The University of the Thai Chamber of Commerce (UTCC) on Thursday lowered its GDP growth forecast to 3.5% from February's 3.8% view, blaming the deepening US-China trade row's impact on Thai exports.
Thanavath Phonvichai, vice-president for research at the UTCC, attributed the cut to six key risk factors: the intensifying trade war between the US and China; China's slowing economy; baht volatility; domestic political conflicts; relatively high non-performing loans at financial institutions and tighter lending approvals; and rising oil prices amid Middle East tensions.
"The Thai economy is now considered to be in a downward trend, primarily caused by the trade war," Mr Thanavath said. "Merchandise exports have shown signs of a slowdown since the fourth quarter of last year and are expected to stay sluggish until the third quarter of this year."
The UTCC forecasts Thai shipments to eke out 0.5% growth this year, down sharply from an earlier forecast of 3.9%, with imports contracting 1.4% after a previous projection of 8.7% growth.
"Nonetheless, to achieve 0.5% growth in exports is not an easy task, as Thailand has to fetch an average of $21.25 billion a month and the domestic political situation must stabilise," Mr Thanavath said. "In the worst-case scenario, Thai exports may be subject to a contraction of as much as 2.2%, and economic growth could reach 3.3% if the trade war deepens and intensifies."
If the trade spat eases, the political scene calms and investor confidence revives, exports could grow by 2.4% and GDP by 3.7%, he said.
Despite myriad risks, Thailand is fortunate to have supporting factors such as growing tourism, accelerated public investment, improving private investment and rate-hike delays by central banks worldwide, Mr Thanavath said.
The UTCC suggests reining in the baht to bring it in line with the currencies of trade rivals. The baht should ideally stay at 32 to the US dollar to favour exports, Mr Thanavath said.
