BANGKOK • Thailand ended last year with its weakest pace of growth in five years. It has little to cheer about this year too, as South-east Asia's second-largest economy faces headwinds from global trade tensions, a surging baht and rising political risks.
The export-reliant country has been sharply hit by the Sino-US trade conflict. Exports may fall 3.3 per cent last year before rising just 0.5 per cent this year, according to the Bank of Thailand (BOT).
A strong baht, which gained 8.3 per cent against the dollar last year and is Asia's top-performing currency, has added to the pressure on exports. Analysts say it could also hit tourism.
Thailand's growth has lagged behind that of its peers for years. The central bank, after several downgrades, predicts it will be just 2.5 per cent last year, the weakest pace since 2014 when the army seized power in a coup. The bank forecasts 2.8 per cent growth this year.
Some analysts are even more pessimistic.
Mr Somprawin Manprasert, chief economist of the Bank of Ayudhya, sees growth of just 2.4 per cent last year and 2.5 per cent this year. "The economy is still in a slowdown," he said, adding that poor exports are now hurting domestic activity.
Mr Charnon Boonnuch, an economist at Nomura in Singapore, said he expects only a sluggish economic recovery this year.
Thailand is a regional production and export base for global carmakers, but car shipments fell 6 per cent in the first 11 months of last year, prompting some factories to cut work hours, said Mr Surapong Paisitpattanapong, a spokesman for the Federation of Thai Industries' auto division.
"A profit from making one car is no more than 5 per cent, but our baht has gained 7 per cent to 8 per cent. So the more they export, the more they suffer losses," he said.
In a bid to fight currency strength, the BOT imposed various steps and cut its key rate twice last year to a record low of 1.25 per cent. But the baht remains firm, driven by the large current account surplus.
The central bank has said more measures are possible, adding that market intervention may be difficult as Thailand risks being added to a United States watch-list of currency manipulators.
The government has been trying to lift growth by infusing more funds, including a US$10 billion (S$13.5 billion) stimulus package, but with little impact.
There was also a four-month delay in the 2020 budget owing to a delay in forming the Cabinet, after the election in March saw former junta leader Prayut Chan-o-cha returning to office as Prime Minister with a slim majority in Parliament.
Political uncertainty is rising after thousands of people recently joined the biggest protest since Mr Prayut's 2014 coup, following a move by the authorities to ban a party that has rallied opposition to the government.
This month, a court will rule on the dissolution of the Future Forward Party, which could again spark protests.
"The economy should be better (this year), albeit not much, if there is no fresh political chaos," said Mr Sanan Angubolkul, vice-chairman of the Board of Trade of Thailand.
Mr Visit Limluecha, vice-chairman of the Thai National Shippers' Council, said there are no positive signs for the economy yet. "I see no light at the end of the tunnel."