More stimulus on the way in Thailand

Looser monetary and fiscal policy should help to drive a modest recovery in Thailand over the coming quarters, and we are revising our GDP growth forecast for next year up slightly. Figures released earlier this month showed Thailand grew by just 2.4% y/y last quarter, up slightly from the 2.3% expansion recorded in the second quarter. While a further slowdown in global demand and the strong baht are likely to hold back exports, looser fiscal and monetary policy should help to support a slow but steady economic recovery over the coming quarters. The government today announced a fiscal stimulus package worth US$3.3bn (around 0.6% of GDP), with the extra funds to be spent on supporting the agricultural sector. The extra US$3.3bn comes in addition to the US$10bn increase in spending that was unveiled in August. Further monetary loosening also looks to be on the way after Governor Veerathai Santiprabhob on Monday stated that “we are ready to act if growth fails to meet our expectations.” The BoT cut interest rates earlier this month to 1.25%, the second reduction in three months. Putting all this together, we think economic growth in Thailand will accelerate from 2.5% this year to 3.0% in 2020 (our previous forecast was for growth of 2.5% next year).