Economic growth of Thailand has declined by 3.3% year on year during the 3rd quarter from 4.6% in the 2nd quarter. Even if the tourism sector that includes hotels, luxury spa in Sukhumvit, bars and restaurants remains strong, the escalating tensions between the United States and China as well as the poor investment outlook is expected to further weaken economic growth over the coming months.
Trade challenges brought about by the tensions between the US and China have escalated since June 2018. Tourism is also affected because of the concerns of the Chinese regarding their safety. According to Fitch Solutions, the export-oriented manufacturing sector of Thailand will bear the brunt of China’s economic meltdown.
There are also predictions that the Chinese economy will be severely affected by increased US protectionism. At present, Thailand’s manufacturing sector is facing some challenges due to the maturing electronics cycle. Since China is Thailand’s largest export destination, it is very likely for the manufacturing sector to be quite cautious with their production capacity particularly since they are facing difficulty in clearing their existing inventory.
However, growth in the US is expected to slow down in 2019 because of the fading fiscal stimulus, the tightening of credit conditions and trade tensions with other countries. The US is the second biggest shipment destination for Thai products accounting for at least 11.1% overall exports.
Fitch Solutions expects developers to be more vigilant when embarking on new projects because macro-prudential measures like higher loan-to-value requirements are likely tobe imposed by Thai authorities so that they can prevent speculations in the housing market.
Another big risk to Thailand’s continued economic expansion is political instability. However, the coming elections and the sustained growth in private consumption can provide support to the economy’s subdued growth prospects. Inflation is still low and consumers remain confident of the economy.
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