KKP Sees Gloomy Economy in 2023, but Low Probability for Severe Recession

KKP Research under Kiatnakin Phatra financial group or Kiatnakin Phatra Bank Public Company Limited (SET: KKP) said the world economy in 2023 have higher risk to recession following an increase in exposure to inflation as energy prices increased along with interest rate hikes to slow down inflation. 

KKP Research estimates that the Thailand economy will take an impact from the world economy, causing the export sector to shrink. The firm expects Thailand’s economy in 2023 will grow no more than 2.8%, decreased from 3.6% in the previous estimate and also slower than this year. 

However, the expectation is that tourist arrivals will increase to 19.2 million next year from 10 million in 2022, indicating the difference between the recovery of service and manufacturing sectors next year. 

The world economy will encounter two negative factors; 1) if the world economy slowdown but not at the point of recession, the world will encounter the risk of prolonged inflation at a higher level or 2) if unthinkable events happening to the financial stability such as real estate, emerging market, liquidity or debt coverage in business sector, this will resulting in even worse recession. These will create new challenges to Thailand’s economy. 

KKP Research estimated that severe recession has low probability to occur due to the remaining liquidity in the market is still at a higher level than normal. If an unfortunate event occurs, there are financial tools to support the market from central banks, raising the possibility that the global economy would stay in stagflation. 

The next phase of economic policy would weigh carefully on benefits and impact on the economy, inflation, foreign exchange and financial stability to terminate the risk to the economy.