GDP on the up: Thailand’s economy gears up for 2.7% ‘Thai’ to growth

Thailand’s Finance Ministry is projecting GDP growth of 2.7% for the current year, with expectations to reach 3% in 2025. The Fiscal Policy Office (FPO) announced that while fiscal measures have been maximally employed to bolster the economy, further support from monetary policy is essential for achieving higher growth rates.

During the ministry’s economic briefing, Pornchai Thiraveja, FPO Director-General, reaffirmed the 2024 growth forecast at 2.7%, maintaining a range between 2.2% and 3.2%, consistent with predictions made in July. This marks a noticeable recovery from the 1.9% growth experienced last year.

The economic resurgence is largely driven by tourism and exports. This year, foreign tourist arrivals are anticipated to hit 36 million, marking a 27.9% increase from the previous year and projected to generate 1.69 trillion baht (US$50 billion) in revenue, a significant 37.4% rise.

Average tourist spending is estimated at 47,000 baht (US$1,390), with 28.4 million arrivals already recorded by October, contributing 1.3 trillion baht (US$38 billion) in revenue, said Pornchai.

“The growth is also supported by private consumption, projected to expand by 4.6%, influenced by the government’s 10,000-baht (US$295) cash distribution.”

Pornchai also noted an export increase of 2.9%, alongside government consumption and investment growth rates of 2.1% and 0.8%, respectively.

Despite the positive outlook, private investment is expected to shrink by 1.9% this year, following a 3.2% growth last year, primarily due to reduced sales of internal combustion engine vehicles. On a positive note, the FPO forecasts a headline inflation rate of 0.4%, which falls outside the Bank of Thailand’s target range of 1 to 3%. This is attributed to decreased crude oil prices, and deflation is considered unlikely given the continuing economic growth.

The current account surplus is predicted to reach US$10.3 billion, or 1.9% of GDP, surpassing the US$7.4 billion surplus recorded in 2023. However, the trade surplus is anticipated to decline to US$13.5 billion from US$19.4 billion last year.

GDP growth

Looking ahead to next year, the FPO anticipates a 3% growth rate, within a range of 2.5 to 3.5%, the highest since the pandemic years of 2020 to 2021. This aligns with the International Monetary Fund’s forecast for Thailand.

Key factors bolstering the 2025 outlook include expected private consumption growth of 2.9%, exports benefiting from global demand and improved economic conditions among major trading partners with a projected expansion of 3.1%, and tourism with foreign arrivals expected to reach 39 million, an 8.3% increase, the FPO highlighted.

“Private investment is forecasted to grow by 2.3% next year due to significant private sector investments approved by the Board of Investment, particularly in high-tech industries.”

Public investment is also expected to rise by 4.7%, driven by accelerated budget disbursement and major government-led projects such as the Laem Chabang Port Phase 3 and the high-speed railway linking three airports.

In terms of economic stability for 2025, the FPO anticipates headline inflation to remain at 1%, with the current account surplus at US$10 billion and a trade surplus of US$12.5 billion.

Challenges remain, with key risks including geopolitical tensions, the US presidential election, and concerns over household and corporate debt. The Finance Ministry plans to normalise fiscal policy by gradually reducing the budget deficit, aiming for a figure close to 3% of GDP in line with the government’s medium-term fiscal plans.

For fiscal 2025, the budget deficit is projected at 4.5% of GDP, expected to decrease to 3.5% by 2026, contingent on GDP growth outcomes reported by the National Economic and Social Development Council.

Pornchai noted that fiscal policies have been extensively utilised, leading to an anticipated government debt level of 65 to 66% of GDP next year, which remains below the fiscal sustainability threshold of 70%. He emphasised the need for monetary policy to play a complementary role in achieving growth targets exceeding 3%, reported Bangkok Post.

Pornchai remarked that monetary policy must complement fiscal efforts to stimulate economic growth, citing Section 28/7 of the Bank of Thailand Act, which requires inflation targets set by the Monetary Policy Committee to be consistent with state policies.

Section 7 mandates that monetary policy must ensure the stability of financial institutions while aligning with government policy.