K-Research predicts 2020 GDP growth of 2.5-3%

K-Research predicts 2020 GDP growth of 2.5-3%

The GDP growth forecast for 2020 has been set at 2.5-3% by Kasikorn Research Center (K-Research), compared with 2.8% growth seen this year.

K-Research said the country needs additional stimulus to meet the upper edge of the estimated range.

The 2020 economic outlook will likely suffer from external risk factors, particularly the US-China trade war and further dampening of exports.

Amid this gloomy sentiment, the research house predicts Thailand's exports to contract 2% next year, said assistant managing director Nattaporn Triratanasirikul.

"Fiscal policy should be the key instrument to support economic momentum while global uncertainties remain," Ms Nattaporn said. "Additional stimulus packages would help the economy to grow by 3% next year. Otherwise it would be below 3%."

Measures should be targeted towards small and medium-sized enterprises that are affected by the trade war, especially those reliant on exports, she said. These industries could see a higher lay-off rate, which was 4.5% in July, up from 2.8% in April and 1.9% in January.

Ms Nattaporn said the government should resume its soft-loan schemes for SMEs in order to ease the financial burden of this business segment and slow down staff lay-offs.

The government's 1,000-baht "Eat, Shop, Spend" handout scheme is expected to increase 2019 GDP growth by 0.02%.

The total budget for the scheme is 19 billion baht, of which 10 billion baht is handed directly to consumers. But with a relatively small budget and limited time for the package, the scheme will only marginally contribute to GDP growth.

K-Research slashed its 2019 GDP growth forecast from an earlier projection of 3.1% to 2.8% because the US-China trade dispute intensified.

The research house also cut its export growth outlook from zero to a 1% contraction for this year after shipments shrank 2.2% year-on-year in the first eight months.

Increased US tariffs could cost global exporters in 2020 as much as US$300 billion, of which $1-2.5 billion would affect Thai exports directly. Under this scenario, K-Research has cut its Thai export outlook to a 2% contraction next year, Ms Nattaporn said.

In addition, the baht is expected to remain firm until the first quarter of next year under a short-term assumption, she said. The country's current account surplus is the key factor strengthening the baht, which is seen at 30.50 to the US dollar by year-end.

K-Research estimates that the US Federal Reserve and the Bank of Thailand will each cut the policy rate one more time this year and once more next year, with Thailand's rate falling to 1% in 2020.

If the Fed cuts the policy rate one time next year and stops easing, this will support a stronger dollar and weaken the baht, Ms Nattaporn said.

The government must continue to monitor the situation, she said.

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