The Covid-19 pandemic will prove a greater shock to the Thai economy than we had initially forecast, as external demand collapses and domestic activity
is disrupted by Thailand's own outbreaks and lockdowns. We at Fitch Solutions forecast real GDP to contract by 6.6% in 2020, from growth of 2.4% in 2019.
The economy's structural weaknesses, particularly its reliance on external demand, will be aggravated by the crisis making the contraction deeper than its
regional peers.
Thailand's policymakers are set to enact further stimulus to support the economy amid the Covid-19 pandemic, with monetary policy easing ramped up and fiscal
support to remain loose for longer. The stimulus already enacted will go some way to curbing the size of the growth slowdown but will fail to stop the economy
falling into contraction. Risks stem from potential deflation and further indebtedness within the private sector, souring the outlook for Thailand's longer-term
growth outlook. Monetary easing will likely take a more unconventional approach over the coming months and we have revised our end-2020 policy rate forecast
to 0.50%, reflecting the Bank of Thailand's desire to maintain some policy space. That said, rates will remain low for longer, reflecting the US Fed.
On the fiscal side, we expect the budget deficit to remain wider for longer. As noted, the government has announced stimulus amounting to 9.0% of GDP in
response to the outbreak, and given that the uptake for support payments has surpassed the government's expectations, this could still increase.
We have revised our forecast for the Thai baht spot rate to average THB31.40/USD in 2020, from a year-to-date average THB31.59/USD and a previous fore-
cast of THB32.50/USD. Our view reflects cooling volatility and some correlation with rising gold. That said, the Bank of Thailand will continue to target a baht
depreciation to support its inflation aims.
Major Forecast Changes
We now forecast real GDP to contract in at 6.6% and grow by 3.8% in 2020 and 2021 respectively, revised from our previous forecasts of -5.4% and 4.1%.
Key Risks
The Covid-19 outbreak could weigh on Thailand's external orientated businesses for longer than expected and result in a deeper and more protracted period
of declining economic output.
Thailand Country Risk Q1 2021fitchsolutions.com
Table of Contents
Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Country Risk Summary
- Economic Risk Index
- Political Risk Index
- SWOT
- Economic - SWOT Analysis
- Political - SWOT Analysis
- Opportunities
- Threats
- Economic Outlook
- Economic Growth Outlook
- Thailand's Economic Recovery To Be Held Back By Tourism
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Outlook On External Position
- TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
- TABLE: MAIN EXPORT AND IMPORT PARTNERS IN 2019
- TABLE: MAIN EXPORTS AND IMPORTS IN 2019
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- Monetary Policy
- Thailand To Hold Rates Low For Longer
- Monetary Policy Framework
- TABLE: MONETARY POLICY FORECASTS
- Fiscal Policy And Public Debt Outlook
- Thailand Fiscal Deficit To Remain Wider For Longer
- Structural Fiscal Position
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.Thailand Country Risk Q1 2021ContentsCurrency Forecast
- Near-Term Uncertainties To Weigh On The Thai Baht
- 10-Year Forecast
- The Thai Economy To 2029
- Political Uncertainty The Main Growth Obstacle
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Political Outlook
- Domestic Politics
- Thailand Protests: Four Scenarios For What Could Happen Next
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Uncertainty Ahead Despite Tight Military Grip
- Operational Risk
- TABLE: OPERATIONAL RISK SCORES
- Economic Openness
- Investment Openness
- TABLE: FREE TRADE AGREEMENTS
- TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
- TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
- TABLE: BARRIERS TO FDI
- Utilities Network
- TABLE: ELECTRICITY RISKS
- TABLE: FUEL RISKS
- TABLE: TELECOMMUNICATIONS RISKS
- TABLE: WATER RISKS
- Global Macro Outlook
- Recovery Ahead, But Challenges Remain
- TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
- TABLE: DEVELOPED MARKETS - REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS - REAL GDP GROWTH, % y-o-y
- Index Tables
- TABLE: THAILAND - MACROECONOMIC DATA AND FORECASTS
