Kasikorn Research Center (K-Research) has slashed its forecast for Thai economic growth this year to 2.5%, mainly as a result of the Russia-Ukraine war.
The centre's base case scenario sees the war continuing in some areas, with possible negotiations between the two countries. K-Research forecasts Thailand’s 2022 GDP growth rate to be 2.5% in this scenario, declining from the previous projection of 3.7%.
In this scenario, the average Dubai crude oil price is expected be around US$105 per barrel this year, said Nattaporn Triratanasirikul, assistant managing director of the research house.
If Russia-Ukraine negotiations conclude in the third quarter of this year, the research centre forecasts Thai GDP growth of 2.9%, with the Dubai crude oil price at $90 per barrel on average for 2022.
The Russia-Ukraine war will continue to drive up energy prices and inflation worldwide, including Thailand, K-Research said. The centre estimates the country’s inflation rate will reach 4.5% this year under a base case scenario.
Thailand’s diesel price could rise above 30 baht per litre in the second half of this year after the end of the government’s subsidy, Ms Nattaporn said.
The government has decided to maintain the cap on diesel prices at 30 baht a litre using subsidies from the Oil Fund until the end of May.
Kevalin Wangpichayasuk, also an assistant managing director of K-Research, said higher fuel prices as a result of the war are estimated to have pushed up the operating costs of Thai businesses by 80 billion baht, especially in the manufacturing sector. The impact differs from industry to industry, depending on the energy expenses of each sector, while some of the higher costs will be passed on to consumers.
The Russia-Ukraine war will also hurt Thailand’s tourism industry, as the number of Russian and European travellers coming to the country is expected to decline. However, this will be offset by foreign tourists from other regions, especially from Asia and neighbouring countries. K-Research has maintained its existing projection of foreign tourist arrivals for this year at 4 million.
However, declining Russian and European tourist numbers will lower the overall spending of visitors by around 50 billion baht this year, Ms Kevalin said.
In addition, the research centre said the war and the sanctions on Russia by the West will continue to affect money markets across the world. The risk factor would also impact the foreign exchange rate and weaken the baht’s rate to the US dollar. The Thai currency is expected to be around 34 baht per dollar by the end of this year.