Global economy – Thailand 2023, the year of uncertainty

Dr. Saowanee Chantapong, Senior Specialist Macroeconomic Department Bank of Thailand

Presenting the Thai economic outlook and risks in 2023 so that all sectors are prepared to deal with the uncertainties ahead. The Thai economy in 2023 continues to recover due to the momentum of tourism. but began to see signs of vulnerability exports due to the economic slowdown of major trading partners The Thai economy in 2022 is expected to expand by 3.2%, up from 1.5% in 2021. The inflation rate is 6.3% and the current account deficit is 3.3% of GDP. For the Thai economy in 2023, the BOT expected to grow by 3.7%, in line with the NESDB (3.0% – 4.0%), the Thai Chamber of Commerce (3.5%-4.0%) and the IMF (3.7%), but still lower than the ASEAN-5 average growth of 4.9% amid COVID-19 crisis The export sector is still the main driver of the Thai economy in a strong situation. Driven by tourism halts after the COVID-19 subsides, the tourism sector is expected to recover. This can help boost the economy again, but the number of foreign tourists is still not as high as before COVID-19. In 2022, it is expected that there will be no more than 10 million foreign tourists as the target and in 2023, The TAT estimates that there will be 11-30 million foreign tourists, with the base year being 18 million. Increased geopolitical tensions

It is expected that in 2023, tourism income will return to support The export sector is the same as in the past. However, it is still a concern for the direction of Thai exports in 2023 if delving into the latest data on the situation. Thailand’s international trade for the 10 months of 2022 was found to be worth 243.1 Bil USD, an increase of 9.1% compared to the previous year (%YoY). Signs of slowdown in the EU market (market share 7.9%), slow growth in Japan market (8.6%), and start to shrink in China market (12%) respectively (Figure F.1) when Analyzed in 2/3 product categories, it was found that Agricultural products and agro-industry, which are essential goods for life and are important factors of production, continue to perform well. Especially food groups such as rice, meat and frozen processed products, and canned and processed seafood, etc.

but export products Durable began to show some signs of contraction in the automobile category. and parts and computer equipment as a result of the global economic slowdown. High inflation, especially in major economies and an upward trend in interest rates, which affects income and lower consumer confidence. Thai exports in 2023 will grow 1% from 2022. However, the author estimates that export capacity of Thailand considering that the value is still at the same level as before the COVID-19 crisis. at an average of 220 Bil USD (2015-2019) looking ahead, according to the JCER/Nikkei Consensus Survey.

Recently, as of September 2022, it was stated that the number 1 risk to the Thai economy in the next 12 months is the slowdown in China. Which has a worrying level of risk with Score = 75 from the highest = 100, followed by the US economic slowdown (60) and the problem of inflation (50), which dropped to 3rd place from being in 1st place this time Survey as of Jun 2022 (Figure F.2). Interest rate increase in major economies. Volatile global financial markets signal increased financial stability risks. including capital outflows US policy interest rates that are rising in line with monetary policy normalization and the value of the US dollar (see WSJ dollar index) are on the rise, raising concerns from many that the currency volatility bond market and equities in emerging markets (EMs), as was the case with the end of quantitative easing (QE tapering) in 2013. This scenario differs from that of QE tapering-2013, where EMs face additional risks from (1) rising global commodity and food prices, putting pressure on (2) the geopolitical issues of the protracted Russo-Ukraine War; and (3) the Fed, the ECB, and other major central banks raised their policy rates faster and more aggressively than the QE tapering cycle. -2013 As a result, most EMs’ currencies depreciated against the US dollar and began to see Investment in international securities (FPT) began to flow out of the EMs, reflected by the MSCI emerging markets index that tended to continue to decline.

This is in line with the view of the IIF Institute (November 8, 22) indicating that the demand for local currency bonds of EMs countries tends to decrease (weaker outlook) to invest in other sources This is partly due to the 3/3 rate of 10-year US government bond yields that are likely to increase since the beginning of 2022 (Figure F.3) and (4) emergency spending and economic stimulus during the COVID-19 crisis. at a high level, causing some countries EMs to face debt problems and Increased budget deficit If interest rates are high both domestically and internationally, it will cause make the loan Higher costs In the case of Thailand, the author estimates that the risk of a financial crisis is limited.

because of the financial market Thailand has a certain level of flexibility to withstand shocks from volatility. from the financial stability obtained Lessons from the 1997 Financial Crisis Developing and Implementing a Flexible Exchange Rate System Including having a high level of international reserves at 228.2 Bil USD or 3 times the short-term external debt and 8 months of the value of imported goods and services. Potential investments in 2023 already mentioned above.

The author hopes that all sectors will help build self-immunity by “exporters” should increase productivity. produce products that match According to the market demand and environmentally friendly, reducing costs, finding new markets and using insurance tools exchange rate risk. “Investors” should diversify their investment risks in terms of industry type, asset type, and country of investment. “Labor” should develop their skills. educated and healthy in order to have jobs and higher incomes and have a social security system to protect And believe that we will all survive the uncertainty in 2023 together! ————————————-

This article is a personal opinion. which is not necessarily consistent with the opinions of the Bank of Thailand

References: Gita Gopinath, Pierre-Olivier Gourinchas (2022), How Countries Should Respond to the Strong Dollar, IMF blog (Exchange rate), 14 Oct 2022 Jonathan Fortun (2022), IIF Capital Flows Tracker – October 2022 Zig Zagging, 8 Nov 2022 Patricia Buckley and Akrur Barua (2022), Does Monetary Tightening in Advanced Economies Spell Trouble for Emerging Markets?, Deloitte Insight, 11 Nov 2022 Rurika Imahashi (2022), ASEAN Economies Seen Hit by U.S. Rate Hikes in 2023: JCER/Nikkei , Nikkei, 3 Oct 2022 Ministry of Commerce (2022), Thailand’s International Trade Press Conference in October and 10 months of 2022, 28 Nov 2022 Digital Economy Base (2022), TAT pushes tourism in 2023 LO 5 world draws 30 million tourists, pumps income 2.38 trillion, Nov 3, 2022 Office of the National Economic and Social Development Council (2022), Gross Domestic Product Quarter 3/2022, 21 Nov 2022 Office of the National Economic and Social Development Council (2022), NESDC Economic Report Thai Economy in the Third Quarter of 2022 and Outlook 2022-2023, Nov 21, 2022

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