SCB EIC revises its 69 GDP growth forecast upward to 2%, and expects the Monetary Policy Committee to keep interest rates unchanged for the entire year.

SCB EIC has revised its GDP growth forecast for Thailand in 2569 upwards to 2%, benefiting from falling global oil prices, but warns that the country's internal structure remains fragile. It expects the Monetary Policy Committee to keep interest rates at 1% throughout the year, but remains concerned about tightening fiscal policy and challenges from volatile fund flows.

On June 23, 69, Dr. Yanyong Thaicharoen, Chief Research Officer for Economic and Sustainability at SCB Economic and Business Research Center (SCB EIC), revealed that SCB EIC has revised its forecast for Thailand's GDP growth in 2569 upwards from 1.7% to 2%. Looking back to the past 2-3 months, amidst the tensions from the world war and the Middle East, many were concerned that the Thai economy would be severely impacted.

However, the situation later eased with the signing of an MOU between the United States and Iran, resulting in a rapid correction in global oil prices. This helped alleviate pressure on the Thai economy, which is heavily reliant on imported energy. In addition, important supporting factors included government measures and the 400,000 billion baht emergency decree, which helped to stabilize the economy.

"Although we've revised our forecast for Thailand's economic growth this year upwards to 2%, the overall trend remains weak compared to past average growth of 2.5–3%. Next year, we predict a slowdown to just 1.9%."

A closer look at the quarterly trends this year reveals clear volatility. The first quarter saw strong growth of 2.8%, but the impact became evident in April and May, with the economy expected to slow to just 1.4%. The third quarter is projected to be better, benefiting from the full stimulus package of the government's 400 billion baht emergency decree, which will inject funds throughout the three months.

“The economy will slow down again in the fourth quarter. Overall, without government measures to help, the Thai economy is currently in a very clear downtrend.”*

Highlighting investment opportunities and their "three vulnerabilities".

Dr. Yanyong stated that the private sector continues to experience growth in private investment and exports, particularly in the machinery and mechanical equipment sector, which aligns with the accelerated number of investment promotion applications from the BOI. However, the majority of the investment is concentrated in high-tech sectors such as AI-related technologies, data centers, and semiconductors, with the main sources of funding coming from Singapore and Chinese investors.

This could lead to the fragility of Thailand's economic structure, particularly the concentration of growth. Growth is seen primarily in the high-tech sector and exports to niche markets such as the United States. However, these businesses have a very high dependence on imports and limited supply chain connections with domestic businesses.

Information from the Ministry of Commerce It clearly indicates that The list of Thailand's technology exporters is highly concentrated. The majority of exporters, approximately 105 companies, are dominated by just 17 of the largest, accounting for as much as 85% of the total export value. This results in the 2% GDP benefit not being distributed to other economic sectors, particularly the vulnerable real estate and automotive sectors that rely heavily on domestic purchasing power.

In addition The vulnerability of Thai households and SMEs stems from the fact that they are still caught in the debt reduction process (Deleveraging Process). Although the survey found that... People are trying to adjust by reducing expenses and debt, but the challenge is that average income has actually decreased in monetary terms (nominal), while "real wages" (after adjusting for inflation) have yet to return to pre-COVID-19 crisis levels.

“In 2569, real wages are expected to decline again due to inflation accelerating faster than income, leading to lower household resilience. Meanwhile, SME confidence continues to plummet, with fewer new business openings and more closures, facing weaknesses in the labor market such as lower hidden unemployment rates and worsening working hours.”

“Regarding monetary policy, SCB EIC assesses that the Monetary Policy Committee (MPC) will maintain the policy interest rate at 1% throughout the year to help support and keep the economy moving forward. They believe that inflation and the baht exchange rate will remain within manageable ranges, and the Bank of Thailand does not need to raise interest rates to maintain stability like some neighboring countries.”

Dr. Yanyong stated that fiscal space is much more limited compared to the COVID-19 period, as public debt has currently surged to around 67% of GDP and is likely to increase further due to the issuance of additional emergency decrees. This reduces the ability to cope with future economic shocks. Therefore, it is suggested that the government focus on fiscal reform by expanding the tax base, rather than solely on increasing tax rates, while simultaneously improving the efficiency and value of public spending.

Regarding capital flows and the Thai baht exchange rate. Although Thailand has benefited from being part of the AI ​​investment supply chain along with South Korea, Taiwan, and Vietnam, resulting in continuous FDI inflows, external pressures such as the monetary policy of the U.S. Federal Reserve (Fed) and the stance of the new Fed chairman continue to create high volatility.

Things to keep an eye on คือ Thailand's current account balance is trending downwards and there is a risk of it becoming negative this year. This depends on the direction of global oil prices and structural problems, including the influx of imported goods from foreign countries.

"Historically, Thailand often had a current account surplus, boosting liquidity and the stability of the baht, making it a safe haven for investors in the region. However, when the current account surplus begins to lessen or becomes negative, this factor will become a major catalyst for greater volatility in fund flows and the baht exchange rate in the future."

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