The centre adjusted down their April export forecast of 2.7 per cent growth, to a new negative forecast of 1.6 per cent contraction.

The EIC also adjusted down their GDP forecast from 3.6 per cent made in April to 3.3 per cent.

The uncertainty from the trade war and the slowdown in the global economy has damaged investment sentiment in the country, said Yunyong Thaicharoen, first executive vice president and head of the EIC.

This has led the centre to predict that private investment will slow down in the second half of 2019.

Public investment in infrastructure projects is still held by the EIC as a key driver of growth and is expected to grow by 7 per cent in 2019.

However, due to budget delays, investment in new projects toward the end of the year may face delays, Yunyong said. The slow pace of post-election Cabinet formation has delayed budget creation.

With regard to monetary policy, the EIC predicted that the central bank will hold the policy rate at 1.75 per cent, with the likelihood to lower rates by 0.25 per cent if Thailand’s economy slows down at a faster pace than expected.

Manit Techa-apichoke, president of BMA-owned Krungthep Thanakhom Co Ltd, said the state firm was empowered by Article 44 of the interim charter to conduct negotiations with the BTS over the Bt100 billion debt transfer and concession extension.

Manit said the negotiation should be completed in about two months.

If the BTS agrees to shoulder the cost of construction of the two extended routes plus accrued interest worth Bt100 billion, the BMA will grant a new 30-year concession for the main routes and all extended routes. The debt covers the construction cost of the northern route of Morchit-Saphan Mai-Khukot extension and the southern route or Bearing-Samut Prakan extension.

If negotiations are successful, the concession for the main routes from Mor Chit to On Nuj and the National Stadium to Tak Sin Bridge, which will end in 2029, will be extended to 2059, Manit said.

And the contract for hiring the BTS to operate two extended routes from On Nuj to Bearing and from Taksin Bridge to Bang Wa, which will expire in 2042, will also be extended to 2059, Manit said. The BMA has paid for the construction cost of these two routes and hired the BTS to operate the extended routes.

The concession for operating the Bearing-Samut Prakan extension and Morchit-Saphan Mai-Khukot extension will also run to 2059, he added.

Manit said the BTS would be asked to shoulder the cost of construction of the Morchit-Saphan Mai-Khukot route and Bearing-Samut Prakan route, which have been built by the Mass Rapid Transit Authority of Thailand (MRTA). The MRTA has built the elevated railways for the two routes and will require the BMA to pay for the construction cost while the BMA will in turn ask the BTS to shoulder the cost.

On Monday, Manit and Surachet Laopoolsuk, deputy governor of MRTA, witnessed the test-run of a BTS Skytrain for one station on the extended Morchit-Saphan Mai-Khukot route. The test-run ended at the Lat Phrao Intersection station.

Surachet said the MRTA has finished the construction of the elevated railway and that Krungthep Thanakhom and BTS started installing the electric and train controls system in March.

Surachet said the Skytrain service to the Lat Prao Intersection service would be available from August 11 in a free test-run period and it will be extended to the Kasetsat University Intersection in December. The entire route service to Khukot will be operational in late 2020, he added.

Surachet said before the BMA could provide the test-run service to the Lat Phrao Intersection, it must first sign a memorandum of understanding to take up the cost of construction of the Morchit-Khukot route for Bt26 billion. The MRTA will ask its board on July 25 to approve the debt transfer to the BMA, Surachet added.

Manit said the BMA would also ask BTS to limit the fare to Bt65 and the BMA would find an appropriate model to subsidise the fare for the BTS.

Meanwhile, Surapong Laoha-Unya, BTS executive director, said it would be difficult to accept the BMA’s demand for the BTS to shoulder the construction cost and at the same time limit the ceiling of the fare of the entire route at Bt65 without a state subsidy.

