Thailand’s economic growth may face challenges this year after experiencing a weaker-than-anticipated fourth quarter, during which consumption sharply declined despite a government cash handout intended to boost sluggish growth, according to Bank of Thailand Governor Sethaput Suthiwartnarueput.
The central bank had previously projected a 2.9% expansion for the economy this year, which is below the Ministry of Finance’s estimate of 3%. In an interview with Reuters, Mr. Sethaput acknowledged, “I must point out that there are some downside risks to that figure.”
He estimated that the economy grew by 2.7% in 2024, with the growth rate in the final quarter expected to exceed 3%, though it would still fall short of projections.
The National Economic and Social Development Council is set to announce the official growth figures for 2024 on February 17.
Mr. Sethaput noted, “The impact of the handouts and the stimulus was less than we anticipated. The funds distributed were sometimes used to pay off debts, rather than stimulate consumption.”
These comments marked his initial remarks this year regarding the growth outlook and the efficacy of the government’s notable 500 billion baht consumption stimulus policy. The second phase of cash handouts to 3 million senior citizens aged 60 and over was initiated earlier this week.
The government aims to implement the third phase of its “digital wallet” program in April, targeting significant growth. This initiative, a central campaign promise of the Pheu Thai Party during elections, was first launched last September after several delays.
According to Mr. Sethaput, the Bank of Thailand maintains a generally neutral monetary policy stance, forecasting inflation to rise to 1.1% this year, which would keep it within the target range of 1% to 3%. However, the central bank is still concerned about the volatility of the baht.
“We believe that, overall, the current policy rate is suitable for achieving the right balance,” he stated. “That said, we are ready to adjust if circumstances change.” Last month, the central bank kept its key interest rate at 2.25% following an unexpected rate cut in October, with the next review scheduled for February 26.
Trump’s return adds uncertainty
The possibility of Donald Trump returning for a second term as US President has introduced further uncertainty, although it is too early to determine its impact on Thailand, the Governor remarked.
“It is highly uncertain, and we’re still in the early stages,” Mr. Sethaput said, who is expected to complete his five-year term in September.
Thailand aims to take advantage of a projected shift in supply chains resulting from tariffs threatened by the new US administration.
Mr. Sethaput also expressed the central bank’s cautious stance on cryptocurrency, even as the government pushes for its use as an alternative payment system, including a proposal for a sandbox environment on the tourist island of Phuket.
He emphasized that cryptocurrencies lack stable value, their underlying technologies are not very scalable, and they can lead to a fragmented payment system, noting that the existing PromptPay digital payment platform is functioning effectively.
“The advantages of utilizing cryptocurrency must be crystal clear, as there are significant risks associated with making that transition,” he warned.
