Outlook Quarter 1/2018
- Economic outlook in 2018
- Bull - Bear: Oil Prices
- In focus: Data Scientist: Hottest Job of the Digital Age
- Box: How can big data create value for an organization?
- Summary of main forecasts
Global Economic Outlook in 2018
The global economy will expand in 2018 in synch with continued growth across most regions, thanks to continuing improvement in trade and robust private consumption. The ongoing recovery in trade means exports will continue to buoy growth in many regions. Additional momentum will come from solid domestic consumption, as labor markets in major economies head toward full employment. However, the global growth recovery will continue with relatively low inflation (goldilock). Oil prices have already turned up, but are not able to lift prices for many agricultural commodities, especially crops. This will affect purchasing power in some sectors. Moreover, higher employment has not yet translated into higher wages, and productivity growth still lags. Thus, the global inflation rate and inflation rates of major economies are likely to begin slowly rising from their long-subdued levels. Even though major economies, led by the U.S., have finally commenced the tightening of monetary policy, normalization is likely to continue to be gradual and will depend on labor market conditions and inflation. Both short-term and long-term interest rates are clearly on an upcycle, following policy rate hikes and balance sheet normalization by the Fed as well as the taper of quantitative easing by the European Central Bank (ECB).
Global economic risks in 2018 will pivot on three key factors: the outcome of tax cuts and fiscal impulse in the U.S., Eurozone political stability, and the slowing of economic growth and debt situation in China. The Trump administration’s tax reform will have an impact on the U.S. economy as well as international capital flows involving both direct and portfolio investment. Although the tax reform bill has finally been passed, the details on mega infrastructure projects promised by Trump have yet to be revealed. A delay in massive infrastructure investment projects may still affect business sentiment in the U.S. as well as the U.S. dollar and other major currencies. Regarding political stability in the Eurozone, ongoing pressure could result in sporadic threats to regional unity and governments in several major countries still face problems. The issues that need monitoring in 2018 include Germany’s new election following Angela Merkel’s failure to form a coalition government; Catalonia’s call for independence from Spain; Italy’s general election by March 2018; and Brexit negotiations set to conclude before March 2019. As for China, GDP growth is likely to slow as policy changes take hold in the wake of the 19th National Congress of the Communist Party of China, which took place in October 2017. China’s revised economic policy aims for “quality” of growth, which will increase the impetus to remedy rising problems that result from high private-sector debts. Elsewhere, other concerns include geopolitical risks on the Korean Peninsula, tensions in the Middle East, and the possibility that rising inflation could lead to a faster-than-expected tightening of monetary policy. These risks may abruptly impact global financial markets, currencies and economic growth going forward.
Economic Intelligence Center (EIC) forecasts the Thai economy to grow 4.0%YOY in 2018 as private investment returns. A stronger global economy will help Thailand’s exports and tourism continue to grow from the preceding year. Global momentum will also help nudge private investment toward positive growth, following several months of rising capacity utilization in export-related sectors. Private investment will gain support from other factors as well: large retail businesses opening new branches; the launch of new real estate projects as public infrastructure spending doubles; and spending on technology by large corporates as they move into the digital age. Investment in transportation, warehousing and online payment technology shows bright prospects, given the rise of e-Commerce businesses in the past two years. A key upside to our forecast is investment by MNCs in the government’s Eastern Economic Corridor development project (EEC).
Consumer markets are strong only in patches. Although private consumption is set to grow, it remains reliant on the purchasing power of certain groups, namely, high-income earners, and car buyers who took part in the first-car tax scheme. The latter group will have paid off their debts in the coming year. Goods and services targeting the middle class can therefore still do well. In addition, after the national mourning period, various activities will resume as normal including social activities, entertainment events and media, as well tourism both among Thais and foreign tourists. However, the majority of consumers are still squeezed by a stagnant labor market and high level of household debt relative to income, affecting access to consumer credits.
EIC expects 4 key economic risks in 2018. Firstly, the low prices of agricultural products, owing to surplus productions, will affect the majority of household incomes, further dampening the already low purchasing power. Secondly, a stronger baht will have an impact on revenues in baht and exporters’ competitiveness. Thirdly, labor shortage (both migrant labor and skilled workers) has the potential to disrupt investment recovery. Lastly, political factors may result in economic costs. These include tensions in the Korean peninsula, Donald Trump, and political uncertainty in many EU countries.
Bull - Bear : Oil price
Bear - We expect the price of crude in 2018 Q1 to remain unchanged from the previous quarter, given the presence of excess supply. Moreover, the agreement among OPEC and non-OPEC producers to extend their production cut until the end of 2018 has already been priced in, as reflected in upward price adjustments toward the end of 2017. Meanwhile, OPEC’s attempt to push prices up further will be made difficult by U.S. shale-oil producers, who are ready to supply more as long as the price averages around their breakeven level of USD 50-55 per barrel. That being said, it is important to closely monitor geopolitical risks in the Middle East, which may strain supply and cause prices to surge.
In focus: Data Scientist: Hottest Job of the Digital Age
While big data is becoming more accessible and less costly, one of the main challenges for any organization today is to find suitable persons to handle enormous amount of data that is continually updated. Data Scientists have become part of the main mechanism driving an organization’s success. However, despite high demand from both the private and public sectors, there is low supply of qualified Data Scientists in the labor market. So, the questions are who is Data Scientist, what are their job descriptions and how can ones prepare to become one?