Kasikorn Research Center <\/span><\/strong>assesses that the economy in the second half of the year will face challenges from exports, drought, and high debt levels. <\/span>The full-year GDP forecast remains at 3.7%, with export figures held steady at -1.2%, but adjustments have been made to government consumption and investment, pending the formation of a new government.<\/span> Regarding the policy interest rate, it is expected to rise to 2.25% by the end of 2023, up from the previous forecast of 2.0%. The general inflation rate is projected to decrease to 1.8% from 2.8%, and the exchange rate for this year is estimated to remain at 33.50 – 34.00 baht per US dollar.<\/span><\/p>

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Ms. Natthaporn Treeratnasilkul, Deputy Managing Director of Kasikorn Research Center Co., Ltd.<\/strong><\/span>, stated that the center maintains its GDP forecast for 2023 at 3.7%, supported by tourism, which is expected to attract 28.5 million foreign tourists to Thailand. This leads to an anticipated GDP growth of about 4.3% in the second half of the year, compared to approximately 3.0% in the first half.<\/span><\/p>

However, the economy in the second half still faces risks from the formation of a new government, which could take various forms. The votes for the Prime Minister on July 13, 29, and 20 will reflect the perspectives of the parliament, and results from each round must be evaluated. If the first vote fails, delays could negatively impact the Thai economy, affecting government spending and overall confidence. In a worst-case scenario, as assessed by the Federation of Thai Industries (FTI), GDP could drop to around 2.5%.<\/span><\/p>

Additionally, there are concerns about the economic direction of China, which is showing signs of weakness, posing risks to the ASEAN and Thai economies that are highly dependent on China. Exports to China are expected to grow by about 3.4%, primarily in food products, while the number of Chinese tourists visiting Thailand is projected to be around 5 million, which is low and may decrease further.<\/span><\/p>

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Ms. Kewalin Wangpichaisuk, Deputy Managing Director of Kasikorn Research Center Co., Ltd.<\/strong> <\/span>noted that the drought issue is impacting the agricultural sector, potentially costing around 48 billion baht this year. The current El Niño phenomenon may pressure water-intensive production and service sectors, including non-metal, food, textiles, tourism, and hospitals in the eastern and central regions, leading to water shortages. There are concerns that the drought may be more severe than in 2023 and could extend into 2024.<\/span><\/p>

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Ms. Thanyalak Watcharachaisurapol, Deputy Managing Director of Kasikorn Research Center Co., Ltd.<\/strong> <\/span>mentioned that household debt by the end of this year is expected to be in the range of 88.5-91.0%, up from 90.6% at the end of Q1 2023. The debt ratio is unlikely to drop below 80%, as the Bank for International Settlements (BIS) anticipates the economy will continue to grow without interruption over the next five years. Meanwhile, measures from the Bank of Thailand (BoT) are expected to slow down new debt growth and accelerate the reduction of existing debt.<\/span><\/p>

The new government is expected to seriously address large, difficult debts in sectors such as agriculture, teachers, and civil servants (with teacher and police debts accounting for about 10.5% of total household debt), as well as debts that have moved out of the system to asset management companies (AMCs), totaling hundreds of billions of baht. Previously, these debts have not received adequate assistance from existing measures, and they also include personal and small business debts, which will affect the living standards of households and the foundational businesses of Thailand in the future.<\/span>
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