SCB EIC Lowers Thailand’s Economic Growth Forecast due to Slumping Exports
The SCB EIC has revised down Thailand’s economic growth forecast for 2023 to 3.1% from the previous 3.9%. This downward revision is a result of a significant contraction in Thai exports, which poses a risk to the country’s economy in the future. The government is advised to take measures to enhance competitiveness and foster long-term growth.
The recent cut in Thai GDP growth by the government-bank is expected to be reflected in the stock market, as brokers have already taken note of the situation. To stimulate economic growth, an exciting campaign is being launched.
Due to slower inflation, it is anticipated that the MPC will maintain interest rates during the September 27 meeting.
SCB EIC’s economic forecast for 2023 has been revised down to 3.1% from the previous 3.9%, based on the second quarter data which indicates a much lower-than-expected performance. The decline in exports of goods continues to be a major factor, although private consumption and the tourism sector remain as the main driving forces. It is estimated that 30 million foreign tourists will visit Thailand, with a particular increase in tourists from the Middle East, making them a new target group. As a result, the service sector is expected to continue its recovery, adding stability to the labor market.
Looking ahead to 2024, SCB EIC projects a growth rate of 3.5% for Thailand’s economy. This is driven by a recovery in foreign tourists, expected to reach 37.7 million, expansion of private investment following the trend of investment approvals from the Office of the Board of Investment, and a rebound in exports.
Inflation is expected to have an upward trend, mainly driven by increasing energy and food prices. However, it is projected to remain within the target range of 1.7% and 2% in 2023 and 2024 respectively. Core inflation is expected to remain stable at 1.4% and 1.5% in 2023 and 2024.
SCB EIC expects Thailand’s policy interest rate to increase further at the Monetary Policy Committee (MPC) meeting at the end of September 2023. This would mark the peak of the interest rate cycle, reaching 2.5%. The decision to increase rates is influenced by the Thai economy’s potential for continuous expansion and the upward trend in inflation due to rising energy and food prices. A positive real policy interest rate will contribute to long-term economic and financial stability by addressing financial imbalances that occurred during a prolonged period of low interest rates.
However, Thailand’s economy still faces considerable uncertainty going forward. This includes the impact of the slowing Chinese economy, which affects Thai exports that rely heavily on the Chinese market and supply chain. Furthermore, the ongoing drought crisis poses risks to crops such as off-season rice and sugarcane. Nonetheless, stable agricultural product prices are expected to partially offset the impact of reduced productivity.
The uncertainty of government policy is another factor, particularly concerning large spending stimulus measures such as the introduction of a digital wallet. While these measures could temporarily boost the Thai economy beyond 5%, they come with long-term fiscal costs.
The use of substantial government funding for short-term economic stimulation may undermine fiscal sustainability in the long run. This could lead to the country’s public debt exceeding the debt limit of 70% of GDP sooner than projected. Such a scenario would limit fiscal space to accommodate future uncertainties and potentially threaten the country’s fiscal stability.
In light of these challenges, SCB EIC emphasizes the importance of the following economic policies:
- Increase competitiveness: This entails promoting fair competition both domestically and internationally. Measures such as strengthening the Trade Competition Act and joining the Organization for Economic Co-operation and Development (OECD) can enable Thai businesses to export more goods and services, elevating their significance in the global supply chain.
- Promote long-term sustainable growth: Achieving this involves restructuring the tax system to reduce inequality and align incentives for businesses and households.
SCB EIC cuts Thailand’s economic growth (GDP) forecast in 2023 down to 3.1% from the previous 3.9% due to a severe contraction in Thai exports. Ready to reveal that China’s economy is slowing Drought crisis and digital wallet It is a risk factor that will put pressure on Thailand’s economy in the future. Advise the government to increase competitiveness and promote the long-term growth of the Thai economy
The Government-Bank cut Thai GDP growth to low growth in 2023. Brokers believe the stock market has already realized this. An exciting campaign to stimulate the economy
Expect the MPC to hold interest rates at the September 27 meeting due to slower inflation.
SCB EIC cuts the economic forecast for 2023 to 3.1% from the previous 3.9% based on 2nd quarter 2023 data which is much lower than expected. and exports of goods which continued to shrink sharply But there are still main drivers of private consumption and the tourism sector. Foreign tourists traveling to Thailand are recovering well, estimated at 30 million people.
Especially tourists from the Middle East who are accelerating and are a new target group of tourists. As a result, the service sector will continue to recover, reducing fragility in the labor market.
In this regard, the outlook for 2024 SCB EIC Thailand’s economy is expected to grow at 3.5%. From foreign tourists who are likely to recover at 37.7 million people, private investment will expand according to the trend of investment approvals from the Office of the Board of Investment. and exports that will recover
while overall inflation is expected to have an accelerating trend from the 4th quarter of 2023, but is still within the target range of 1.7% and 2% in 2023 and 2024, respectively, as energy and food prices tend to increase. Meanwhile, core inflation will remain stable at 1.4% and 1.5% in 2023 and 2024, respectively.
anyway SCB EIC expects Thailand’s policy interest rate to increase once again.At the Monetary Policy Committee (MPC) meeting at the end of September 2023. To the highest point of the interest rate cycle (Terminal rate) this time at 2.5%.
This follows the Thai economy which is likely to continue to expand towards its potential level. and inflationary pressures due to energy and food prices which have an upward trend This will allow the real policy interest rate to turn positive. Helps create long-term economic and financial stability as a result of the build-up of financial imbalances during a period of prolonged low interest rates.
in the future Thailand’s economy still faces great uncertainty. of important weight
Chinese economic growth is slowing Affect Thai exports of some product groups that are highly dependent on the Chinese market and are part of the Chinese supply chain, including that the impact on FDI (international direct investment) from China may slow down somewhat. and may affect Chinese purchasing power in some Thai real estate sectors (Segments)
Drought crisis In the base case, the drought will be the most severe in 41 years in many areas. As a result, the production of economically important crops such as off-season rice and sugarcane is likely to decrease somewhat, but farmers’ income in 2024 is likely to remain stable due to an increase in agricultural product prices. This will help partially offset the impact of reduced productivity.
Uncertainty of government policy If large spending stimulus measures are announced For example, with a digital wallet, next year the Thai economy can temporarily expand beyond 5%, but this must come at the cost of long-term fiscal costs.
The huge spending stimulus money of hundreds of billions of baht can be used to raise the potential of Thailand’s economy. Finding a new economic engine at a time when the Thai economy is facing challenges from the scars of the post-Covid crisis. including adaptations to global supply chains and climate change
In addition, the use of large amounts of government money to stimulate the economy in the short term. It will undermine fiscal sustainability in the long term. As a result, public debt will exceed the debt limit of 70% of GDP faster than approximately 2 years, which can affect fiscal space to accommodate the uncertainty ahead and the fiscal stability of the country.
SCB EIC is of the opinion that economic policy in the future should give importance to
1. Increase competitiveness inside and outside the country including spreading economic opportunities By promoting competition to increase the real effectiveness of the Trade Competition Act. and push Thailand to join the Organization for Economic Co-operation and Development (OECD) to promote Allow Thai businesses to benefit from exporting more goods and services and increase their importance in the global supply chain.
2. Promote long-term sustainable growth of the Thai economy through tax restructuring Reducing the inequality of the tax system which distorts the incentives of businesses and households.
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