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Euro debt crisis main threat to Thailand in 2013

Publication Date : 12-10-2012


Standard Chartered Bank has pointed to the prolonged European debt crisis as Thailand's biggest risk for 2013, potentially dragging down the country's exports and domestic consumption, while public investment is expected to be the country's main driver of economic growth next year.

The bank forecasts Thailand's economy will expand at 4 per cent in 2013.

Speaking at a seminar on "Economic Updates: Looking Ahead with Standard Chartered" yesterday, a senior economist at Standard Chartered Bank (Thai), Usara Wilaipich, said developments in the European crisis could threaten both the Thai and world economies.

Conflict between the two major political parties in the United States over how to tackle that country's budget deficit could also have some impact on the global economy, but it would not be serious, according to Standard Chartered. In Asia, China is expected to continue its growth.

Usara expressed little concern over domestic factors, expecting the political situation to be stable, while external factors remain the most worrying, as the crisis in Europe has not reached bottom yet.

The state of next year's global economy, including Thailand's, would likely depend on how the euro zone's policy makers manage their fiscal and economic problems, she said.

Thai exports have slowed down from the beginning of this year due mainly to the European debt crisis, she noted. Standard Chartered projects Thai export growth at 5 per cent for 2012.

Next year's export growth is expected to be between 5 and 7 per cent if the European economy grows at a low level or contracts, Usara said.

In 2013, Thailand would likely depend on public investment to support its economic expansion, given the European developments, she said.

"We expect [Thailand's] domestic consumption and investment, as well as exports, to grow at low levels. Next year may require public investment to drive the economy," Usara said.

On the quantitative easing in the US, Europe and Japan, Usara said that such measures could bring imbalances to Thailand, with high liquidity leading to bubbles in the Thai stock market.

The Stock Exchange of Thailand Index has been rising, contrary to the downward indices of business sentiment, private investment and private consumption.

"Investors should be careful about volatility," Usara warned, anticipating fluctuations of Thai stocks and the baht by the end of this year.

Standard Chartered expects the baht to stay at 30.50 per US dollar at this year-end before appreciating to 29.75 at the year-end of 2013.


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