Due to the effects of Russia's war in Ukraine and a slowdown in China on the global economy, Thailand's main economic forecasting organization decreased its growth prediction for this year and upped inflation expectations.
The National Economic and Social Development Council forecasted a 2.5 percent to 3.5 percent increase in gross domestic product on Tuesday, down a full percentage point from its previous forecast.At a press conference, NESDC Secretary-General Danucha Pichayanan remarked, "The greatest issue right now is the crisis between Russia and Ukraine, which has a chain-reaction effect." "The Covid epidemic in China, which is one of Thailand's biggest export markets, is also a worry."
The slower full-year prognosis contrasts with a better-than-expected performance in the previous quarter, which was boosted by increased tourist arrivals and exports. According to the NESDC, GDP increased 2.2 percent from a year earlier in the three months ending March, outpacing the 1.7 percent median estimate in a Bloomberg survey and the 1.8 percent gain in the previous quarter.
Following the GDP figures, the baht rose 0.5 percent versus the dollar, while the country's benchmark stock index rose 1.2 percent, according to Bloomberg statistics. The 10-year government bond yield increased 8 basis points to 3.39 percent, the highest level since 2014.The findings come as the Bank of Thailand deals with consumer prices that have risen faster than its goal range of 1% to 3% since January. From India to Malaysia, central banks have moved to abandon cheap money policies in order to combat inflation rather than boost economic growth.Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said the full-year growth drop is "substantial" and "shows to a heightened feeling of caution among policymakers." The Bank of Thailand, on the other hand, "will not join the bandwagon of regional central banks shifting toward normalization, and we continue to expect it to maintain its policy rate steady throughout this year as it prioritizes supporting the economy."
The council increased its headline inflation projection for this year to 4.2 percent-5.2 percent, up from 1.5 percent-2.5 percent in February, while forecasting a current account deficit of 1.5 percent of GDP, down from 1.5 percent previously.
It also stated that GDP increased by 1.1 percent in the first quarter compared to the previous three months, versus the 0.9 percent rise forecast in the survey.
"Today's numbers reinforce our belief that services will become an increasingly important driver of development this year, helped by a modest recovery in tourism," said Sian Fenner, senior Asia economist at Oxford Economics Ltd. in Singapore. "However, the prognosis is facing increasing challenges, especially in the short term." The recovery in household spending will be hampered by higher inflation, while goods export momentum will be moderated due to the Russia-Ukraine conflict and China lockdowns."
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