Thailand’s second quarter of 2023 saw a slowdown in economic recovery, with GDP progress falling from 2.6% year-on-year in the first quarter to 1.8%, as reported by the National Economic and Social Development Council on August 21. The figures fell significantly wanting consensus estimates of 3.1% and progress projections of 2.9%. The economy’s quarter-on-quarter progress was a mere zero.2%, as quickly as seasonally adjusted.
As a result of these underwhelming progress figures and ongoing economic challenges, BMI – a Fitch Solutions firm – revised its full-year progress forecast for this yr, dropping from 3.0% to 2.8%. This falls below each consensus expectations of 3.6% and the typical of three.6% for 2010-19.
A closer take a look at the newest figures reveals several weak points within the economy. Government consumption noticed a four.3% annualised contraction within the second quarter, largely as a end result of extended political uncertainty after the May basic elections. Restricted credit conditions and declining investor sentiment have additionally negatively impacted funding growth, which plunged from three.1% year-on-year in the first quarter to zero.4% in the second.
On a brighter notice, web exports made a positive contribution to headline growth, largely due to a greater contraction in imports, falling from 0.9% within the first quarter to 2.4% within the second. However, export development also slowed, from 2.1% year-on-year in the first quarter to zero.7% within the second.
Looking forward, it appears Thailand’s financial rebound might be considerably lacklustre, given the continued tight credit circumstances, political uncertainty and external headwinds.
Tight credit conditions will continue to put pressure on home exercise. The Bank of Thailand (BoT) has already elevated its key policy fee by a total of a hundred seventy five foundation factors since starting its climbing cycle over a 12 months ago.
While the latest hike in August is regarded as the end of the domestic tightening cycle, the credit score cycle has already turned, with credit score development now in contraction. Additionally, rates of interest will remain at a nine-year high of two.25% for a while, additional suppressing credit score growth. We anticipate rate cuts to solely materialise within the first half of 2024.
The high borrowing prices may even have an result on households and companies. In the first quarter of 2023, the household debt-to-GDP ratio stood at ninety.6%, which is excessive in comparison with friends, and high contemplating the country’s relatively lower GDP per capita of around US$8,000.
Political developments have additionally negatively impacted growth. Both consumer and enterprise sentiment deteriorated in July, with a knock-on effect on enterprise activity. Manufacturing buying managers’ index (PMI) readings have been very volatile.
Finally, we forecast world economic growth to sluggish from 3.1% in 2022 to 2.4% in 2023 which is able to maintain a lid on Thailand’s export efficiency.
Despite these challenges, Thailand’s tourism business will help underpin growth. The outlook for tourism has brightened considerably and the month-to-month information remains supportive. Steps of Thailand can additionally be optimistic as it is expecting 28-30 million international guests this yr, reports Bangkok Post.
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