BANGKOK (The Nation/ANN): Despite a decrease in global oil prices, the Thai economy will be worse off amid the Covid-19 situation, but technical growth will occur and net exports in the future could sustain Gross Domestic Product growth, CIMB Research Office head Amonthep Chawla said.
The oil price plummeted by as much as 30 per cent after Saudi Arabia announced it would increase production.
The Gulf state cancelled an agreement by Opec and Russia to limit oil production, and said it was prepared to increase production to 10 million barrels per day in order to bag a larger share of the market.
“This would impact the US oil industry, and the Federal Reserve will possibly lower its policy interest rate again in its March 17-18 meeting, ” he predicted.
“Also, the global economy will continue to fluctuate from the Covid-19 situation.”
In addition, the export of products related to the oil price, such as petro-chemicals, rubber or other agricultural products, would decrease sharply this year, Amonthep said.
Meanwhile, imports would contract at sharper rate than exports.
“Thailand’s net oil imports accounted for over 10 per cent of total imports. When the oil price decreases, total imports will decrease as well, ” he explained.
“The private sector would delay investment, causing a reduction in the import of machines and material.”
Industries that will benefit from a low oil price would be transportation, airline, and tourist consumption, due to a decrease in costs.
“However, these industries have been severely impacted by the Covid-19, and the advantage in this low-oil-price situation would possibly not compensate for their damages, ” Chawla said.
“Moreover, the Monetary Policy Committee would likely lower the interest rate to a yearly 0.75 per cent at its March 25 meeting, ” he predicted.
“The baht would weaken in the short term at 31 per US dollar this month amid investors’ concern, before strengthening in the future, ” Amonthep added. - The Nation/Asia News Network