Thai GDP in Q3/2023 remained worrisome, dragging overall 2023 growth amid all-rounded risks.

In Q3/2023, the Thai economy witnessed a slower growth, falling short of market estimates.

During Q3/2023, the Thai economy grew slightly by 1.5%YOY compared to the same period in the prior year or 0.8%QOQ_SA (seasonally adjusted quarter-on-quarter growth), marking a continuous stall from the onset of 2023 and notably lower than the Bloomberg survey’s consensus estimate of 2.2%YOY or 1.3%QOQ_SA. In terms of the expenditure approach, the Thai economy in Q3/2023 saw boosts from tourism services recovery, buoyed by an ongoing surge in foreign tourist arrivals. Concurrently, domestic tourism demand remained robust. Additionally, merchandise exports contracted by a slower pace, albeit with a noteworthy improvement in net exports due to a sharp decline in imports. Meanwhile, public consumption remained subdued by the base effect that included assistance measures to fight COVID-19. Domestic investments expanded  primarily thanks to private investments, while public investments continued to decline.

Regarding the production approach, the services sector surged, particularly in tourism-related domains. Meanwhile, the agriculture sector stalled following drought conditions. Simultaneously, the industrial sector grappled with ongoing contraction from declining production for exports.

SCB EIC anticipates a surge in Thai economic growth in Q4/2023, surpassing the preceding 3 quarters.

SCB EIC views that in Q4/2023, the Thai economy will post higher growth than the previous 3 quarters. This positive outlook hinges on robust backing from growing private consumption, driven by a resilient labor market recovery. Other key indicators include ongoing improvements in consumer confidence index readings and a notable increase in foreign tourist arrivals, particularly from Asia and Russia, as the quarter marks the beginning of the high season. Additionally, the economy should continue to see boosts from the rebound in export value with return to positive growth in Q4/2023. Such conditions should be prompted by heightening prices of certain products, such as agricultural products, and the advantageous low base effect. However, despite these promising indicators, SCB EIC views that the overall GDP growth for 2023 may fall short of initial expectations, given weaker-than-expected economic data observed.

Looking ahead to 2024, Thailand’s economic recovery remains fragile with multifaceted risks.

SCB EIC views a potential acceleration in Thailand’s 2024 economic growth, albeit fragile from all-rounded risks. This anticipated growth are driven by factors such as the ongoing recovery of foreign tourist arrivals, expected to reach 37.7 million, a rebound in exports leading to positive growth, and strengthening private investments following investment approvals by the Board of Investment. However, the economy should see low growth momentum from the public sector during H1/2024 compared to H2/2024 due to the delayed announcement of the FY 2024 Budget Act.
 
Nevertheless, various downside risks remain in 2024, including (1) The Israel-Hamas war – in the base case, the war should have a limited impact on the Thai economy, however, if conditions escalate, the global economy, including Thailand, could see indirect impacts from higher global oil prices and more volatile conditions in the global financial market. (2) Stalling Chinese economic growth with implications on Thai exports, particularly products with high reliance on the Chinese market or products that are part of China’s supply chain. (3) More severe impacts from the drought in various areas could significantly reduce the production of Thailand’s economic crops, such as off-season rice and sugar cane.