Thai economy set for boost as tourism and domestic consumption surge

The Thai economy is predicted to experience a boost in the second half of the year, driven by a surge in tourism and domestic consumption, according to the Economic Intelligence Service (EIS) of the Thailand Development Research Institute (TDRI). However, ongoing political instability remains a factor to watch.

The EIS forecasts that Chinese tourist arrivals in Thailand will increase by three to four times the numbers recorded in 2022, reaching five to six million this year compared to 10 million in 2019. EIS director Kirida Bhaopichitr believes that improved domestic consumption will be a key factor in stimulating the Thai economy during the latter half of the year.

Although Thai exports have experienced a boost due to China’s reopening, EIS anticipates a decline in total shipments this year, citing the risk of a global economic downturn and uncertainty surrounding the formation of a new government. Bhaopichitr stated during a joint TDRI and Krungthai Card Public Co (KTC) media briefing, that…

“Politics is another domestic risk factor which may dampen investors’ confidence as the formation of a new government escalates. The political instability may delay the fiscal 2024 budget disbursement, thus affecting government spending in the fourth quarter of 2023.”

Under these circumstances, EIS predicts a 3.5% economic growth for Thailand in 2023, primarily driven by international arrivals and private consumption. The Bank of Thailand forecasts international arrivals to reach 30 million this year and increase to 35.5 million in 2024, reported Bangkok Post.

Bhaopichitr also mentioned that the Bank of Thailand is expected to continue raising its policy rate to curb inflation. EIS projects a 0.75 percentage point increase in the policy rate, targeting a range of 2.25% to 2.5% by the end of this year, up from the current 2%.

Furthermore, the consumer confidence index in April saw an 11-month consecutive rise, reaching its highest level in 38 months. Bhaopichitr attributed this to the rebound in the tourism sector, which led to a decrease in unemployment and income growth from increased employment in the hotel, restaurant, construction, trading, and manufacturing industries.

Chutidej Chayuti, KTC’s chief financial officer, stated that an increase in the interest rate would not significantly impact KTC customers, as the ceiling set for credit cards and personal loans already covers two of KTC’s core businesses. Chayuti also revealed that KTC’s credit card spending is expected to remain positive in the second half of this year, in line with the economic recovery. KTC aims to achieve over 10% growth in card spending this year, with the potential to reach 15% growth depending on economic conditions in the second half of the year.