The Phuket News Novosti Phuket Khao Phuket

Login | Create Account | Search

SCB sees stagflation for Thailand economy

BANGKOK: Thailand’s economy has gone into stagflation because of a fragile recovery and surging price hikes, says an economist at the Economic Intelligence Center (EIC), a research unit under Siam Commercial Bank (SCB).

By Bangkok Post

Wednesday 30 March 2022, 09:41AM

A woman shops at a market in Bangkok on March 15. A higher inflation rate in Thailand may cause domestic spending to recover slower than the EIC previously forecast. Photo: Varuth Hirunyatheb / Bangkok Post

A woman shops at a market in Bangkok on March 15. A higher inflation rate in Thailand may cause domestic spending to recover slower than the EIC previously forecast. Photo: Varuth Hirunyatheb / Bangkok Post

The EIC downgraded its 2022 economic growth forecast for Thailand to 2.7% from 3.2%. The revision was attributed to the Russia-Ukraine war, which sent energy and commodity prices soaring, reports the Bangkok Post.

Thailand’s annual average headline inflation rate is expected to jump to a 14-year high of 4.9% this year, rising significantly from a previous forecast of 1.6%, said Yunyong Thaicharoen, SCB’s chief wholesale banking officer and an economist at the EIC.

Under a base-case scenario that sees the Ukraine war ending in the second half of this year, the Brent crude oil price would be at an average of US$110 per barrel this year.

If the war lasts to the end of this year, leading to an energy supply shock, the average oil price would be $133, said the EIC.

For Thailand, the higher inflation rate will cause domestic spending to recover slower than EIC previously forecast, said the centre.

In particular, private consumption will be adversely affected by a decline in household purchasing power on the back of surging fuel and food prices, alongside a sluggish rebound in wages, which are currently falling behind rising living costs.

“Higher costs and falling profit margins will pressure firms to raise common product prices, passing on rising costs to consumers. In this scenario, lower-income earners would be hurt,” Mr Yunyong said.

Thai Residential

Given the weak Thai economic rebound amid several external risk factors, the country’s recovery to pre-pandemic levels will be delayed to the third quarter of next year, he said.

Mr Yunyong said the Russia-Ukraine war would also result in lower numbers of Russian and European tourists visiting Thailand, though this would partially be offset by Asian and Asean travellers.

The EIC slightly reduced its foreign tourist arrival projection for this year from 5.9 million  to 5.7mn, providing the country with annual tourism income of B300 billion.

Even though the country’s headline inflation rate could exceed the Bank of Thailand’s target range of 1-3% this year, the EIC expects the central bank’s Monetary Policy Committee to maintain the policy rate at 0.5% throughout 2022. This is because the central bank is expected to focus on measures to support economic growth.

Based on external uncertainties and money market volatility, the baht is expected to depreciate to around 33.5-34 against the US dollar in the short term, according to EIC.

“The baht will rebound slightly to 32.5-33.5 against the greenback in late 2022 as a promising tourism recovery will help improve the current account balance,” said Mr Yunyong.

Comment on this story

* Please login to comment. If you do not have an account please register below by simply entering a username, password and email address. You can still leave your comment below at the same time.


Be the first to comment.


Have a news tip-off? Click here


Phuket community
Helicopter to join search for German tourist

JohnC@ very insensitive comment especially as she has now been safe Thai’s are very caring towards...(Read More)

Missing German tourist found safe

Fantastic news pleased for the family, if she is an Alzheimer’s sufferer as has been reported they...(Read More)

Ukrainians arrested in Phuket, face extradition for offences in US

This cannot be real. Western MSM is saying all Ukrainians are angels. There must be some mistake...(Read More)

Missing German tourist found safe

What did she eat and drink for a week?...(Read More)

Phuket Immigration seeks expat volunteers

@DeKaaskopp. What you said is the same as what was said about slaves....(Read More)

Helicopter to join search for German tourist

@JohnC No need to doubt anymore. Hope you can sleep better now....(Read More)

Violence clouds Jerusalem funeral of Al Jazeera journalist

Somehow Israel must have a "carte blanche" to do whatever they want. Annexation of land an...(Read More)

Pandemic, or Endemic Epidemic? It’s all Academic!

Great article! Really a to the point comment. A fine enlighting how Thai softening their wrong doing...(Read More)

Female students face police over vicious attack on 11-year-old

Too many feral children here without parental control. Be it fights, riding crazy on motorbikes or j...(Read More)