No products in the basket.
SCB EIC sees little impact of Israeli-Palestinian war on the Thai economy
According to SCB EIC’s analysis, the current Israeli-Palestinian conflict is not expected to have a significant impact on the Thai economy in terms of tourism and merchandise exports.
Key Takeaways
- The global economy is experiencing a slowdown, led by a contraction in the service sector and a slower expansion in the manufacturing sector, with the US economy showing clear signs of slowing down in the fourth quarter.
- The global inflation rate is expected to accelerate in the coming years, with central banks in the US, Europe, and the UK keeping interest rates high until mid-2024 before gradually reducing them in the latter half of the year.
- Thailand’s economy is expected to recover through private consumption and the service sector, driven by an increase in international tourists from ASEAN, East Asia, and Europe, as well as a resurgence in Thai domestic tourism, while exports are also expected to rebound in the fourth quarter.
The global economy is currently experiencing a gradual expansion. Inflation rates in major economies may vary, with some experiencing a decrease while others remain high. Thailand’s economy is expected to recover through private consumption and services, although there may be some impact from the Israel-Palestine conflict.
Thai economic trends
The Thai economy is expected to experience a recovery primarily driven by private consumption and the service sector. It is anticipated that there will be an increase in the number of foreign tourists visiting Thailand in the fourth quarter, particularly from ASEAN, East Asia, and Europe.
The growth in the number of foreign tourists was slower than expected due to the loss of confidence of some Chinese tourists and the impact of the escalating war in Israel. However, domestic travel among Thai tourists is expected to remain at a high level.
Exports are expected to expand further
Additionally, there are signs of recovery in the export of Thai products, which is expected to expand further in the fourth quarter due to increased prices of export products, depending on the El Niño condition. The prices of energy-related export products are higher, and there is a low base factor contributing to this outcome.
Inflation in Thailand is expected to accelerate
Inflation in Thailand is expected to accelerate, influenced by factors such as drought, limited agricultural exports, and OPEC+ production cuts. The interest rate policy in Thailand is predicted to remain at the current level of 2.5% throughout next year, supporting the stability of the financial sector. The Thai baht is expected to strengthen against the US dollar due to the country’s economic recovery and the looser monetary policy of the Federal Reserve.
Thailand’s policy interest rate
According to SCB EIC, it is anticipated that the policy interest rate in Thailand will remain at its current level of 2.5% throughout the upcoming year. This is due to the belief that the current rate is suitable for maintaining stable economic growth over the long term (neutral rate) while also aligning with the projected inflation trend for the upcoming period, which is expected to accelerate.
Due to the war in Israel, global oil and safe asset prices surged. However, the value of the baht was not significantly impacted as the Federal Reserve made dovish comments and capital inflows returned to the Thai bond market.
Discover more from Thailand Business News
Subscribe to get the latest posts sent to your email.
