Fiscal Policy Office says that it maintains 2022 GDP forecast despite adverse global economic conditions

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The Fiscal Policy Office (FPO) came out to say that it would continue to maintain the country’s gross domestic product (GDP) growth targets for the year despite the global upheaval from incoming recession to rising commodities.

The FPO announced that it would maintain its forecast for Thailand’s GDP growth rate for 2022 at 3.5% as previously expected, supported by the recovery of domestic demand and tourism sector.

FPO director-general Pornchai Thiraveja said that the Thai economy in 2022 is expected to grow continuously at 3.5% per year (expected range of 3.0 to 4.0%) after the easing of international travel measures and canceling the Thailand Pass system for foreign tourists from 1 July 2022 onwards, resulting in better incomes for households and businesses related to tourism.

As per the expectations of the FPO as many as 8 miillion tourists who are expected to come to Thailand during the course of this year from a mere 428,000 seen during last year and yet a far cry from the 39.9 million seen during 2019, the pre Covid-19 era.

The FPO said that it is also expected that farm income will expand well in line with higher agricultural product prices, resulting in the continued expansion of expenditure, which will be a key support for the recovery of consumption that is being predicted to grow at 4.8% per year (expected range of 4.3-5.3%).

Meanwhile, the value of merchandise exports is expected to grow at 7.7% per year (expected range of 7.2-8.2%), despite the impact of the conflict between Russia and Ukraine, which has resulted in the price adjustment of energy and commodities; as a result, the monetary policy of major economies has become more stringent, as well as the problem of raw material shortages in the protracted supply chain.

Private investment is expected to grow 5.7% per year (expected range of 5.2-6.2%) inline with the domestic economic recovery, while the role of fiscal policy will still help mitigate the impact of the energy price situation and support the expansion of the Thai economy in all sectors thoroughly.

In terms of domestic stability, headline inflation is expected to increase from last year at 6.5% per annum as rising energy prices drive higher domestic production costs and spread across a broader range of product categories, with it being expected to gradually decline if the price of oil becomes more stable.

As for the Thai economic outlook in 2023, the FPO said that there is still a steady recovery trend from this year. Initially, the FPO kept the predicted growth rate at 3.2-4.2%, which is the assumption used in the budgeting for fiscal in the year 2023. The FPO revealed that this goes in accordance with the Bank of Thailand’s forecasts of 4.2%.

Risk Factors

Porchai said that the GDP growth of Thailand was not one without any risk factors, and as many as 4 issues could impact the expected GDP growth of the country.

  1. The longevity of the conflict between Russia and Ukraine affecting energy and commodity prices, which is passed on to the costs of households and businesses.
  2. Global financial market volatility due to stricter monetary policy actions by many central banks, especially the US Federal Reserve, which tends to accelerate policy rate hikes following the continued acceleration of inflation and tight labor market conditions.
  3. Uncertainties of the current and potential outbreaks of COVID-19 in the future.
  4. Trade partners’ economies slowed down, especially the economies of major countries and China. In addition, if the COVID-19 epidemic situation in China is prolonged than expected, it will affect the production supply chain and affect the global manufacturing and trade sectors.

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