Thailand
Thailand: KBank raises concerns over investment risk
Kasikornbank (KBank) will trim its 2019 economic growth forecast because of a global economic slowdown and the possibility of lukewarm private investment if there is a lengthy process forming a new government.
“We will cut our economic growth forecast soon, as many risks are present and this could dent growth,” said Kobsidthi Silpachai, head of capital markets research at KBank.
The bank predicts the economy to expand by 4%, assuming that merchandise shipments grow by 4.5%, investment rises 5%, inflation registers 0.8% and the baht stands at 33 to the US dollar by year-end.
The Bank of Thailand recently cut its 2019 growth forecast to 3.8% from 4% amid sluggish export demand, while the Fiscal Policy Office is expected to slash its growth projection in April from 4%.
The declining market share of China’s yuan in global trade to 1.85% from 2.15% in the past indicates how global trade is ebbing, Mr Kobsidthi said.
Although Thailand and Vietnam are expected to gain from the US-China trade spat because both countries stand to benefit from Chinese manufacturers’ relocation, such benefits are unlikely to outstrip cooling global trade, he said.
Apart from the GDP forecast, the private investment growth estimate is expected to be revised down by the bank because the Eastern Economic Corridor carries a great deal of weight in the current forecasts.
“Investors may be more wary about the investment plan if the establishment of the government remains unclear,” Mr Kobsidthi said, noting that the scenario has prompted the bank to cut its private investment growth forecast.
He said the baht has a downward bias in the near future, pressured by cooling global trade, local political factors and dividend repatriation of Japanese and Thai listed firms during March and April.
Praipol Koomsup, a former member of the Bank of Thailand’s Monetary Policy Committee, said instability in the new government is expected regardless of which political parties take the lead in formation.
If the Palang Pracharath Party manages to form a new government, the camp could amass just above 250 parliament member seats, which are at risk when it faces a no-confidence debate.
For a coalition government led by the Pheu Thai Party, it would not be easy for a prime minister nominated by the party to win support from the 250 regime-appointed senators, Mr Praipol said.
Aside from political stability, populist policies promised by political parties during the election campaign could be added to public debt and fiscal liability, he said.
He forecasts the policy rate to remain steady this year because of a series of cuts in economic growth forecasts and political uncertainty in the wake of the election.
Source: https://www.bangkokpost.com/business/news/1652796/kbank-raises-concerns-over-investment-risk