Thailand’s GDP sees modest growth amid calls for interest rate cut

Thailand’s economic growth in 2023, as measured by the gross domestic product (GDP), registered a 1.9% increase, according to the National Social and Economic Development Council (NESDC). This growth, however, was tempered by a decline in manufacturing and public spending, despite an upswing in private consumption and visitor numbers.

This growth bolsters the argument for an interest rate slash during the Bank of Thailand‘s (BoT) next policy review, scheduled for April 10. In their most recent meeting, the BoT decided to maintain the key interest rate at 2.50%, marking the highest level of more than a decade. The decision was not unanimous, with two members advocating for a rate cut.

The NESDC’s growth prediction for 2024 stands at 2.2-3.2%, a reduction from the earlier 2.7%-3.7% forecast made by the agency in November, reported Bangkok Post.

The Secretary-General of the NESDC, Danucha Pichayanan, announced at a press briefing that the fourth quarter GDP saw a growth of 1.7%. This figure falls short of the 2.5% expansion previously predicted in a survey by Reuters.

In related news, despite Thailand’s economy being projected to grow by 3.3% last year, the nation faced vulnerabilities stemming from international politics, foreign conflicts, and unrest in neighbouring countries. Tawee Piyapatana, Senior Vice President of the Federation of Thai Industries, expressed concerns about these risks during a Joint Standing Committee on Commerce, Industry, and Banking (JSCCIB) meeting.

The committee maintained its GDP growth forecast at 2.8-3.3% for 2023, with exports expected to increase by 2-3% and inflation between 0.7-2%. Tawee highlighted the fragility of the economy, citing the tourism sector’s support alongside manufacturing contraction and persistent negative inflation rates domestically.

Geopolitical risks, including elections abroad and instability in neighbouring nations, posed challenges for Thai exports. Concerns were also raised about the influx of cheap goods into Thai and ASEAN markets, prompting calls for government action to protect domestic businesses, including reconsidering VAT exemptions for online purchases and reviewing policies for Free Trade Zone benefits.