“In the latter half of 2018, the government allocated Bt18 billion to stimulate the economy. We expect the incoming government to at least match last year’s spending amid the ongoing slowdown in economic growth and decline in exports,” Yunyong Thaicharoen, first executive vice president and head of the EIC, said on Monday.

The economist said the policies will likely include measures proposed by the Phalang Pracharat Party and the welfare card scheme to boost spending by low-income earners.

However, Yunyong said that the next government should strike a balance in its budget spending between short-term economic stimulus and long-term policies to increase the digital capabilities of companies and the workforce.

Public investment in infrastructure is expected to be one of the key drivers of economic growth in the second half. Although it has lowered year-on-year forecast of public investment growth from 4.1 per cent in January to 3.7 per cent today, the EIC still expects public investment in infrastructure to grow by 7 per cent from the same period last year.

However, the slow formation of the new government will likely delay release of the new budget. This, Yunyong said, could lead to delay in public investments in new projects towards the end of the year.

The EIC predicted that Thailand’s GDP will grow by 3.1 per cent year on year, lowering its economic growth projection of 3.3 per cent made in May. The US-China trade conflict was cited as the key cause for the decline in exports.

The unit predicted that this year’s exports will decline by 1.6 per cent year on year. A decrease of 1.6 per cent will mean a US$40-billion loss in export value compared to last year. If the EIC’s projections are correct, Thai exports in 2019 will fall to their lowest point since 2015.

Another factor affecting Thai exports is the strong baht, which has appreciated by up to 13 per cent on average against Thailand’s key trading partners in the past five years. Research by EIC has suggested that the strengthening of the baht has had a direct impact on exports as it makes Thai goods less competitive compared to its competitors.

Yunyong said the Thai currency has appreciated by 8 per cent against the Vietnamese dong this year, and by 23 per cent in the past five years. In correlation to this, when comparing Thai and Vietnamese exports of similar goods to the same destinations, Vietnam’s exports of these goods grew by 38.4 per cent in 2018 while Thai exports of these goods declined by 29 per cent.

The EIC predicts that the baht will valued at between Bt30 to Bt31 per US dollar for the rest of 2019.

To cope with this problem, Yunyong suggested that the government encourage firms to make more overseas investments to reduce the level of Thailand’s current account surplus. He added that exporters, in particular, should look to expand their production base abroad to mitigate the risks from the country’s decline in exports as a result of the US-China trade war.

The fall in exports has a wide-ranging impact on Thailand’s economy, Yunyong said. When exports decline, private investment figures will also fall as a large portion of total private investment is directed to export-oriented firms. The EIC has adjusted down its private investment growth forecast from 4.1 per cent in January to 3.7 per cent.

Furthermore, decline in domestic spending is also expected. Yunyong expects unemployment from the manufacturing and agricultural sectors to rise as a result of the downtrend in exports. The rise in unemployment in these sectors will negatively impact the level of domestic spending, he said.

The EIC expects domestic spending to grow by 3.9 per cent year on year in 2019, compared to 4.6 per cent in 2018.

Another factor that may lead to low domestic spending is the rising level of household debt, which currently accounts for 78.7 per cent of the Kingdom’s GDP, increasing by almost 1 per cent in the past six months, according to the EIC.

Yunyong added that the rising level of household debt is a key reason why the Bank of Thailand (BOT) is most likely to hold the policy rate at 1.75 per cent for the year.

The central bank, he said, is still in a hawkish stance, valuing monetary policy normalisation and the creation of policy space. Hence, unless the baht gets unexpectedly stronger and economic growth slumps at an even sharper rate, the BOT is unlikely to lower the policy rate, he said.

SRT acting governor Worawut Mala said details of the project will be discussed between SRT’s working committee and CP Holding and its partners, and the conclusion of Friday’s meeting will be attached to the contract.

“We are confident the contract will be signed within July, and if a conclusion cannot be achieved at Friday’s meeting, then we still have time to hold another discussion next week. If CP agrees with SRT’s plan for the handing over of land, we will hold another meeting to discuss further details and redo the contract before it is signed. Cabinet approval will not be required for this conclusion, because the project has already been approved,” he said.

As for whether the land earmarked for the construction is ready for takeover, Worawut said SRT will hand over 8,000 of the 10,000 rai required after the contract is signed. The remaining 20 per cent of the land cannot be handed over immediately because it is facing encroachment issues.

