The world economy showed signs of slowing more clearly from inflation, tight money
EIC estimates that the world economy shows signs of a clearer slowdown. from inflation and tightening financial conditions. However, the Thai economy continued to recover from domestic consumption and the service sector after opening the country. The policy interest rate is expected to reach 1.25%.
The world economy has shown signs of slowing and many economic indicators reflect increasing risks. Going forward by the US economy entered a technical recession in the second quarter of the past.
Although employment is still at a good level, European energy supply risks from cuts in Russian natural gas deliveries and inflation could lead to a contraction in the European economy in the third quarter of this year.
Decline in worlds economy: World Consumer Confidence
Amid a significant decline in world consumer confidence following accelerating inflation. Which reduces purchasing power and the tightening of monetary policy. On the side of the problem of disruption of global supply, although it began to unravel. But the world economy risks especially the tough stance between China and the United States in the case of Taiwan. It also underscores the ongoing trend of global supply chain decoupling in the post-COVID world. Increased risk of economic recession.
At the same time, the inflation outlook may pass its peak in the 3rd quarter and will begin to slow down in line with the slowdown in energy prices. And slower world economic activity in both manufacturing sectors following a slowdown in global demand. And in the service sector due to the gradual exhaustion of outstanding demand and seasonal factors. As a result, the US Federal Reserve (Fed).
It is likely to raise the policy interest rate at a slower rate going forward. As a result, the volatility in the world money market has decreased and the return on risky assets has begun to recover.
Slow Worlds Economy and Countries Recovery Planning
The country’s economy continues to recover after opening the country. Although inflation is still a pressure factor and will affect the purchasing power of households more widely. The country’s economy in the second quarter expanded by 2.5% due to the acceleration of domestic consumption. The recovery of the service sector, especially the tourism sector and the wholesale and retail trade. and income in the agricultural sector that expanded favorably.
Going forward, the opening of the country to foreign tourists will make the tourism and service sectors become more important drivers of the economy. With the EIC projecting the number of foreign tourists entering.
It estimates that the number of foreign tourists next year may rise to near 28 million in line with the trend of Chinese tourists that are expected to increase more next year if the Chinese government starts to relax border measures.
On the consumption side, there was a recovery trend following the return of economic activity to near normal. But there are still risks going forward from the high inflation outlook (7.6% in July).
Starting to see an acceleration in general product prices. (Basic goods) from passing the cost of the business sector to the increased consumer. While the minimum wage is likely to increase at the end of the year which will affect labor costs.
In the business sector and the increase in product prices. According to the EIC survey (EIC world economy Survey 2022), most households have problems with insufficient income, increased expenses from inflation. And more than half have problems with debt repayment. This could be further affected in a rising interest rate environment.
The EIC expects the MPC to gradually raise interest rates in the remaining two meetings this year. The policy interest rate at the end of the year will rise to 1.25% as inflation is likely to be near its peak. The baht appreciated and the economic conditions in the fragile group that are still recovering slowly. and to be in line with the economic recovery in the country that is clearly starting to recover.
However, the rate hike will be gradual by 0.25% per round in the remaining 2 meetings of the year in order to maintain the economic status. In the fragile groups so that they do not suffer from the double impact of inflation. And the debt burden will increase including income opportunities that may be affected by interest rate hikes.