World Bank Predicts 2.9% Growth for Thailand in 2022
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| Cover Image Attribute: Bangkok Skyline, Thailand / Source: Pinterest |
According to the Thailand Economic Monitor 2022 published Wednesday by the World Bank, Thailand's economy is forecast to grow by 2.9% this year, as the tourism industry and private consumption show signs of recovery.
However, there are a few areas of concern, including the quick price increase and the level of household debt. In addition, global tensions stemming from the Russia-Ukraine conflict and the unpredictability of the pandemic in China; must be continuously observed, as these two possibilities affect Thailand's oil reliance and susceptibility to supply chain disruptions.
Kiatipong Ariyapruchya, senior economist for Thailand at the World Bank, opined that price control measures are necessary for the nation to preserve domestic demand. Despite the stability of the financial system, vulnerabilities connected with rising business and household debt persist.
The World Bank predicted that the country's headline inflation would remain at a 14-year high of 5.2% this year, but core inflation would remain at 2.3% before declining to 2.2% the following year. In 2022, exports of products are anticipated to increase by 4.1%, a deceleration from 2021 when they increased by 18.8% due to softening global demand and prolonged supply chain disruptions.
In addition, the war in Ukraine may exacerbate Thailand's debt and poverty through rising food and energy prices. The World Bank forecasts that a 10% increase in worldwide food prices would increase the poverty rate by 1.4%, while a 10% increase in global energy prices would increase the poverty rate by 0.2%. This year, the overall public debt has risen to 61.5 percent, which will increase to 62.5 percent.
"Poverty and unemployment are estimated to have declined over the past year, but labor incomes have fallen, and household debt has increased to meet expenditure needs," said Kiatipong.
Kiatipong proposed that the Monetary Policy Committee of the Bank of Thailand (BOT) gradually increase interest rates to counteract excessive inflation. Suppose the committee can raise interest rates at each of its remaining sessions this year. Then, in that case, interest rates are projected to return to near-normal levels by 2023, when Thailand's economy fully recovers.
He stressed that monetary policy's primary purpose is to stabilize the economy and inflation while fostering expansion. Therefore, the pace of interest rate increase must be adjusted gradually by the stage of economic recovery so that the choice does not influence economic growth.
In addition, the drop in COVID-19 cases and the further easing of border restrictions in Thailand and other countries are positive indicators that the country's economy will gain momentum in the second half and return to pre-pandemic levels in the fourth quarter of 2022.
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