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Thai bank revised up 2020 GDP forecasts to -6.4% and projected 2021 growth at 3.3%

This upward revision reflects the better-than-expected performance 3Q20, which can be attributed to stronger government spending and a rebound in exports



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Krungsri Research predicts that Thai GDP will fall by -6.4% in 2020, then grow by 3.3% in 2021, and expects that the MPC will keep interest rates unchanged through next year

At the latest meeting of the Monetary Policy Committee (MPC) on November 18, it was unanimously agreed that interest rates should stay at 0.50% since although 3Q20 recovery was better than expected, this remains weak and different sectors are rebounding at different rates.

Krungsri Research has revised up 2020 GDP forecasts to-6.4% from -10.3% and projected 2021 growth at 3.3% amid opportunity and challenge. 

Better-than-expected performance 3Q20

This upward revision reflects the better-than-expected performance 3Q20, which can be attributed to stronger government spending and a rebound in exports. Looking forward, growth in the Thai economy should turn positive in 2Q21 on a combination of the low-base effect, the positive effects of government spending, and recovery in overseas demand.

However, challenges, especially domestic headwinds, will remain, including the recovery in tourism, which is lagging behind other economic growth drivers, the impacts of high unemployment on income and consumer spending, and rising domestic political unrests, which may undermine growth and raise concern over the continuity of economic policy.

However, exports would become the engine of growth in the coming period. Private investment in export-related sectors should recover moderately. In addition, regionalization would provide opportunity to Thai exports and domestic production in the medium term.

Return to pre-pandemic conditions is expected to take two years

Moreover, a return to pre-pandemic conditions is expected to take two years, implying the labor market remains fragile, especially wage income is still low.

This may then weigh on private-sector consumption, especially for low-income groups for whom temporary government support is coming to an end. In addition, the MPC expressed its concerns about the rapid appreciation in the value of the baht and the possible impacts of this on the recovery.

As such, the committee agreed to closely monitor the movement of exchange rates and capital flows, and it is now prepared to issue additional regulations as needed. Thus, the BOT has now announced that it will reduce pressure on the baht by resolving structural problems in the forex market through:

(i) allowing residents to freely deposit funds in Foreign Currency Deposits (FCDs);

(ii) relaxing regulations regarding investment in foreign securities; and (iii) requiring a bond pre-trade registration.

Following the announcement of the BOT’s new regulations, on November 20, the baht weakened to USD 30.33/baht, down slightly from the start of the week, when it touched a 10-month high of USD 30.14/baht. On the same day, despite net foreign selling in Thai bonds worth THB1.29 bn, foreign investors bought Thai stock worth a net THB2.39 bn, following the easing of investors’ fears and the realization that the new measures are aimed to maintain a stabilization in capital flows, not cut off inflows.

Krungsri Research also believes that given the fragility of the recovery, the softness in inflation and the unprecedentedly loose monetary policy pursued by central banks worldwide, the MPC will keep policy interest rates at their historic low through all of 2021, while the recovery to the pre-pandemic level would take time.

Therefore, it will be necessary to provide targeted financial assistance and other measures to help businesses continue their operation and to avoid lack of liquidity.

Source :

Weekly Economic Review ประกาศวันที่ :24 November 2020


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