the impact of high oil prices on business in 2021, Ms Kevalin views that, if diesel prices remain within the range of 25.0-29.2 baht per litre for the rest of this year, production costs of the business sector will increase by 0.55-0.73%, while transport costs will rise by 0.33-0.44%. Based on these rising costs, businesses are estimated to have to bear an average cost increase of 1%.