Political stability still in doubt ahead of expected stimulus

Political stability still in doubt ahead of expected stimulus

Revving up consumer spending is one of the targeted measures likely to continue under the newly installed government, according to SCB analysts. (Photo by Wichan Charoenkiatpakul)
Revving up consumer spending is one of the targeted measures likely to continue under the newly installed government, according to SCB analysts. (Photo by Wichan Charoenkiatpakul)

Economic policies aimed at stimulating domestic consumption are expected to materialise soon, but long-term government stability still poses uncertainty for investment sentiment, says a banking executive.

Previous economic policies enacted under the military-led government are likely to continue under the new administration, with MPs from the Palang Pracharath Party taking the helm of important ministries in charge of economic affairs, said Sathit Pongtanya, first senior vice-president for the family office business at Siam Commercial Bank (SCB).

Such policies will help support investment sentiment in Thailand's capital market, Mr Sathit said.

"The new government will try hard to shore up economic growth through domestic consumption and government spending, since global factors remain full of uncertainty," he said.

Although government stability is expected to remain intact during the first six months, long-term stability is difficult to predict, Mr Sathit said.

Increased investment in the Eastern Economic Corridor and other infrastructure projects, liquidity injections for farmers, minimum wage hikes and income tax deductions are measures anticipated from the government to stimulate economic growth, said Sukit Udomsirikul, managing director of SCB Securities (SCBS).

But the upcoming 15% withholding tax imposed on fixed-income funds is set to discourage investment in debt securities amid the low-interest-rate environment, Mr Sukit said.

Meanwhile, offshore fund flows are expected to continue moving into the country's capital markets as confidence is boosted by clearer domestic politics after the new government took office, he said.

Revving up consumer spending is among the targeted measures poised to be continued under the new government, says SCB. SEKSAN ROJJANAMETAKUN

The local stock market is regarded as having a low risk of exposure to the Sino-US trade dispute, Mr Sukit said, while forecast adjustments of SET-listed firms' results are drawing to a close.

The Stock Exchange of Thailand index is projected to move in a range of 1,700-1,750 points in the second half, based on a GDP growth forecast of 3.1% this year, according to SCBS.

Looser monetary policies worldwide and the protracted Sino-US trade dispute will chiefly determine the second-half investment outlook, according to SCB analysts.

Despite a recent truce, the US-China trade spat is not expected to end soon and US President Donald Trump is likely to use the dispute as a political tool to enhance his popularity before the 2020 presidential election, said Sornchai Suneta, executive vice-president of SCB CIO Office.

Mr Trump made a recent threat to impose additional tariffs on Chinese imports if a deal brokered with China fails.

Global central banks are poised to embark on loosened monetary policies to shore up economic growth momentum while maintaining policy space to prevent adverse effects on foreign exchange rates, Mr Sornchai said.

The US Federal Reserve is expected to cut its policy rate twice this year in order to hedge against a possible recession, he said.

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