Fintech would enable the 40 per cent of unbanked or underserved Thais to get access to formal financial and banking services, according to panellists at the “Thailand Economic Monitor, Harnessing Fintech for Financial Inclusion” seminar. The unbanked segment in Thailand is currently prey to loan sharks in an informal lending sector that is driving a crisis in household debt, which has reached an alarmingly high level of 78 per cent of GDP.
Somprawin Manprasert, head of Krungsri Research, said that fintech was helping financial institutes offer effective banking services in the digital era. As the world moves to online platforms, banks are following suit. Banking services will be transformed by innovations, including information-based lending ecosystems incorporating existing and new data and digital footprint; both hard and soft infrastructure – such as regulation and trust; online platforms; and products personalised according to risks, returns and profiles of individual customers.
“Financial institutes and banks will become ‘data companies’,” said Somprawin.
The future will also bring more partnerships both among banks and between banks and non-banks. Banking will be the transaction-facilitator for consumers.
“Fintech helps identify consumers and also helps banks to access information, both existing and new data, at lower cost. With banks better able to ‘see’ consumers’ information, they can expand services to unbanked and underserved people,” said Somprawin.
Pipavin Sodprasert, Thailand country manager for Alibaba’s Ant Financial (Alipay), said that digital technology is spreading financial services in three ways. It is connecting people to financial institutes, complementing existing services, and catalysing banking outreach to the financially underserved. Ant Financial sees itself as a catalyst, with a mission to reach out to the globe’s 1.7 billion unbanked adults. The company is focusing on blockchain as the cornerstone of secure digital banking of the future.
“Around 40 per cent of our staff are focusing on security, “said Pipavin.
Thammarak Moenjak, director at the Bank of Thailand’s Financial Institutions Strategy Department, agreed that fintech helps people access informal financial services at lower cost and reduced risk. Fintech aids productivity, inclusivity and immunity of financial and banking services, he added.
The seminar panel also unveiled other financial innovations, such as virtual banking in Hong Kong and evolving collaborations between banks and partners to reach new consumers. Panellists said the challenge now would be to facilitate sharing of payments and other data across the various models of fintech, adding that technology infrastructure was an important factor in achieving success here.

She added that the central banks of many other countries were also keeping a close watch on this currency’s development due to concerns about the possible risk to investors.
Facebook is expected to officially launch Libra early next year.
Praoporn said the new currency may fall under the Digital Asset Law, which means its trading in Thailand will have to be approved by the SEC. However, as it may not be regulated under this law if it is used for the payment of goods and services, the central bank and SEC are looking for ways to control the currency if it is used for payments.
She added that a new law may have to be put in place before Libra can be used.
SEC consultant Bhume Bhumiratana said it was time for either the central bank or the Finance Ministry to launch a baht-backed digital currency to protect Thailand from a possible adverse impact from other digital currencies. However, this may not be easily done, because Thailand will have to amend several laws and regulations to support the launch of a local digital currency.

Completion of the linkage is expected to help reduce Thailand’s logistics cost from 13.8 per cent of GDP to 12 per cent by 2021.
Krisda Chinavicharana, Director-General, said the department is working with its counterparts in Laos, Philippines and Indonesia on the link-up of international import and export data via the electronic system.
He expects the programme will be completed this year, enabling connection between all memebers in the trade bloc.
The department plans to extend the linkage to China and South Korea in the near future.

In a deal with the Thailand Convention and Exhibition Bureau (TCEB), the “Business Meets Beach” initiative will see the association’s 70 member-hotels join forces to promote Phuket as the premier destination for the MICE industry.

“With its rare combination of stunning scenery and outstanding indoor and al-fresco MICE venues, Phuket has everything that professional planners could wish for,” said association president Anthony Lark.

“But the island is more than simply a venue for meetings and events. It is a giant canvas on which guests can paint their own stories, themed on Phuket’s rich local culture and heritage. This is what makes our island truly special.”

Part of the campaign is the “Stay Free” initiative, in which 19 hotels will offer guests a third night free, plus a complimentary cocktail reception. It’s on offer through October for groups of 40 delegates or more.

Phuket hoteliers join hands to launch the Business Meets Beach campaign to drive MICE business to the island

Cooperative marketing activities, social-media updates and familiarisation trips for the trade and media are being planned for this year and next.

Building on the success of destination promotions undertaken by the TCEB and Tourism Authority, the overall aim of the campaign is to double MICE expenditures by 2020 while maximising the benefits to association members and the Phuket economy.

