Following a lackluster GDP growth rate of only 1.5% in the initial quarter, trailing behind neighboring economies, the Thai government is gearing up to ramp up efforts to stimulate economic expansion.
In response to pressing concerns, the first economic cabinet meeting convened last week with plans for weekly follow-up meetings.
Prime Minister Srettha Thavisin expressed apprehensions about a potential recession, primarily highlighting vulnerabilities in the service and tourism sectors.
While opinions from the private sector vary regarding recession risks, there are reservations about the tourism sector’s capability to sustain the economy long-term without a clear direction for development.
Potential Recession Unlikely
Membership within the Federation of Thai Tourism Associations (Fetta), comprising key tourism bodies, view the tourism industry as insufficient to single-handedly rescue the economy from a potential downturn.
Sisdivachr Cheewarattanaporn, the president of the Association of Thai Travel Agents and a Fetta member, pinpointed longstanding unaddressed supply-side issues as hampering the country’s long-term competitiveness.
The set target of 3.5 trillion baht in tourism revenue this year poses a tangible challenge, especially with some international markets experiencing economic challenges. For instance, many Chinese travelers are tightening their travel budgets due to economic stagnation in the mainland, noted Mr. Sisdivachr.
While the government aims for 8 million Chinese arrivals this year, a more realistic projection suggests 7 million visitors with stable expenses due to evolving travel patterns.
Nonetheless, the likelihood of Thailand experiencing a recession this year could be mitigated if additional stimulus measures are directed towards other pivotal sectors like industry and exports, as proposed by Mr. Sisdivachr.
Guarded Optimism from Authorities
Both the Finance Ministry and the National Economic and Social Development Council (NESDC) maintain a positive stance, anticipating reduced chances of a recession this year. They foresee an uptick in growth for the upcoming months.
An anonymous ministry source highlighted that despite the modest 1.5% growth rate in the first quarter, there are hopeful signs of acceleration in the following quarters, potentially surpassing a growth rate of 2.4% by the end of 2024, with the peak expected in the final quarter.
Positive Indicators
Citing recent April data, the source underscores promising growth momentum compared to the initial quarter. Notably, tourist figures surged by 4% month-on-month in April.
April also reflected a rebound in export growth, registering 6.8%. Although industrial production data is pending release, there are positive expectations for strong growth in this sector, as highlighted by the source.
Key risks moving forward encompass China’s economic recovery hindered by the real estate sector, geopolitical tensions between major global players such as China and the US, alongside conflicts in the Middle East, and the aspect of government stability.
Recovery and Growth Forecasts
The NESDC, which released the first-quarter growth figure, anticipates an annual expansion of 2.5% this year, within a range of 2-3%, marking an improvement from the 1.9% growth rate in the previous year.
Faster disbursement of the government’s investment budget following the implementation of the fiscal 2024 budget is anticipated to provide a supportive factor this year, post a seven-month delay.
The NESDC projects that accelerated government investment outflows, a recovering tourism sector, increased domestic consumption—especially in services—and a rise in private investment supported by capital goods imports and investment promotion initiatives in industrial zones will drive economic growth.
Economic risks include heightened household and business debts with rising interest obligations, leading to a cautious lending environment by financial institutions. On the global front, risks are posed by economic and trade volatility alongside geopolitical tensions, alongside shifts in the monetary policies of major economies and a possible slowdown in China’s growth.
Mitigating Recession Concerns
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, dispelled immediate recession fears, noting that the economy hasn’t shown signs of contraction over recent quarters. Factors such as delays in government formation and budget disbursement contributed to the relatively low first-quarter GDP growth of 1.5%.
The chamber expects the recent economic ministers’ meeting to yield new stimulus measures, projecting economic improvements in the latter half of the year, especially in the tourism sector, with prospects of meeting the anticipated target of 36 million foreign arrivals.
Anticipated budget spending for fiscal 2024, accompanied by potential contributions from the digital wallet initiative in the final quarter, are poised to bolster economic expansion across all sectors.
Key economic variables to monitor include domestic politics and geopolitical issues, crucial influencers in determining whether Thailand can achieve its growth targets, according to Mr. Sanan.
