Thai economy to be driven by private consumption, tourism in 2023

Stimulating private consumption is a reasonable strategy for the government to maintain economic growth amidst global uncertainties, according to Tim Leelahaphan, an economist at Standard Chartered Bank Thailand. The first half of 2023 saw a 7% year-on-year increase in the country’s private consumption.

Expectations are high for private consumption and tourism to be the main drivers of economic growth in the latter half of the year. Standard Chartered Bank Thailand is currently awaiting further details of the government’s proposed 10,000 baht digital handout scheme, which requires a massive portion of the government’s budget, estimated at 560 billion baht.

Tim projected an increase in the fiscal deficit to 4.0% of GDP in 2024, up from 3.8% in the current year. However, he also noted that the government is expected to focus more on financial and fiscal discipline over the next four to five years, which should decrease the fiscal deficit over the long term.

Despite downgrading its 2023 Thai GDP forecast to 3.3% from 4.2%, the bank predicts a 4.3% economic growth in the second half of the year. This is due to a clearer political outlook, spending-friendly policies, and an increase in foreign tourist arrivals.

Tourist arrivals have already exceeded 17.5 million in the first eight months of the year, averaging 2.2 million per month. With the high season for tourism on the horizon, the bank anticipates a monthly increase to three million from late September, bringing total arrivals to 30 million for the year.

As there is no inflationary or economic recovery pressure, Tim expects the Bank of Thailand to maintain its policy rate at 2.25% at next week’s meeting. However, he also noted that rate hikes could be back on the table by the final quarter of this year, particularly if inflation rises faster and more strongly than current expectations.

Moreover, Standard Chartered Bank Thailand predicts a reduction in the US Federal Reserve’s policy rate in the first quarter of 2024, with the European Central Bank expected to follow suit around mid-next year, reports Bangkok Post.

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