SCB Economic Intelligence Center (EIC), the research arm of Siam Commercial Bank, has upgraded its Thai economic growth forecast for 2023 to 3.9% from 3.4% because local and global economic trends are better than expected.
The growth of the Thai economy stems largely from the rapidly recovering tourism sector, with foreign arrivals projected to top 30 million this year and reach nearly 40 million -- the level recorded in 2019 -- late next year, said Somprawin Manprasert, chief economist at SCB EIC.
With China lifting its zero-Covid policy, visitors from that nation are expected to rebound to 4.8 million this year, with arrivals from other countries also improving. This should support the labour market and help consumption recover, said the research house.
While the outlook for exports remains sombre, growth of 1.2% is forecast this year as a global economic expansion remains possible and there could be an upside rebound in Chinese demand, said Mr Somprawin.
Headline inflation is expected to stay within the target range at 2.7% as global energy prices fall and the government continues to provide energy subsidies, according to SCB EIC, which upgraded its global economic growth outlook from 1.8% to 2.3%.
Given the country's steady economic rebound and easing inflation, the Bank of Thailand's Monetary Policy Committee is expected to continue policy rate hikes to 2% in the second half of this year from 1.5% at present, he said. SCB EIC believes major central banks will stay on course with their rate hikes and keep their policy rates relatively high for an extended period.
The Federal Reserve is expected to raise its policy benchmark rate to 5-5.25%, with the European Central Bank hiking its rate to 3.75% this year.
However, the rate of interest rate hikes is expected to be slower than in 2022 as global financial conditions tighten this year, although the pace of tightening is expected to decrease, said SCB EIC.
"Thailand's financial conditions will continue to tighten amid the trend of rising interest rates," said Mr Somprawin. "The baht is expected to weaken during the first half this year, then regain steam against the greenback to 32-33 baht at year-end."
SCB EIC expects Western financial turmoil and the collapse of US banks as unlikely to impact Thailand's financial stability given the solid condition of the local banking sector.