The 19 hotels participating in the Stay Free promotion are the Angsana Laguna Phuket, Cape Sienna Hotel & Villas, COMO Point Yamu, Dewa Phuket Resort, Dusit Thani Laguna Phuket, Hilton Phuket Arcadia Resort & Spa, Le Meridien Phuket Beach Resort, Movenpick Resort & Spa Karon Beach Phuket, Novotel Phuket Kamala Beach, Outrigger Laguna Phuket Beach Resort, Phuket Marriott Resort and Spa, Nai Yang Beach, Pullman Phuket Arcadia Naithon Beach, Pullman Phuket Panwa Beach Resort, Splash Beach Resort, the Nai Harn Phuket, the Nature Phuket, the Slate, the Village Coconut Island, and Trisara.

The Thailand Economic Monitor noted that exports contracted by 4 per cent in the first quarter of 2019 – the first quarterly contraction in three years.

Private investment and household consumption continued to grow close to their three-year high, helped by low inflation, increasing employment and rising recurrent fiscal spending.

At the same time, public investment weakened as the implementation of “megaprojects” slowed due to election-related delays.

As a result, the economy’s pace of expansion slowed to 2.8 per cent in the first quarter of 2019, falling below 3 per cent for the first time since mid-2015.

The World Bank projects growth to gradually increase from the expected 3.5 per cent in 2019 to 3.6 and 3.7 in 2020 and 2021, assuming private consumption can be sustained and public investment accelerates.

“Policy continuity and the implementation of planned public infrastructure projects in the Eastern Economic Corridor will be of vital importance to sustain growth,” said Birgit Hansl, World Bank country manager for Thailand.

“Increased regional integration and making better use of Thailand’s strategic location could support trade in goods and services.”

Prolonged political uncertainty is a key risk for Thailand’s economic outlook. Lingering doubts about the cohesiveness of the newly established 19-party coalition government could adversely impact investor and consumer confidence and contribute to a further delay in the timely implementation of large infrastructure projects.

Externally, ongoing trade tensions between the US and China could further weaken demand for Thailand’s exports and discourage private investment in export-oriented industries.

The Thailand Economic Monitor highlights the importance of harnessing financial technology (fintech) for financial inclusion. Thailand has made large strides in expanding access to financial services.

Today, 82 per cent of Thai adults have a formal bank account and the gender gap is small. However, the report finds that challenges remain in the quality of digital financial services, as well as in access to broadband services.

“Expansion of digital services to the underserved would bring about new economic opportunities and support a reduction of inequality as envisaged in Thailand’s national strategy,” said Kiatipong Ariyapruchya, World Bank senior economist for Thailand. “As fintech activities continue to grow in Thailand, inter-governmental collaboration and building a supportive environment for a sound fintech ecosystem would be important.”

Among the report’s policy recommendations to realise the full potential of fintech are: lifting barriers to firms seeking to enter the financial sector; encouraging collaboration between traditional banks and fintech firms; improving coordination among regulators for example on regulatory sandboxes; encouraging public-private and private-private collaboration; and supporting initiatives such as incubators and early-stage seed funding vehicles, as well as providing matching grants to help a fintech firms to take off in Thailand.

OCSB secretary general Worawan Chitaroon said that when the bill has been endorsed by the Council of State, it will be forwarded to the Cabinet for deliberation and approval to replace the outdated Cane and Sugar Act of B.E. 2527.

Among other things, the new bill will allow sugar cane to be used as a material for other products rather than for only making sugar and will also do away with provisions that violate the regulations of the World Trade Organisation, she said.

“The current Cane and Sugar Act has been in use since 1984 so some provisions do not go along with Thailand’s commitment to international rules, prompting Brazil to file a complaint with the WTO that Thailand subsidises its industry in violation of WTO regulations,” Worawan said.

“And the new bill will allow sugar cane to be used to make other products that will benefit not only farmers and sugar mills but also consumers and the overall national economy.”

She said the new bill would particularly benefit the bio petrol and bio-chemical industries in the Eastern Economic Corridor zone.

Narathip Anantasook, chief of the Office of the Federation of Sugar Cane Farmers of Thailand, said sugar cane planters have provided input for the drafting of the new bill.

Narathip added that the federation had proposed the new provisions that would prevent Thailand from violating the WTO regulations regarding the sugar industry.

He said the coup order that floats the price of sugar in line with the WTO regulations would expire in September and the new bill would prompt the country to comply with the WTO rules.

Komkrit Nakhalak, assistant managing director of Mitr Phol Sugar Co Ltd, said the new bill’s regulations that would allow sugar cane to be used for other products would benefit the EEC project.

