Thailand is expected to record subdued economic growth again this year, clouded by external uncertainties, with the 2020 budget debacle having the most negative effect, says Talis Asset Management.
Southeast Asia's second-largest economy is projected to expand by a mere 1.9% this year as a delay in fiscal 2020 budget disbursement takes a toll on attempts to stimulate domestic economic growth, said chief executive Chatrapee Tantixalerm.
"Fiscal 2020 budget disbursement, injecting capital into several public investment projects, is the only hope to drive Thailand's GDP growth, but the disbursement process continues to be delayed," Mr Chatrapee said.
The annual budget for fiscal 2020 was due to start on Oct 1, 2019 but was hampered by the lengthy government installation and legislative process.
The budget bill likely faces further delay because the validity of the bill rests on a court ruling after some lawmakers' ID cards were allegedly used during the vote in the lower chamber while the legislators themselves were absent.
Drought conditions and the fragile stability of the coalition government add to the internal headwinds for Thailand's growth prospects in 2020, Mr Chatrapee said.
External negative factors denting economic growth include the coronavirus outbreak, the Sino-US trade dispute and geopolitical conflict between Iran and the US, he said.
With a host of internal and external uncertainties, Thailand's economy is expected to expand by a mere 1.9% in 2020, according to Talis Asset Management.
The economy grew by 2.5% for the January-to-September period of 2019, dampened by an export slump that stemmed from the global economic slowdown and US-China trade tensions, elevated household debt weighing on domestic consumption, and weak investment after a months-long delay in annual budget spending for fiscal 2020.
The World Bank has warned that Thailand's average annual economic growth will be stuck below 3% if there is no significant increase in investment and productivity growth.
As the baht's value against the US dollar continues to be strong and fiscal 2020 budget disbursement is delayed, the Bank of Thailand's Monetary Policy Committee could make another rate cut at this year's first meeting on Feb 5, said Talis chief investment officer Prapas Tonpibulsak.
"A 25-basis-point cut in the benchmark rate usually induces the Stock Exchange of Thailand index to rise by 70-80 points," Mr Prapas said. "However, since SET-listed firms' aggregate net profit is forecast to decline by 4% this year, this would deduct the positive effect from the rate cut by 0.25%."