Prospects for the global economy should improve in 2017 despite the fragile recovery, says Siam Commercial Bank's research unit.
Sutapa Amornvivat, chief economist and first executive vice-president of SCB's Economic Intelligence Center, said the EIC expects global economic growth to improve from last year, led by expansion in major economies such as the US and Japan.
The recovery is still considered vulnerable because of troubles in the financial sectors of Europe and China, as well as uncertainty in Europe over Brexit and upcoming elections in many countries. In addition, the world faces risks from the US Federal Reserve's interest rate hike and changes in US economic policies.
All eyes are on US President Donald Trump's economic policy and its potential impact on the global economy and Thai exporters. Mr Trump's economic leanings are likely to diverge from past US policy.
Domestically, the use of fiscal policy to stimulate growth will have a positive impact on the US economy, said the EIC. But Mr Trump's scepticism of free trade is likely to lead to more harm than good, it added.
In the worst case scenario, American protectionism, if implemented full-steam, may cause its major trade partners such as China to retaliate, leading to a trade war, said the EIC.
Such a scenario would have adverse effects on many countries, including the US. As the Thai economy is heavily dependent on exports, it would be greatly affected.
As part of the supply chain of China's exports to the US, Thailand's midstream manufacturing industries, including electronic parts, basic plastics, and furniture wood, would be especially vulnerable. And despite a growth projection for exports in line with rising oil prices, the EIC views protectionism as a major obstacle.
The research house forecasts 3.3% year-on-year growth for the Thai economy in 2017, driven mainly by domestic spending. The clampdown on zero-dollar illegal tour operations started last year will continue to exert pressure on the tourism sector.
More recently floods in the South have led to approximately 50 billion baht in business revenue losses.
Household spending is likely to pick up, following the recovery of commodities prices and higher income for exporters and agricultural producers.
The expiration of the first-time car buyer scheme and lower income tax thanks to the new tax structure will also help reduce some households' expenses, said the EIC.
Public spending is likely to swell because of more investments in mega-projects, it said. The EIC expects mega-project spending to double from last year.
The economy may also benefit from other stimulus measures to be rolled out by the government, particularly the 1.9-trillion-baht fund expected to be disbursed this year to boost economic growth at the community level.
The EIC projects private investment to continue to slow this year.