Cash ‘n’ climb: Thailand GDP rises but 2026 could be a steep drop

Thailand’s GDP forecast has been upgraded for this year and next to 2.8% and 3%, respectively, due to the government’s cash handout boosting the economy. However, analysts warn of an economic cliff in 2026 if no new growth engines are introduced.

Kiatnakin Phatra Research (KKP) and BofA Global Research have both raised their Thai GDP outlooks for 2024 from 2.6% to 2.8% and for next year from 2.8% to 3.0%. The analysts attribute this to the government’s 10,000-baht (US$300) cash handouts, which are expected to provide a temporary lift to the Thai economy.

KKP stated that the revised GDP forecast reflects a short-term economic recovery driven by cash handouts to low-income earners in the fourth quarter. An additional stimulus budget has also been set aside for 2025.

The short-term benefits of the handout are significant, with 142 billion baht (US$4.3 billion) distributed to vulnerable groups, accounting for approximately 0.7% of GDP, according to KKP. The brokerage estimates an economic multiplier of 0.3%, predicting Thai growth in the fourth quarter to exceed 4%.

For fiscal 2025, another budget of 150 to 180 billion baht (US$4.5 to 5.4 billion), or 0.8 to 0.9% of GDP, has been approved for stimulus. KKP expects the second cash handout to be available in the second and third quarters of next year, aiding the Thai economy’s growth to reach 3% in 2025.

Exports have shown improvement, particularly in the electronics sector, prompting KKP to increase its 2024 real export growth estimate from 1.3% to 2.3%.

Cash handout

“The positive impact from improved shipments may not be as great as in the past because of several reasons,” the brokerage noted.

“The improved exports for some products are likely due to rerouting, or changing the trade route from China to the US directly to sending products via Thailand to avoid tariff barriers, which may have relatively little added value domestically.”

BofA stated that the revised GDP estimates reflect the fiscal stimulus, optimism for the new government’s policies, and a cyclical upturn in exports and manufacturing.

“Despite medium-term challenges, we see cyclical tailwinds that would support growth in the short term, but the impacts could be short-lived,” BofA mentioned in a research note prepared by emerging Asia economist Pipat Luengnaruemitchai.

However, Thailand faces several strong structural headwinds that remain obstacles, “capping the country’s medium-term growth.”

These challenges include unfavourable demographic shifts, competitiveness issues, a decline in investment, and negative macro-financial feedback loops as asset quality deteriorates and banks become reluctant to lend.

“What Thailand needs are ambitious and serious reforms to lift its medium-term growth potential,” the research emphasised.

“Without the reforms and new engines of growth, the economy could face an economic cliff in 2026 as the impact of the fiscal stimulus wanes and the growth contribution from foreign tourism fades.”

Without new growth engines, GDP expansion in 2026 could slow towards 2.5%, according to the report, reported Bangkok Post.