Kasikorn Research Center has revised its GDP forecast for 2023 to 3.2%, down from the previous range of 3.2% to 4.2%. This adjustment comes despite an increase in the GDP estimate for the entire year of 2022 from 2.9% to 3.2%.

Ms. Nataporn Treeratnasilkul, Deputy Managing Director of Kasikorn Research Center stated that the global economic slowdown is expected to significantly pressure the recovery of the Thai economy, as both the U.S. and Eurozone economies are likely to stagnate due to interest rate hikes aimed at controlling inflation. Additionally, the energy crisis in Europe is also a contributing factor.

While there is an increasing likelihood that China will reopen its borders in the second quarter of 2023, the situation in China must be closely monitored, including the number of infections, fatalities, and the adequacy of the healthcare system. There remains a possibility of a new wave of outbreaks in China, which could have a cascading effect on economic activities there. Therefore, Kasikorn Research Center maintains a cautious outlook regarding China's reopening, keeping the number of tourists at 22 million and the Thai economic growth forecast for 2023 at 3.2%.

Regarding interest rates, it is anticipated that the Federal Reserve will continue to raise the policy interest rate in the first quarter of 2023, potentially reaching 5.0% or higher, before maintaining high rates throughout the year. Meanwhile, the Bank of Thailand is likely to raise the policy interest rate in two more meetings by 0.25% each, emphasizing that domestic interest rates are also on an upward trend. The Thai baht is expected to appreciate in the first quarter of the year if the Fed proceeds with its planned interest rate hikes, as the market has already priced in this possibility.

 

In the financial sector, the outlook for loans from registered commercial banks in Thailand for 2023 is expected to grow within a limited range of 4.2% to 5.2% (with a midpoint of 4.7%), compared to an anticipated growth of 5.0% this year due to various economic risk factors and uneven business recovery. This cautious outlook is also reflected in the expectations for asset quality in the commercial banking system, which is projected to show little improvement.

The ratio of non-performing loans (NPL) to total loans is expected to remain relatively unchanged from 2022, with NPLs at the end of 2023 projected to be in the range of 2.55% to 2.80%, compared to the expected range of 2.65% to 2.75% at the end of 2022.

Ms. Kewalin Wangpichayasuk, Deputy Managing Director of Kasikorn Research Center stated that the outlook for Thai businesses in 2023 faces multiple challenges. On the cost side, there will be increases in electricity, labor, and interest costs, while on the revenue side, the core global economy is entering a recession and the appreciating baht will dampen demand for Thai exports. Additionally, due to these various factors affecting different types of businesses differently, the recovery of business revenues in 2023 is expected to exhibit a K-shaped pattern, with recovery led by hotels, restaurants, private hospitals, and retail, while sectors such as real estate and exports in electronics and electrical appliances are expected to recover slowly or contract.

Furthermore, in 2023, Thai businesses will face increasing challenges related to environmental, social, and governance (ESG) issues, as trading partners become stricter with various criteria, particularly the Carbon Border Adjustment Mechanism (CBAM) from Europe, and Thailand's efforts to clarify its Green Taxonomy. Thai businesses need to accelerate their study and adaptation to enhance their long-term competitiveness.