Beware the risk of a stagflation worldIn the third quarter of this year, the world economy and investment climate began to deteriorate after strong momentum in the first half. This is a signal of stagflation -- the cost of production is trending upward while demand is pressured by negative factors such as the Delta variant and tightened economic policy. The governor of the Bank of Thailand has suggested that the Ministry of Finance borrow an additional one trillion baht to remedy the "income hole" caused by the loss of labour income of about 1.3 trillion baht since last year -- and this may reach 2.6 trillion baht next year. With public debt at 8.8 trillion baht (56% of GDP), our view is that there is still room for borrowing. However, we also believe monetary policy can be of additional help, since there is room for an interest rate cut while inflation is not a risk.

Source: Bangkok Post September 25, 2021 00:11 UTC