World Bank revises Thailand’s economic growth forecast due to export contraction

The World Bank revised Thailand’s economic growth forecast downwards for 2023 and 2024, attributing the adjustment to a predicted contraction in the country’s exports due to reduced global demand. The primary engines of economic growth will be tourism and private consumption.

A decrease from 3.6% to 3.4% is predicted for Thailand’s economic growth this year, as reported by the World Bank’s October 2023 East Asia and Pacific Regional Economic Outlook. The economic growth for 2024 is also anticipated to drop by 0.2 percentage points, from 3.7% to 3.5%.

The contraction of Thailand’s goods exports by 2.1% in 2023, in US dollar terms, is expected due to diminished demand from leading advanced economies. Furthermore, the country’s economic growth in the second quarter of the current year has fallen more than anticipated to 1.8% on an annual basis.

The formation of a new government is taking longer than expected, leading to further delays in public and private investment. However, the projected GDP growth for 2023 and 2024 is expected to be primarily driven by the recovery of tourism and robust private consumption.

The World Bank anticipates that foreign tourist arrivals will reach pre-pandemic levels by the end of 2024.

Furthermore, the World Bank’s report predicts a growth of 3.3% for Thailand’s economy in 2025.

Emerging market economies

It forecasts headline inflation of 1.5% in 2023, lower than most emerging market economies due to a downturn in energy prices and the continued implementation of price caps. However, increased consumption and elevated global food prices could still pose upside risks to core inflation.

With fiscal consolidation progressing slowly due to extended energy subsidies, public debt is likely to remain above 60% of GDP until the end of 2023. The current account balance is forecasted to bounce back from its deep deficit over the past two years and return to positive territory in 2023.

Inflation slowdown is expected to ease pressure on households, while the expansion of the state welfare card scheme will likely contribute to poverty reduction in 2023.

Manuela V. Ferro, World Bank East Asia and Pacific vice-president, noted that Thailand’s household debt ratio is 90.6% of GDP which is a higher concern than public debt. Public debt is predicted to be 60.2% of GDP this year, declining to 59.6% in 2024, and further to 59.5% in 2025.

The projected poverty headcount, measured at the upper-middle income poverty line (US$6.85 a day in 2017 PPP), is expected to decrease to 9.1% in 2023 and continue to decline throughout 2024 and 2025.

Despite these forecasts, the World Bank stated that growth in the region remains higher than that projected in other emerging markets and developing economies. The East Asia Pacific region is now estimated to grow by 4.6% in 2023, while China’s growth is projected to be 5.1% in 2023.

The East Asia and Pacific region will be the fastest growing and the most dynamic of the world’s major regions in 2023, even though growth is anticipated to moderate in line with the slower patch of China’s economy, stated Ferro.

Ferro further emphasised that maintaining high growth over the medium term will necessitate reforms, particularly in services, to sustain industrial competitiveness, diversify trading partners, and boost productivity in sectors from retail and finance to education and health, Bangkok Post reported.

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