Thailand’s consumer cashflow set to rise above 2019 levels

Thailand’s consumer spending is set to smash past 2019 levels for the first time, fuelled by expected interest rate cuts from the Bank of Thailand and a booming tourism sector, leading analysts reveal.

In spite of sky-high household debt, consumer confidence is riding high thanks to a surge in foreign tourist arrivals—a key lifeline for Thailand’s economy, according to BMI, a Fitch Solutions company.

Foreign visitors are bouncing back in full force, with BMI forecasting a staggering 28.3% year-on-year rise in 2024. The London-based research firm also predicts Thai GDP growth will hit 2.6% in 2024, up from last year’s 1.9%.

“The surge in arrivals bodes well for spending in the tourism sector and related services like hotels, restaurants, and cultural recreational activities.”

Still, household debt looms large over the consumer outlook. BMI warns that this debt “not only constrains future borrowing but also dents current disposable income levels.” The pain has been magnified by soaring debt servicing costs, driven by recent interest rate hikes unseen in the last decade.

Several central banks are predicted to start loosening their rates from late this year into 2025, said BMI.

“While rates won’t drop to the historical lows of the last decade, easing monetary policy will take the heat off debt servicing costs.”

In Thailand, the central bank is anticipated to ease interest rates in response to controlled inflation and a strong baht, giving another boost to spending levels. BMI forecasts total spending to break past 2019 figures for the first time, hitting a whopping 9.2 trillion baht, reported Bangkok Post.

Household spending is expected to stay robust in 2025, climbing 4.0% year-on-year in real terms to 9.6 trillion baht, BMI predicts.

Asia Plus Securities (ASPS) also anticipates the Bank of Thailand will start slicing rates this year due to the rapid strengthening of the baht. The Thai currency has appreciated to more than 33 baht to the dollar, and bond yields for one to eight-year maturities are now lower than the current 2.5% interest rate, highlighting expectations of a rate cut, the brokerage noted.

ASPS expects the central bank’s Monetary Policy Committee to “trim the interest rate at least once by 0.25% in 2024.”

A 25-basis-point cut is projected to give the Stock Exchange of Thailand index a 60-point boost, pushing it to 1,510, ASPS forecasts.