Thailand’s revised GDP growth forecast met with caution due to global slowdown risks

Analysts expressed caution over the Bank of Thailand’s revised GDP growth forecast of 3.2 to 3.8% for the upcoming year, highlighting potential risks from an economic slowdown in China and the US. Doubts have also been raised about the efficacy of government stimulus to revive the economy.

Nattaporn Triratanasirikul, the deputy managing director of Kasikorn Research Centre (K-Research), deemed the central bank’s 2024 forecast consistent with the think tank’s estimate. In contrast, K-Research had downgraded Thailand’s 2023 growth outlook to 2.5% from 3% after the GDP expansion of just 1.5% in the third quarter, resulting in a year-to-date growth of 1.9%.

K-Research highlighted that while private consumption is likely to witness growth in the fourth quarter due to the burgeoning recovery of tourism, the delay in the government’s fiscal budget could exert pressure on public spending and investment moving forward, Nattaporn revealed.

“A growth range of 3.2%-3.8% next year is plausible upon the launch of the government’s digital wallet initiative aimed at boosting consumption. However, uncertainties continue to surround this project.”

Furthermore, Nattaporn warned that an economic slowdown in China and the US, being closely linked to Thailand’s economy, could pose significant risks, reported Bangkok Post.

CGS-CIMB Securities (Thailand) also slashed the country’s 2023 GDP growth forecast to 2.5%, from 3.2%, but retained the 2024 estimate at 4% banking on anticipated export growth of 3.7%. The company’s investment strategist, Gun Hathaisattha, expressed doubts about the feasibility of achieving a fourth-quarter GDP growth exceeding 5% year-on-year, which is necessary to meet the 2023 growth forecast of 3.2%.

Global economy recession

Furthermore, Gun didn’t dismiss the possibility of the global economy falling into a recession next year, considering high interest rates lasting longer than previously expected.

The Bank of Thailand has acknowledged a slower-than-expected recovery of goods exports and tourism owing to tepid growth in China and a delay in global electronics demand recovery. Despite this, they aim to increase total foreign arrivals from 28.3 million this year to 34.5 million in 2024, which is still short of the pre-pandemic level of 40 million in 2019.

Maybank Securities, on the other hand, predicts Thai GDP growth to increase to 3.6% in 2024, up from 2.3% this year, with CPI inflation expected to speed up to 1.8%, from 1.3% this year.

Lastly, the projected growth contribution from the digital wallet scheme presumes an exceptionally low fiscal multiplier, roughly below 0.3x if 500 billion baht was allocated for this project. The Malaysian brokerage noted the possibility of the wallet scheme negatively impacting public spending if fiscal outlays in other areas are reduced to accommodate it.