SCB says digital wallet will boost GDP in 2025 by 0.5-0.7%, estimates flood damage in Chiang Rai at 400 million baht

SCB EIC, Siam Commercial Bank, assessed the government's urgent economic stimulus policies, which have positive effects on consumer, tourism, and agricultural businesses. It pointed out that the Digital Wallet has adjusted its targets to specific groups appropriately, but it is a temporary economic stimulus, pushing GDP in 2025 up by 0.5-0.7%, while household debt remains a major problem. It is expected that the MPC will start cutting interest rates in December and continue to 2% early next year. It estimates that the flood damage in Chiang Rai will be 400 million baht. Mr. Somprawin Manprasert, Senior Executive Vice President, Chief Executive Officer, Economic Intelligence Center (EIC) and Senior Executive Vice President, Chief Corporate Strategy Officer, Siam Commercial Bank, revealed that the global economy is likely to slow down in the second half of this year after growing well in the first half. The overall picture for 2024 is expected to expand by 2.7% and there is a tendency for a soft landing to sl ightly accelerate to 2.8% in 2025. Although the market is now starting to worry again that the global economy may enter a recession, especially in the United States because the unemployment rate has increased so quickly that it has entered the criteria for the US recession warning index. However, SCB EIC assesses that the chance of a soft landing for the global economy is still much higher, considering the positive momentum of major economic groups in the first half of the year and the recent data reflecting future growth. In addition, the US unemployment rate has increased rapidly. During the rest of 2024 and 2025, the US Federal Reserve (Fed) is likely to gradually reduce the policy interest rate by a total of 2.0% and the European Central Bank (ECB) is likely to continue reducing the interest rate by a total of 1.50%. However, there are still pressures, including international politics. Prolonged geopolitical conflicts, international protectionist measures, and the implementation of US international policy after the general election at the end of this year will be important factors that determine the direction of global trade in the future. For the Thai economy, SCB EIC estimates that in 2024, growth will still be low at 2.5%, but what we want to focus on in 2025 is the GDP adjustment down to 2.6%, which is a significant slowdown, considered to be growth below potential. The number of foreign tourists in 2025 is estimated at 39.4 million people, with the growth of the number of foreign tourists still being pressured by the trend of the return of Chinese tourists in group tours, while Thai exports in 2025 will still grow lower than in the past. In addition to being a result of structural problems, there are also cyclical problems that have dragged down the Thai economy in the long term, resulting in a decrease in domestic production, a tightening of the financial sector, and investors delaying investment. In the short term, in the banking, financial, and fiscal sectors, agencies must work together to solve mone tary and fiscal policy problems to help support the economy from declining, along with solving structural problems. While the 10,000 baht top-up project via digital wallet has been adjusted to be used by specific groups, SCB EIC sees it as more appropriate than casting a net, which will encourage people to spend more. It is expected to increase GDP in 2025 by 0.5-0.7%, resulting in GDP reaching 3%. Although the budget is high, it will not stimulate the economy fully and temporarily. As a result, Thailand's public debt may tend to hit the ceiling in 2027. Mr. Somprawin emphasized that household debt is the most important problem at the moment. The proportion of debt is in the retail business group, plus private sector debt. The government's policies to solve household debt come in many forms, including supporting financial institutions to grant loans, reducing imports to FIDF, and haircutting debt. He believes that the main principle in solving debt must take into account Moral Hazard so that the financial s ystem can proceed correctly. Financial institutions must create incentives for debtors to jointly solve their debts, and must prepare guidelines to deal with risks that may arise in the future. For the urgent economic policies of the new cabinet, it is a continuation of the policies of the previous cabinet, with a greater focus on the household sector and vulnerable business sectors. SCB EIC assesses that the government's economic stimulus policies in the short term will have positive effects on businesses related to consumption, tourism, and the agricultural sector, while businesses with a high proportion of basic labor will be affected in terms of costs, and energy businesses may be affected in terms of income. As for the policy to promote competitiveness, it will have positive effects on businesses related to infrastructure, industries that are in line with global trends, and industries of the future. As for the environmental policy, it is still both a challenge and an opportunity for many businesses to a dapt. In addition, SCE EIC also assessed the impact of the flooding situation, when combined with the latest situation in Chiang Rai Province, for the 7th time, the damage value in the agricultural sector increased from the original 2,200 million baht to 2,600 million baht. SCB EIC also assessed that the MPC is likely to start reducing the policy interest rate in December and continue to 2% early next year from clearer signs of slowing domestic demand, partly due to the prolonged tight financial situation. As for the baht, it recently appreciated rapidly after the US dollar index weakened, the price of gold increased, and concerns about Thai politics eased. In the short term, the baht may weaken slightly due to US economic factors before returning to the appreciation trend following the US easing cycle. As for the end of 2024 and 2025, the baht is estimated to be in the range of 34-34.5 and 33-34 baht per US dollar, respectively. Source: Thai News Agency