EIC sees Thai inflation hit 24-year high, revises up GDP forecast

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The Siam Commercial Bank’s Economic Intelligence Center (EIC) raised Thailand’s economic growth projection for this year from 2.7 to 2.9 per cent on Tuesday, while forecasting annual inflation to reach a 24-year high of 5.9 per cent.

The uplift in the growth projection was thanks to “a rebound in the tourism and service sector, backed by Thailand’s reopening,” said Somprawin Manprasert, the EIC’s chief economist.

With easing border restriction worldwide, EIC estimates Thailand will see 7.4 million foreign arrivals this year, up from the prior forecast of 5.7 million. 

“The agricultural sector would be another growth driver this year,” Somprawin remarked, citing rising farm product prices in the wake of supply-side pressures from an ongoing war in Ukraine and Western sanctions on Russia. 

However, the research house warned that the overall situation would still face downward pressures from soaring inflation which is now underway to its record-high in decades.

EIC raised its prediction of Thailand’s annual inflation in 2022 to 5.9 per cent, up from the previous 4.9 per cent and the highest pace in 24 years. The analysts said this will weigh on domestic purchasing power, household consumption, as well as private investment. 

In response to surging inflation, EIC expects the Bank of Thailand’s Monetary Policy Committee (MPC) to lift its key policy rate to 0.75 per cent, from 0.5 per cent, in the third quarter this year.  

Somprawin also believes that Thailand’s exports will encounter headwinds as a result of global inflation in the remainder of 2022. “We expect the tourism and service sector to replace export-oriented manufacturing as Thailand’s key economic driver,” he added.

The latest adjustment in EIC’s outlook differs from those made by the Bank of Thailand. The MPC projects Thailand’s GDP to grow 3.3 per cent in 2022, with a larger annual inflation forecast of 6.2 per cent.

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