Russia-Ukraine war continues to impact Thai economy, Ministry of Finance says

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The Ministry of Finance’s Fiscal Policy Office (FPO) slashed its economic growth projection for 2022 down to 3.5 per cent on Wednesday, citing consequences of Russia’s invasion of Ukraine.  

“The conflict between Russia and Ukraine has affected consumer confidence and prices of products in the country,” said Pornchai Thiraveja, FPO’s director-general.

The FPO said the invasion is leading to inflation in Thailand, caused by higher global energy prices. The war is also leading to a slowdown in economies of major trading partner countries, especially in Europe and the United States.

The office’s previous GDP prediction was at 4 per cent for 2022, before cutting it down to 3.5 per cent. Thailand’s economic growth in 2021 was 1.6 per cent.

Current GDP projections of the FPO are based on assumptions that inflation will be 5 per cent in 2022, along with the expectation that global crude oil prices will be around US$99.5 per barrel, up 43.8 per cent when compared to the prices in 2021.

Brent crude futures settled at $104.99 per barrel on Tuesday.

The Thai baht just hit a five-year low at 34.07 baht per US dollar on Tuesday. And the FPO expects the currency to stay around 33.1 baht per US dollar in 2022 as they expect the currency to strengthen towards the end of the year.  

They also predict exports to expand by six per cent in 2022 on top of the 18.8 per cent expansion in 2021.

The Ministry of Commerce said on Tuesday that exports expanded by 19.5 per cent to US$28.86 billion in March, representing 13 straight months of expansion and the highest monthly expansion in 30 years. In the first quarter, Thai exports rose by 14.9 per cent year-on-year.

For tourism, the FPO expects Thailand to welcome only 6.1 million foreign tourists in 2022, up from 5.7 million 2021. A huge difference from pre-pandemic levels when Thailand welcomed 39 million people in 2019.

The FPO said the government’s spending on investment and stimulus measures will support the economy.

However, risk factors continue to be the prolonging of the war in Ukraine which will affect energy prices, the uncertainty surrounding the possible outbreak of new Covid variants and the fluctuation in the global monetary policy which could affect the baht and supply chain disruption such as the shortage of semiconductor in the automobile and electronic sectors.

The FPO’s latest GDP prediction is slightly higher than that of the Bank of Thailand’s latest prediction of 3.2 per cent, based on assumptions that the headline inflation will be around 4.9 per cent and the number of tourists will be around 5.6 million people.


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