CIMB Thai Bank has adjusted its Thailand GDP forecasts for 2023 to 3% and for 2024 to 3.5% owing to a slowdown in the Chinese economy.
Amonthep Chawla, head of research at CIMB Thai Bank, said the projections have been revised as a deceleration in the Chinese economy is affecting Thailand’s exports.
Instead, he said, growth will possibly be driven by tourism-related services and strong purchasing power among the upper-middle class, alongside anticipated government stimulus in the second quarter of 2024.
Research indicates that Thailand’s economic recovery is uneven, with low purchasing power among low-income households, exacerbated by drought and high household debt. While Thailand’s tourism industry remains robust, most of it is concentrated in major tourist cities.
Thailand’s economic outlook for 2024 depends on the global economy and government policies, which could impact GDP forecasts related to exports, tourism, private and public consumption and investment.
Here are some key points:
The Good
- The US may avoid a soft-landing scenario, and China could implement stimulus policies to drive growth, mitigating issues related to problems of corporate debt and property bubbles.
- Thailand’s exports could rebound quickly, and tourist arrivals could exceed expectations.
- Government stimulus policies aimed at injecting cash into low-income households and stimulating consumption could be implemented by the end of Meanwhile, foreign direct investment (FDI) may rise thanks to political stability and improved investor confidence.
The Bad
- The US economy could slow down due to higher interest rates and inflation, while China could experience a sharper slowdown driven by corporate debt defaults and property market instability.
- Thailand’s exports are projected to grow modestly due to weak global demand, but tourism may continue to remain a growth driver.
- Government stimulus policies might be implemented by the second quarter of 2024 after budget approval, potentially leading to increased consumption and investment. FDI could relocate to Thailand.
The Ugly
- The US could experience slowing economic growth with a technical recession in the first half of 2024, while China might experience a sharper slowdown but still maintain over 4% growth in
- Exports could drop due to weak global demand and supply chain disruptions, while tourism revenue may grow slower than expected.
- Delays in government stimulus policies until the second half of 2024 could worsen consumption among low-income households already affected by a severe drought situation.
The Bank of Thailand could halt the rate hike cycle at 2.25% as a pre-emptive measure against high inflation resulting from the government’s stimulus policies, especially the minimum wage increase. Additionally, the Thai baht may strengthen against the US dollar due to anticipated US rate cuts in 2024 and more tourism revenue in Thailand.
However, several risk factors could potentially hinder Thailand’s economic expansion, namely:
- Decoupling: The complete separation of the US and Chinese economies, driven by trade wars, technological conflicts and supply chain disruptions, could significantly impact Thailand’s exports and the Asean region as a whole.
- De-dollarisation: Reducing reliance on the US dollar in favour of other currencies like the Chinese renminbi, may introduce more exchange rate volatility.
- Disinflation: China’s deflationary pressures could lead to lower prices of goods and divergent monetary policies in the Asean region compared to the US, which still faces inflationary pressures and may hike interest rates.
- Digitization: Thailand’s move into the digital era may pose challenges for small and medium-sized enterprises (SMEs) in adapting to technologies like blockchain. This could worsen inequalities and require government intervention
- Democracy Movement: Political movements advocating for a new Constitution emphasising greater democracy may introduce political tensions or conflicts that impact investor confidence.
Source : THE NATION THAILAND
September 11, 2023
