The Thai economy continued to recover following better domestic demand and tourism conditions. However, risks from the global economic slowdown could underweight recovery in the periods ahead.

 
The Thai economy continued to improve in Q2/22.

The Thai economy continued to expand for the third consecutive quarter by 2.5% compared wtih the same period in the prior year. In comparison to the prior quarter with some signs of recovery from the country re-opening, growth in the second quarter edged up by 0.7% QOQ sa. Such improving economic conditions were supported by domestic demand recovery as economic activities increasingly return to usual conditions following easing virus curbs and the country re-opening. In terms of the production approach, various economic sectors showed robust recovery. The service sector growth was a notable driver that improved due the continually recovering tourism sector, as well as the agriculture sector from higher outputs. However, the construction sector continued to contract from slowing public investment. The industrial sector stalled after achieving robust growth in the previous quarter. Such conditions reflected slowing export volume outlooks to some key markets, such as China and the US, and concerns regarding fluctuating costs.

 

Going forward, the major growth drivers for the Thai economy should be from the tourism and service sector.

For the remainder of 2022, EIC anticipates that the economy will continue to recover despite high pressure from domestic inflation as the tourism sector should recover at a faster-than-anticipated pace following easing international travel restrictions in various countries, including Thailand. EIC expects that the number of international tourist arrivals in 2022 could reach as high as 10 million persons (from the previous expectation of 7.4 million persons) due to pent-up demand for travel suggested by indicators, such as the high bookings of airport slots during winter (Oct 2022 – Mar 2023) for Thailand’s main international airports. Such better conditions, in turn, should benefit the service and private consumption sector, particularly travel-related services, including hotels, restaurants, and transportation. The growth should continue to strengthen in 2023 as Chinese tourists should start to travel overseas. Moreover, the Chinese government should start to ease the Zero COVID policy in late 2022 and lift travel restrictions in 2023.

 

Pressures from global economic risks could slow Thailand’s economic recovery.

The Thai economy should continue to improve. However, going forward, increasing risks from global environments could stall the economic recovery. Notable risks include concerns that a recession will hit the US economy following tightening monetary policy, implications on Europe’s economic conditions following the energy supply risks from Russia, and China’s fragile economic environments in various sectors. The global inflation hikes and rising global energy prices could further exacerbate such weak conditions. Moreover, exports value, as Thailand’s key driver in recent periods, should slow in late 2022, especially in volume, following geopolitical risks from the escalating tensions between China and the US with potential economic decoupling acceleration between the two major economies. The slowing export condition was already reflected by weakening net export figures that dragged economic growth in the latest quarter after supporting growth in the prior quarter. With such regards, private investment growth could also slow in the periods ahead. Meanwhile, government stimulus packages will continue to play a vital role in supporting economic growth. However, such a supporting momentum should slow as EIC evaluates that only THB 27 billion from the THB 500 billion Emergency Loan should be available for new projects and will expire by Sep 2022.