Thai government’s 5% GDP growth aim deemed optimistic amidst challenges

The administration of Prime Minister Srettha Thavisin aims to boost annual GDP growth by 5%. This goal was unveiled during a policy statement delivered by the premier to the heads of government agencies last week during discussions about the fiscal 2024 budget. However, the World Bank recently cut its growth forecast for Thailand to 3.4% this year and trimmed its outlook for 2024 to 3.5%.

This, along with challenges like a delayed budget allocation, a stagnant export sector and a recent dent in tourism caused by the Siam Paragon mall shooting, has led some industry leaders to view the 5% growth target as optimistic.

Aat Pisanwanich, director of the Center for International Trade Studies, stated that there is a slim chance of the economy expanding by 5% during the current administration, citing that over the past decade, the economy has grown by no more than 4%.

He also mentioned that the Thai economy has expanded at an average of 3% per year for nearly a decade, while potential GDP growth was 5%. The ability to achieve this growth depends on the management of the government’s economic policies.

The government’s proposed stimulus measures include a 10,000-baht digital wallet scheme for those aged 16 and over, raising the daily minimum wage to 600 baht, and increasing the minimum salary for university graduates with bachelor’s degrees to 25,000 baht per month.

However, these measures are expected to result in higher costs for business operators and subsequent inflation, reducing domestic spending and production capacity as costs increase.

Long-Term Expansion

Despite these challenges, Jareeporn Jarukornsakul, group chief executive of WHA Corporation Plc, believes Thailand should experience long-term expansion, driven by higher investment, particularly in the Eastern Economic Corridor (EEC). She cited the continuous influx of new investors from China and Taiwan, with US tech firms expected to follow suit.

Nonetheless, KKP, the research unit of Kiatnakin Phatra Bank, predicts the combined government stimulus measures require a budget of up to 3.6% of GDP, but they would stimulate economic growth by only 1%.

They suggest that instead of spending 560 billion baht on the digital wallet scheme, the government should allocate this budget to long-term structural reform projects that could generate sustainable economic benefits, reported Bangkok Post.

While the government’s target of 5% annual GDP growth is seen as attainable by the Thai Chamber of Commerce, it will require robust collaboration between the government and the private sector.

The government will need to prioritise political stability, restore foreign investor confidence, speed up finalising free trade agreements, and explore potential markets in strategic countries.

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