Thai economy needs more stimulus amidst global challenges

Kasikorn Research Centre (K-Research) warned that the Thai economy requires additional government stimulus to boost domestic consumption amidst challenges such as global politics, China’s economic deceleration, and fluctuating currency rates.

The centre’s managing director, Burin Adulwattana, emphasised that the decrease in headline inflation for the fourth consecutive month in January does not suggest deflation risks, but rather highlights consumers’ dwindling purchasing power.

“Low inflation is temporary as core inflation remains up slightly by 0.5%.”

Burin argues that the economy needs enhanced measures to bolster purchasing power.

Despite a slow return of Chinese tourists, tourism numbers remain the only economic indicators showing positive growth this year. Burin anticipates a 2% growth in exports this year, following a contraction of nearly 1% in 2023, as global trade recovers. However, he warned of potential challenges, including conflict in the Red Sea and the potential impacts of climate change.

“The swing of the baht is likely to persist, pressured by the Federal Reserve’s interest rate policy and uncertainties regarding the Thai interest rate.”

Asia Plus Securities (ASPS) echoed K-Research’s sentiments, suggesting that the Thai government may need to implement more stimulus measures as China’s deflation impacts exports and the economy. Notably, China’s January CPI dropped by 0.8% year-on-year, reflecting the country’s economic deceleration, the brokerage added.

“Since exports may be pressured by China’s weak economic growth, Thailand’s economy needs to be driven by consumption. Therefore, the government has to push forward additional stimulus policies, especially the digital wallet.”

BMI, a subsidiary of Fitch Group, predicts that Thailand’s external health will continue its upturn in 2024, but will still not reach pre-pandemic levels.

“While there have been encouraging signs of improvement – with the export volume expanding for three consecutive months after a year-long contraction, this may prove to be fleeting against a backdrop of tepid external demand.”

China’s economic deceleration and Beijing’s policy decision to favour domestic flights over international ones suggest that it will take time before Chinese tourist numbers rebound to their typical levels, reported Bangkok Post.