Thailand: An inevitable recession – ANZ

The combination of risks from COVID-19 related disruptions and a severe drought will compound growth headwinds in 2020 and will also amplify deflationary risks, per ANZ Bank. USD/THB is trading at 31.840.

Key quotes

“We maintain our forecast for Thailand’s economy to contract by 3.5% in 2020 after a 2.4% expansion in 2019.”

“We estimate that if incoming tourists tumbled by 50% in 2020, headline GDP growth will slump to -5.6%. It is highly possible that tourism flows will not recover in the near-term.”

“Headline CPI contracted for the second consecutive month in April; core CPI is also inching lower. We forecast this trend to persist in the coming months, with overall inflation averaging 0.5% in 2020. Inflation is expected to pick up to modest levels in 2021 as growth rebounds.”

“The Bank of Thailand (BoT) has cut the benchmark policy rate twice this year, to 0.75%. We expect one more cut to 0.50%. However, given that the benchmark rate already stands quite low, the central bank will likely continue to utilise other policy tools in its effort to support the economy.”