K-Research doubts that the Bank of Thailand will keep its rates as it is for at least two more years.
According to Charl Kengchon, manager director of K-Research, was quoted saying that holding interest rates is the most likely move for the Bank of Thailand because the country is currently experiencing subdued inflation. This allows the benchmark rates to stay still in spite of the global economic changes, particularly the impending interest rate hike of the Federal Reserve this December.
The steady interest rate will not hold back growth in Thailand though according to K-Research. Domestic consumption is set to expand by 2.2% while GDP growth is anticipated to be at 3.3% with the good flow of domestic investment. In fact, domestic investment is seen to get better at 4.4% by next year. Meanwhile, exports is predicted to also be a factor in bolstering the Thai economy with an anticipated growth of 0.8%.
The election of incoming President Trump also has effects on Thailand. While the market volatility has been a short-term affair, the long-term effects could come in the form of trade changes. It is a well-known fact that Trump is against TPP or the Trans-Pacific Partnership and foreign direct investment or FDI. This could mean that the ASEAN countries including Thailand, will seek out new opportunities that is looking to be offered by China. This poses as a bit of a conflict as Trump is known to be averse with the Chinese.
Charl Kengchon commented on the matter saying, “Thailand’s FDI, especially from China and Japan, would decelerate in the mid-term, around the next two years, as foreign investors would prefer to wait and get a clearer picture of Mr Trump’s policies. This would have an impact on domestic investment and local business operators and they should prepare for adjustments in line with changes in the global situation.”
Kasikorn Research Center or K-Research is the academic arm of one of Thailand’s leading bank group, Kasikornbank.