SCB EIC expects a slower growth momentum for Thai economy, underweighting recovery in 2024.

In Q4/2023, the Thai economic expansion remained subdued

The Thai economy in Q4/2023 demonstrated a modest 1.7% year-on-year growth, with a -0.6% quarter-on-quarter, seasonally adjusted, contraction. In terms of the expenditure approach, the Thai economy saw an upswing towards the end of 2023, driven by robust private consumption growth. This surge was propelled by increased consumer confidence, a rise in tourist numbers, a favorable unemployment rate, and a rebound in merchandise exports. However, the Thai economy grappled with significant challenges, notably a sharp contraction in both public consumption and investment. Public investment witnessed a notable decline, attributed to the delay in enacting the 2024 Budget Act. As for the production approach, the services sector emerged as a robust growth engine, particularly within tourism and wholesale-retail services. However, the construction sector faced a substantial contraction, chiefly driven by diminishing public sector construction, notably government projects. Concurrently, the agricultural sector witnessed a predicted contraction, impacted by adverse hot and dry weather conditions in the initial 8 months of 2023, leading to a decline in crop production. Furthermore, the manufacturing sector continued to weaken, mirroring the decline in production for exports.

SCB EIC anticipates higher Thai economic growth in Q1/2024.

SCB EIC views that the Thai economy in Q1/2024 should expand by a higher rate than the prior quarter driven by a robust private consumption growth, particularly following tourism sector recovery from an increasing influx of Chinese tourists. A significant surge of Chinese tourists is expected in February, coinciding with the Chinese New Year festival, while the number of tourists visiting Thailand from various countries already recovered to near-normal levels. Moreover, the reading of the consumer confidence index strengthened, reflecting positive impacts from economic relief and stimulus measures, notably measures aimed at reducing the cost of living, particularly in terms of energy costs, along with the implementation of the Easy e-receipt scheme to stimulate spending. Additionally, the Thai economy is poised to benefit from the resurgence of exports. However, various factors may slow Thai economic growth in this quarter, including the delayed enactment of the 2024 Budget Act, leading to sluggish public spending in the first 4 months of 2024.  This delay is expected to exert pressure on both public consumption and investment.

In the broader context, the outlook for the Thai economy in 2024 remains  worrisome, characterized by a slow recovery.

SCB EIC views that the Thai economy in 2024 should recover at a slow pace, primarily driven by private consumption recovery momentum. The services sector, particularly benefiting from the continual return of foreign tourists and ongoing domestic travels by Thais, is anticipated to play a pivotal role in boosting the economy. Similarly, private investment should improve, indicated by higher project approvals from the Board of Investment and a rebound in exports according to more favorable global trade and manufacturing conditions. However, potential disruptions stemming from supply chain risks, such as attacks by Houthi rebels and the drought impacting the Panama Canal, warrant monitoring. Meanwhile, notable Thailand-specific risks include diminishing public investments resulting from the delayed enactment of the 2024 Budget Act. Consequently, overall economic support from public spending, particularly investment, is expected to be limited during the first half of the year. The disbursement rate of public spending should accelerate after the 2024 Budget Act is enacted during April – May, but will not be able to offset the preceeding delays. . Furthermore, the government is anticipated to grapple with heightened budget constraints, attributed to the substantial public debt accumulated since the COVID crisis. In addition, the supply side of the Thai economy remains notably weak, particularly evident from the continued contraction in various manufacturing-related sectors, with no clear signs of recovery. These factors collectively contribute to the view that the Thai economy will undergo a slow recovery in the periods ahead.