Thailand’s second quarter of 2023 saw a slowdown in economic recovery, with GDP progress falling from 2.6% year-on-year within the first quarter to 1.8%, as reported by the National Economic and Social Development Council on August 21. The figures fell considerably in need of consensus estimates of 3.1% and progress projections of two.9%. The economy’s quarter-on-quarter progress was a mere zero.2%, once seasonally adjusted.
As a result of these underwhelming progress figures and ongoing economic challenges, BMI – a Fitch Solutions firm – revised its full-year growth forecast for this yr, dropping from 3.0% to 2.8%. This falls beneath both consensus expectations of three.6% and the average of three.6% for 2010-19.
A nearer have a glance at the most recent figures reveals several weak factors within the economy. Government consumption noticed a four.3% annualised contraction in the second quarter, largely because of prolonged political uncertainty after the May basic elections. Restricted credit circumstances and declining investor sentiment have additionally negatively impacted funding development, which plunged from 3.1% year-on-year in the first quarter to zero.4% in the second.
On a brighter observe, internet exports made a positive contribution to headline growth, largely due to a larger contraction in imports, falling from zero.9% within the first quarter to 2.4% within the second. However, export growth additionally slowed, from 2.1% year-on-year within the first quarter to 0.7% in the second.
Looking forward, it seems Thailand’s financial rebound will be considerably lacklustre, given the ongoing tight credit score conditions, political uncertainty and exterior headwinds.
Tight credit circumstances will proceed to place stress on domestic activity. The Bank of Thailand (BoT) has already increased its key policy price by a total of a hundred seventy five basis points since beginning its climbing cycle over a 12 months in the past.
While the newest hike in August is thought to be the tip of the domestic tightening cycle, the credit cycle has already turned, with credit score progress now in contraction. Additionally, rates of interest will stay at a nine-year high of two.25% for some time, further suppressing credit growth. We count on price cuts to solely materialise in the first half of 2024.
The excessive borrowing prices may also have an result on households and companies. In the primary quarter of 2023, the household debt-to-GDP ratio stood at ninety.6%, which is excessive compared to peers, and excessive considering the country’s relatively lower GDP per capita of round US$8,000.
Political developments have also negatively impacted progress. Both shopper and enterprise sentiment deteriorated in July, with a knock-on impact on enterprise exercise. Manufacturing buying managers’ index (PMI) readings have been very unstable.
Finally, we forecast global financial development to gradual from three.1% in 2022 to 2.4% in 2023 which will maintain a lid on Thailand’s export performance.
Despite these challenges, Thailand’s tourism trade will assist underpin progress. The outlook for tourism has brightened considerably and the month-to-month knowledge stays supportive. The Tourism Authority of Thailand can additionally be optimistic as it’s expecting 28-30 million international guests this yr, reviews Bangkok Post.
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