BOT Also Maintained Thai’s 2018 & 2019 GDP Growth Target

In the latest Monetary Policy Committee (MPC) meeting, Bank of Thailand (BOT) kept its one-day bond repurchase rate at 1.50%, unchanged since April 2015. The central bank highlighted that monetary conditions remained accommodative and conducive to the country’s economic recovery. According to BOT, the Thai economy was projected to expand by 4.4% yoy this year, the same rate to the previous assessment, driven by private consumption and private investment. The private consumption will be boasted by improvement in income and employment, while private investment is expected to expand further on the back of public investment projects anticipation and the new production base to the country. In contrast, BOT expected merchandise exports growth to slowdown due to ongoing trade tension between US and China currently. In July, Thailand’s exports picked up slightly by 8.3% yoy (8.2% in June), but exports to China slowed further to 3.5%, while exports to US dropped by 1.9% in the same month, the first decline since October 2016. However, the central bank believed that the weak performance in exports due to some trade protectionism measures will be offset by benefits from the relocation of production base to Thailand for some industries.

Last Monday, President Donald Trump announced another 10% tariffs to be charged for US$200 billion worth of Chinese goods. This will be implemented on 24 September 2018, and higher tariff of 25% will be effective on 1 January 2019. According to Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office under the Commerce Ministry Thailand, “the higher US tariff on 5745 Chinese products give Thailand the potential to export more replacement goods”. In particular, coloured rice, rubber block, coconuts, guavas, mangos, mangosteens, natural honey, and internal engines are among the high-potential products to replace Chinese goods in the US market.

Separately, Singapore’s non-oil domestic exports (NODX) slowed from 11% yoy in July to 5% yoy in August, but slightly better than market expectations of 3.9%. The lower NODX growth was mainly contributed from the drop in demand for electronic products, particularly parts of ICs (-47.8%) as well as diodes, transistors (-28.8%). Similar to other Asean countries, Indonesia’s exports also moderated by 4.1% yoy in August (19.7% yoy in July). This was due to the weak demand for agriculture products and mining goods during the month. The trade performance will likely remain cloudy with rising uncertainty on external environment, especially over the unpredictability of newly elected US President’s global trade policies. Despite the uncertainty, we do not expect Bank Indonesia to hike rates aggressively in the months ahead as the decision will be made based on data-dependent, and recent measures which was announced to help stabilising rupiah should give some support to the currency.

Source: Affin Hwang Research - 21 Sept 2018