SRT recently earmarked Bt200 million to be used for evicting people living in the area – a job it previously thought would take two to three years to complete. SRT officials are currently surveying the actual demands of the land squatters.

Sujit Chaosirikul, SRT’s deputy governor, said two key topics will be discussed on Friday, namely the plan for handing over the 10,000 rai and details on a benchmark indicating when the high-speed trains will be in service.

“The project has made a lot of progress, and if a conclusion can be made on these two topics, SRT will be able to set a date for the signing of the contract. We expect the contract to be signed within July for sure,” he said.

In trading worth Bt65.33 billion, foreign and individual investors continued to show net buying of Bt1.86 billion and Bt1.55 billion respectively.

Sarawut Taechowchawalit, research manager at RHB Securities (Thailand), said that the SET index had dropped along with stock markets in the rest of Southeast Asia, Europe and the United States, as investors waited to see whether US Federal Reserve president Jerome Powell would cut the interest rate cut in his July 10-11 address to Congress on financial and economic policy.

Sarawut forecast the market would stabilise maintain a support level of 1,707 points on Wednesday.

He believed that the market would maintain or drop on Wednesday according to the support index at 1,707 points.

Durian totalled 48.51 per cent of trade under the FTA worth US$1.19 billion (Bt36.68 billion) between January and May.

Auramon Supthaweethum, Commerce Ministry director of trade negotiations, said the Thai market has benefited ever since China scrapped tariffs on Asean-grown vegetables and fruit in 2003. The value of the market increased by 1,312 per cent between 2003 and 2018, from $136.5 million to $1.92 billion.

Thailand is the largest exporter of fruit and vegetables to China. Last year, $909.6 million in Thai fruit and veg was exported to China, representing a growth rate of 784 per cent since the FTA came into effect. However, overall trade under the FTA dropped 33 per cent in the first five months of 2019, to $361.1 million.

Cassava makes up 96 per cent of vegetable exports, according to official figures, with beans and dried veg accounting for the rest. Meanwhile the fresh fruit market has grown 2,841 per cent to around US$1.01 billion, lying third behind only Hong Kong and Chile. In the first five months of 2019, a 123 per cent growth in trade was driven by exports of durian, followed by longan, mangosteen and young coconut.

Thailand has always enjoyed a positive balance of trade in fruit and veg with China. Thailand had a trade surplus of Bt100.22 million before the FTA deal, but this has been exceeded by more than eight times in just the first five months of 2019, with a trade surplus of Bt854.75 million.

“Many countries, including Thailand and China, are now paying more attention to quality control and consumer safety, Auramon noted.

“Thai exporters’ fruit and vegetables now pass universal standards such as the Good Agricultural Practice test, Pest Risk Analysis, Maximum Residue Limits test, and Good Manufacturing Practices test,” he added.

“To avoid the risk of losing opportunities to exporting fruit and veg to China, we urge Thai farmers and traders to pay close attention to said standards, including farm and packing house registration, which can be used to trace produce when any problems occur.”

Worapol Sokatiyanirak, former chair of the National Legislative Assembly’s Finance, Banking, Financial Institute and Capital Market Sub-committee, delivered the warning during his speech on “Thailand’s Strategy to Deal with Global Economic Crisis” at the National Institute of Development Administration.

Worapol said the first challenge was the ongoing US-China trade war, which could escalate into a currency war and impact the global investment atmosphere – especially for export-reliant countries like Thailand.

The second challenge for Thailand is the economic crisis in Europe, which stems from the debts of southern European countries, problems surrounding immigration, the low employment rate, and instability of the EU after Britain leaves the Union.

The third is Thai household debt that has risen by over Bt1 trillion to Bt12.8 trillion in the last year and now accounts for 78.6 per cent of the country’s GDP.

Worapol also pinpointed migration of manufacturing to Vietnam and Indonesia due to Thailand’s slow economic growth. To counter the trend, the government may need to reduce corporate tax for international companies from 20 to 12 per cent to attract more foreign investors, he said.

He also urged the new government to curb the strong baht in the next six months. This could be achieved, he said, with a 0.25 per cent cut in the policy interest rate to accelerate economic growth, along with clarification of long-term policies on infrastructure investment, networking with neighbouring countries, boosting agricultural products’ value, and building bases for the digital, creative and health economies.