He said Mitr Phol also has a project to build a biological fuel factory on its 4,000 rai of land in Khon Kaen’s Ban Phai district and the project would benefit from the new bill.

The lag in forming a new coalition government has led to a delay in the scheduled October start date for the 2020 budget.

“The new annual budget for the next fiscal year is expected to come into force in early January next year, a three-month delay,” said Dechapiwat.

Prime Minister General Prayut Chan-o-cha has struggled to form a Cabinet since the general election in March but vowed the new ministers would be sworn in by the middle of this month.

Economists and businesses have expressed concern that delayed budget disbursement could deepen the slowdown in an economy already impacted by contraction of exports.

Dechapiwat, however, said that the new government could use the bridging fund worth about Bt1.5 trillion, or half of the expenditure in fiscal 2019. The new government could spend taxpayers’ money on so-called current spending – such as salaries for state employees and other fixed items.

The government can also meet its obligations on public investment. The total expenditure for salaries of state officials, other fixed items and capital spending in the period from October to December 2019 is estimated at Bt1.2 trillion, he said.

The bridging fund would allow the government to maintain the state welfare card project for 14 million recipients. The junta-backed government allocated Bt40 billion for the state welfare card project for fiscal 2020. The new government could spend about Bt20 billion during the budget delay, said Dechapiwat.

“The welfare card project would not be disrupted,” he added.

Regarding the fiscal 2019 budget due for completion at the end of September, so far capital spending had reached only Bt400 billion of the total planned Bt650 billion, Dechapiwat said. The Budget Bureau Office had ordered state agencies to sign pending contracts with private firms by the end of September, he added.

“The Office is targeting 100 per cent disbursement of the Bt3 trillion under the current fiscal 2019 budget. Full spending would boost the economy during the delay in government formation,” he said.

The junta-backed government set expenditure for fiscal 2020 at Bt3.2 trillion, up 6.7 per cent, with an estimated budget deficit of Bt450 billion. The incoming government, however, will review the spending plan as the coalition administration is composed of political parties with differing policy priorities. The new Cabinet is scheduled to take office by middle of this month, when ministers will start forming spending plans with the Budget Bureau. The Bureau will then submit the budget framework to the Cabinet for approval in August, before organising a public hearing on the draft budget and then re-submitting the draft budget to the Cabinet for approval.

The draft will be forwarded to Parliament in early October, for up to 105 days of deliberation by the lower house flowed by up to 20 days in the Senate. It will will then be submitted for royal endorsement and is expected to come into force in early January next year, Dechapiwat said.

On June 30, the European Union and Vietnam signed the EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) in Hanoi.

The FTA, dubbed the “most ambitious and comprehensive” free-trade pact that the EU has ever negotiated with a developing country, aims to lower taxes on 99 per cent of goods traded by both countries. Once it is enforced. Vietnam will be able to immediately lower taxes on 65 per cent of goods imported from the EU, and gradually lower tax on the remaining imports in the next 10 years. The EU, meanwhile, will immediately lower taxes on 71 per cent of goods imported from Vietnam and slowly lower tariff on the remainder in the next seven years.

The EVIPA, which was signed at the same time, aims to help Vietnam in the development of its law-enforcement frameworks in order to maintain transparency and attract more investments from European countries.

The EU is also expected to use the EVFTA as a prototype in its negotiations with Thailand, especially in terms of pushing forward top-priority agenda such as opening markets for pharmaceuticals, automobiles and alcoholic beverages, liberalisation of service and investment sectors, protection of intellectual property, penetration into public procurement markets, investment dispute settlement and compliance to obligations of international organisations.

TPSO’s analysis, however, revealed that once the EVFTA is enforced, Vietnam may gain an advantage over Thailand when it comes to competing in the EU market due to more competitive prices thanks to tax exemptions and GSP (Generalised System of Preferences), which Thailand lost in 2015.

The agreement, however, will pave the way for Vietnam to access the EU market, which has a population of over 508 million and a gross domestic product (GDP) of approximately US$18 trillion (Bt552 trillion).

During the signing ceremony, Vietnam’s Industry and Trade Minister Tran Tuan Ahn said his country’s exports to the EU will rise by 4 to 6 per cent reaching a value of $19 billion and $75 billion by 2028. The EVFTA is also expected to boost Vietnam’s exports in agricultural and fishery and aquatic animal categories.

