Bangkok: CIMB Thai has projected a subdued GDP growth of just 2% for Thailand this year, highlighting the significant challenges the economy is facing. The bank has also urged the government to rethink its approach to economic stimulus, advising against indiscriminate monetary handouts.
According to Thai News Agency, CIMB Thai's analysis indicates that the Thai economy is under pressure from various factors, including high energy prices and import costs impacting domestic consumption. The bank forecasts that GDP growth for the second quarter will be a modest 1.8%, with a potential contraction compared to the first quarter. CIMB Thai recommends that the government shift its focus from cash handouts to job creation as a means of fostering sustainable livelihoods.
Dr. Amorntep Chavala, Assistant Managing Director and Head of Research at CIMB Thai Bank, elaborated on the current economic conditions, noting the continued sluggishness in investment and high import levels contributing to a current account deficit. Although government measures have stabilized consumption towards the end of the second quarter, the economy is still expected to gradually recover in the third quarter, with tourism and consumption support measures playing critical roles. However, the overall growth projection remains at only 2% for the year.
The bank also critiqued current economic stimulus measures like the "Co-Pay" scheme, suggesting they only offer short-term relief without addressing sustainable income generation. Dr. Amorntep emphasized the need for the government to abandon indiscriminate cash distributions in favor of targeted aid for those most in need. He advocated for long-term strategies, including workforce development and infrastructure investment, to spur economic growth and reduce public debt.
Dr. Amorntep further commented on the importance of addressing structural economic issues to achieve more robust growth in the future. He highlighted the need for strategic public investment, infrastructure upgrades, and tackling labor market challenges as essential steps.
Regarding financial markets, CIMB Thai's assessment anticipates a potential appreciation of the Thai baht by the end of the year, contingent on the US Federal Reserve's interest rate decisions. The bank expects capital to return to the Thai market, driven by a positive current account balance and a favorable exchange rate, influenced by the Fed possibly delaying rate hikes.