Many economic institutions have reportedly cut down Thailand’s GDP growth forecast for 2022, citing the potential that the Ukraine-Russia conflict will hinder Thailand’s economy and continue to drive up energy costs. However, it firmly believes that the Thai stock market is still strong and that the SET is resilient to global economic issues.
Prior to the outbreak of Russia’s invasion of Ukraine, the World Bank cut its global growth projection and warned that rising inflation, debt, and income inequality could threaten emerging and developing countries’ recovery. Global GDP is predicted to drop to 4.1 percent in 2022 and 3.2 percent in 2023 as more countries begin to unwind unprecedented levels of fiscal and monetary policy support.
The Bank also trimmed the economic growth of Thailand, expecting the Thai economy in 2021-22 to grow 1.0 percent and 3.9 percent, respectively, down by 1.2 percentage points each from the previous forecast in June 2021.
The University of the Thai Chamber of Commerce (UTCC) cautioned last Wednesday that if the Russia-Ukraine crisis continues throughout 2022, Thailand’s headline inflation will reach 5 percent, plunging the country into stagflation as a result of the rapid increase in prices. The possible consequences of Russia’s invasion of Ukraine for the Thai economy, in the worst-case scenario, Thailand would lose around THB244.7 billion, resulting in a 1.5 percent decline in GDP or a drop to 2.7 percent in 2022, while inflation slows to 4.5-5.5 percent. However, UTCC still maintains its previous forecast of 4.2 percent growth for Thailand’s economy this year.
Meanwhile, Krungsri Research Center estimated that the Ukraine-Russia war will reduce Thai GDP growth by 0.4-2.4 percentage points, since the subsequent energy crisis from turmoil in Ukraine weakened confidence and affected Thailand’s recovery.
To assess the impact of Russia’s attack on Ukraine, Krungsri outlined three possible scenarios: 1) an end to conflict in March, with Western sanctions on some of Russia’s trade and financial transactions remaining in place until the end of 2022; 2) an extension of conflict into 2Q22, with sanctions intensified to cover all non-energy exports from Russia; and 3) a spread of conflict to other countries and an extension to mid-2022, provoking strong sanctions from the West that are met with a ban on Russian exports of energy to Europe, thus triggering a European energy crisis.
For Thailand, these three possibilities result in a 0.4, 1.1, and 2.4 percentage point reduction in projected growth, a 1.4, 2.3, and 3.5 percentage point increase in inflation, and a 1.1, 3.0, and 4.7 percentage point decline in exports.
Although multiple economic institutions have downgraded their forecasts for Thailand’s economic growth this year. Asia Plus Securities, however, believes that the Thai stock market is safe and that foreign negative factors have a lesser impact on the SET Index than developed markets.
ASPS also stated that as a result of the Russia-Ukraine war, Thailand’s interest rate is less likely to be increased in 2022, compared to the United States, where interest rates are expected to be increased six times this year. Recommend “BUY” on SCB, KBANK, and GPSC.
