Radhika Rao, Economist
DBS Group Research
- Thai markets have been remarkably untouched by the selloff in Asia this year.
- The economy is on course to expand 4.5% YoY, after a strong 1H18 and up from 3.9% in 2017. Base effects and some spillover impact from rising trade protectionism might moderate 2019 growth to 4.2%.
- The external sector has yet far belied concerns over a negative impact from US-China trade disputes, with strong exports trend helping to keep the current account surplus at 9.5-10% of GDP this year, before slowing to 8% in 2019.
- Inflation has shrugged off a slow start to the year, lifted by supply-side pressures, particularly high oil prices. We expect full-year inflation to average 1.3% YoY, before rising to 1.6% next year on a higher core.
- The Bank of Thailand signaled its readiness to normalize rates, but a hike is not imminent given manageable inflation and a stable currency. Policy tightening expectations might resurface late-2018 and early next as the US continues to hike rates, and the spillover impact weighs on EM. An upside surprise in Thai growth could also be another catalyst for the BOT to hike in 2019.