Thailand’s GDP growth disappoints with a slow 1.8% rise in 2023

GDP growth in 2023 slowed down to a disappointing 1.8%, according to an announcement by the Fiscal Policy Office (FPO). Director-general, Pornchai Thiraveja, attributed this to a combination of negative factors impacting the economy. Originally, the growth was forecast to rise to 2.7% in 2023, based on a projection made in October last year.

The less-than-anticipated growth is due to a downturn in exports and the manufacturing sector. This is evidenced by a 4.7% year-on-year fall in the Manufacturing Production Index (MPI), with automotive products witnessing a 23-month contraction, electronics for 15 months and rubber products for nine months.

With this downturn, the value of exports is expected to fall by 1.5%. This is a slightly greater drop than the earlier October estimate of 1.8%, resulting from a slowdown in major trading partners. The reduced MPI resulted in a mere 1.4% GDP expansion in the last quarter of the previous year, compared to 2.6% in the first quarter, 1.8% in the second quarter and 1.5% in the third.

Pornchai stated that for economic growth in 2023 to reach the October estimate of 2.7%, GDP in the fourth quarter of 2023 would have to expand by 4 to 5%. However, he did not declare the Thai economy to be in a crisis, as there is no specific definition of such a state, reported Bangkok Post.

The FPO forecasts a 2.8% growth for the economy in 2024 and a 4.2% expansion in the value of exported goods, in alignment with global market demand. Additionally, international tourists, particularly from China and Malaysia, are projected to reach 33.5 million, a significant increase from 28 million in 2023. Consequently, tourism revenue is expected to rise by 23.6% from the previous year, reaching 1.48 trillion baht (US$ 41,404,494,800).

Pornchai noted that the economy is affected by geopolitical tensions, such as the Russia-Ukraine and Israel-Palestine conflicts, and tensions in the Red Sea. Upcoming elections in large economies like the US, Russia, and India could impact global trade. Additionally, worldwide money market volatility and a slowdown in China, which could affect exports and tourism, are also contributing factors.

Economic downturn

Despite the potential for economic downturn, Thailand’s risk of recession remains lower than that of other countries, with a probability of 15%, compared to 65% for Venezuela, 60% for the UK, 50% for the US and 20% for Singapore. In contrast, Malaysia has a mere 5% probability, according to Kobsidthi Silapachai, head of capital markets research at Kasikornbank (KBank).

KBank has reduced its economic growth estimate for 2023 to 2.5%, while its Kasikorn Research Centre predicts a GDP growth of 3.1% for 2024 under its base-case projection. The bank also predicts a weakening of the Thai currency in the coming months and anticipates the Bank of Thailand to cut its policy rate in the second half of this year.