However, according to TPSO these agreements may affect Thai-EU trade in the following sectors:

Vehicles and components

Thai entrepreneurs should be prepared for the possible migration of automotive component manufacturing bases to Vietnam, and to combat this, they should adapt their manufacturing and marketing plans in line with the emerging electric car industry.

Computer, computer components and electrical circuit boards

Vietnam’s competitive edge in this industry is growing and it might convince manufacturers to move their base from Thailand. Hence, Thai entrepreneurs should upgrade the skills of their workforce and utilise modern technology and innovations to boost the products’ values and maintain their competitiveness.

Apparel

Vietnam is already benefiting from lower labour cost and a much bigger workforce. In order to compete with Vietnam, Thai entrepreneurs will need to use new technology and innovation to improve and diversify their products, like using fibre that has special qualities, build stronger brands and expand the market via online channels.

Rice

Though Thailand still has an upper hand in the market thanks to its well-known high-quality jasmine rice, it still needs to improve the manufacturing of organic and coloured jasmine rice that has a high demand in European niche markets. Thailand also needs to promote the unique characteristics of Thai jasmine rice to distinguish it from competitors and maintain premium prices. Entrepreneurs should also apply new technology and innovations such as Blockchain to help boost confidence in food safety among consumers.

Processed aquatic animals (shrimp, fish, squid)

It is estimated that EVFTA will boost Vietnam’s exports in this sector considerably in 2019. In order to deal with this, Thai entrepreneurs should study the dining trends of European consumers and create new products that match the market’s needs. They should also focus on conserving marine resources and complying with fishery laws.

Gems and jewellery

Germany is Thailand’s major exporter in Europe with possibilities of further expansion. However, Thai exporters should follow market trends and changes in consumer behaviour closely in order to design new products that satisfy their requirements. They should also make the most of Thailand’s reputation for excellent craftsmanship and quality.

Meanwhile, some Thai products exported to Vietnam may also face tough competition from EU products that will receive tax benefits from the EVFTA, such as automotive equipment and components, as well as alcoholic beverages.

Prior to the signing of the EVFTA, the World Bank ranked Vietnam as a lower-middle-income country based on per capita Gross National Income (GNI), due to which it receives GSP privileges from the EU, which also allows foreign investors in Vietnam to receive tax privileges. However, a TPSO study on Vietnam’s per capita GNI found that with the EVFTA, Vietnam will become an upper-middle-income country in the next seven to 11 years, which means there is a possibility that it will lose its GSP privileges from the EU.

Statistics on Vietnam-EU trade from 2014 to 2017 indicated an increase in trade value. In 2017, Vietnam-EU trade rose 11.6 per cent from the previous year with the value standing at $50.42 billion. The value of Vietnam exports recorded a 12.55 per cent increase to $38.3 billion, while imports rose by 8.73 per cent to $12.13 billion. In 2017, Vietnam had a favourable trade balance of $26.16 billion.

Data on Thailand-EU trade from 2014 to 2017 also indicated an increase, though the value of trade began declining from 2015 after Thailand lost its GSP privileges. In 2017, the value of trade rose by 10.96 per cent from the previous year with total trade valued at $44.54 billion. Export value stood at $23.71 billion, recording an 8.04 per cent increase, while imports stood at $20.83 billion marking a 14.47 per cent increase. Thailand had a favourable balance of trade by $2.89 billion.

The Asian Development Bank, meanwhile, estimates Vietnam’s total GDP growth at 6.8 per cent this year, versus Thailand’s estimated GDP growth of 3.9 per cent. The Economist Intelligence Unit estimates Vietnam’s GDP growth in the production sector for 2019 as follows: 2.8 per cent growth in agricultural sector, 7.4 per cent in industrial sector and 7.9 per cent in service sector.

Thailand growth in the agricultural sector, meanwhile, was estimated at 1.8 per cent, industrial sector at 4.3 per cent and service sector at 3.2 per cent.

The Commerce Ministry’s Trade Policy and Strategy Office will continue monitoring the situation and analysing the impact these agreements will have on Thailand in economic, trading and export aspects so Thai entrepreneurs can prepare for upcoming challenges.