External factors continue to be the major concern for the Thai
economy for the rest of the year and into 2017. The recovery of
the Thai export sector is still limited by the recent pattern of global
economic recovery that depends heavily on domestic consumption,
while the manufacturing sector remains stagnant. Moreover,
accumulating debt issues and heightened political uncertainty in
leading economies continue to put downward pressure on a recovery,
while monetary policy is starting to become less effective. Regarding
global interest rates, EIC predicts that the Fed will raise the policy
rate 2-4 times starting at the end of 2016 until the end of 2017,
about a 0.5%-1% increase. Despite these external risks, Thailand’s high
current account surplus and international reserves will help maintain
stability against global financial volatility. EIC forecasts the Bank of
Thailand will keep the policy rate at 1.5% until the end of 2017 due
to gradual economic recovery and low pressure on inflation, leaving
policy space in case of any future need. EIC predicts that the Thai
baht will gradually depreciate to 35.5 THB/USD at the end of 2016
and 37.0 THB/USD at the end of 2017.