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27 Oct 2020

Econ Digest

Keep an eye on the 2020 US presidential election while assessing the direction of the US and Thai economies


Regarding the 2020 US presidential election held on November 3, 2020, KResearch views that if Joe Biden becomes the new President, the US economy may grow at least 3.0% in 2021, which would be higher than the projected growth of less than 2.0% in the case where Donald Trump secures his reelection due to his administrative constraints. However, the outcome remains to be seen until the official announcement of the US presidential election results prior January 20, 2021.    


           If the endorsement of the US presidential election results is delayed, it is expected that the money and capital markets will be affected over the short term. The US dollar, being a safe haven currency, may strengthen while risky assets will likely experience increased sell-off. Over the medium- to long-term, in the case that Biden wins the election, the US Dollar may soften in line with the signals of the Federal Reserve (Fed) for more monetary easing, and it will likely be pressured further as a result of the US fiscal deficit. On the contrary, if Donald Trump wins the election, it is expected that money and capital markets will fluctuate in the short term, while the trend of the US fiscal deficit may not be as severe as in the case that Joe Biden wins, and the US government bond yield may not accelerate. However, the risk factors from the frequently changing stances of President Donald Trump may bolster the US dollar at some points, despite the US dollar being pressured by the Fed’s signals of easing monetary policy in the long term.             


             Regarding the direct impact of the US election on Thailand’s real economic sector during 2021, KResearch sees that if Biden becomes the new US President, it is expected that the US economy will improve, and this may help bolster the exporting of Thailand’s key consumer products to the US. As a result, overall Thai shipments to the US may grow within a range of 10-12% to approximately USD36.7-37.3 billion during 2021, bettering the 6.4% growth projected for 2020. However, if President Trump is re-elected, it is expected that Thai exports to the US may grow at less than 5% to roughly USD35.0 billion in 2021. Most Thai shipments to the US will likely grow at a meager pace, including luxury products in particular. If either Biden or President Trump wins the election, Thailand may indirectly be affected by steady capital outflows from China via aggressive US foreign policy towards Beijing. Nevertheless, close attention must be paid to the US-China trade war because it can escalate if President Trump is re-elected, but it may not elevate in the short term in the case of Joe Biden’s election.

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