Trade row, uncertainty sap business sentiment

Trade row, uncertainty sap business sentiment

Business sentiment remains sapped as enterprises fret over domestic and global economic prospects due to the deepening trade row between the United States and China.
Business sentiment remains sapped as enterprises fret over domestic and global economic prospects due to the deepening trade row between the United States and China.

Business sentiment remains sapped as enterprises fret over domestic and global economic prospects due to the deepening trade row between the United States and China and domestic political instability.

The Thai Chamber of Commerce (TCC) confidence index, a gauge of nationwide business sentiment, dropped for a second straight month in April to 47.8 points from 48.4 in March and 48.5 points in February.

Thanavath Phonvichai, vice-president for research at the University of the Thai Chamber of Commerce (UTCC), said that despite the long holidays in April which were good for tourism, the business sector was still gravely concerned about not just the world's economic outlook -- which was dampened by the intensifying trade row between the two giant economies -- but also by domestic economic prospects amid poor exports and political instability.

Given the spate of negatives, the economy is forecast to grow 2.8-3% in the first half and 3-4% in the second half, ending the whole year with growth of 3.5%, Mr Thanavath said.

"With exports expected to see flat growth or a possible contraction this year due to the deepening trade spat and volatile foreign exchange, tourism is likely the key sector to shore up economic growth this year," he said. "Politics is another factor, and the new government's stability and the continuity of the megaprojects initiated by this government."

The UTCC on May 16 lowered its GDP growth forecast to 3.5% from February's 3.8% view, blaming the deepening US-China trade row's impact on Thai exports.

The cut was attributed to six key risk factors: the intensifying trade war between the US and China; China's slowing economy; baht volatility; domestic political conflict; relatively high non-performing loans at financial institutions and tighter lending approvals; and rising oil prices amid Middle East tensions.

Mr Thanavath said Thailand's economy is considered to be in a downward trend, primarily caused by the trade war. He cited merchandise exports showing signs of a slowdown since the fourth quarter last year; they are expected to stay sluggish until the third quarter this year.

The UTCC forecasts shipments to eke out 0.5% growth this year, down sharply from an earlier forecast of 3.9%, with imports falling 1.4% after a previous projection of 8.7% growth.

Still, Mr Thanavath warned that achieving 0.5% growth in exports would not be an easy task, as Thailand has to fetch an average of $21.25 billion a month and the domestic political situation must stabilise.

In the worst-case scenario, exports may be subject to a contraction of as much as 2.2%, and economic growth could reach 3.3% if the trade war deepens and intensifies.

If the trade spat eases, the political scene calms and investor confidence revives, exports could grow by 2.4% and GDP by 3.7%, he said.

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