A view of Bangkok, the capital city of Thailand (Source: oneyoungworld.com) Hanoi (VNA) - Thailand's economy isforecast for clear recovery momentum in 2022 as domestic demand will remain weakin 2021, says CIMB Thai Bank (CIMBT).
"Thailand may only post a recovery next year inthe export sector because domestic demand remains weak and has sluggishprospects, especially for small businesses that face tepid sales growth,"said Amonthep Chawla, head of research at CIMBT, as quoted by the Bangkok Post.
"Higher non-performing loans could causecommercial banks to be more cautious on business loan approvals. Moreover,swelling household debt is making people more reserved on spending becauseworking hours have not returned to normal, causing income to remain lower thanbefore the pandemic."
The ratio of household debt-to-GDP in the secondquarter ballooned to 84 percent, an 18-year high. The ratio was an increasefrom 80 percent of GDP registered in the first quarter.
The rising household debt-to-GDP ratio and the slowrecovery in income will delay the deleveraging process, which together couldhave an adverse impact on consumption and economic growth in the medium term,according to the latest edited minutes of the Bank of Thailand's MonetaryPolicy Committee.
In addition to fragile domestic demand, anotherdownside affecting the economic recovery momentum is the baht's strengtheningvalue against the US dollar, said Amonthep. The firmer baht affects the valueof merchandise exports.
The baht appreciation stems from two main factors. The first is Thailand's trade surplus, with imports seeing slow growth as privateinvestment recovers at a weak pace. The country's current account surplus, which represents acountry's imports and exports of goods and services, payments made to foreigninvestors and transfers, could make the baht appreciate at a faster pace in2021, said Amonthep.
The second factor is substantial net offshore inflowsmoving into Thailand's capital market from an abundance of funds in the USfinancial market, caused by the Federal Reserve's loose monetary policy. Theseinflows are identified as hot money or offshore investment seeking short-termgains through foreign exchange, interest rates and low inflation. Inflows intoemerging market economies could re-emerge similar to 2008 when the Fedimplemented a quantitative easing to offset the financial crisis, he said./.
VNA
