Debt spectre haunts Thailand despite Q1 growth of 2.2%
Though first-quarter GDP growth beat expectations, Thailand’s economy faces uncertainty and needs more government support amid spiralling public debt, the National Economic and Social Development Council (NESDC) warned on Tuesday.
The warning came as the NESDC unveiled first-quarter growth of 2.2 per cent year on year, while offering its overall outlook for 2022.
GDP growth beat the forecasted 2.1 per cent after easing Covid restrictions sparked a tourism revival and a surge in exports.
Domestic consumption also accelerated as economic activities began to return to normal.
However, the ongoing Russia-Ukraine war saw the consumer confidence index drop from 38.9 last quarter to 37.3 as inflation took a toll on Thailand.
NESDC secretary-general Danucha Pichayanan pinpointed several challenges to Thai economic recovery and growth this year.
Apart from outside factors like the Ukraine war, China slowdown, Covid-19 uncertainty and supply chain disruption, Thailand’s rising private and household debt are key factors of concern, he said.
The NESDC report said high levels of private debt will hinder recovery while the ability to repay debt would be pressured by rising interest rates along with incomplete recovery in the labour market. Household debt, meanwhile, will place limits on how much people can consume.
"We need to accelerate the support scheme for the private sector and debt restructuring measures issued by the Bank of Thailand while considering more measures to extend the debt repayment period for households so they have liquidity," Danucha said.
He said the current situation lacked precedents, so was not easy to improve. To weather the crisis, the NESDC has asked for firm cooperation from all parties. He also urged more government aid for citizens, adding that support schemes should be targeted at the neediest people as national budgets and resources are now limited.
Meanwhile, the public could greatly support the country by spending more on essential goods and services. He also pleaded for Thais to consider domestic travel rather than going abroad.
On the outlook for this year, the NESDC forecasts the economy will expand in the range of 2.5-3.5 per cent – lower than the previous forecast of 3.5-4.5 per cent.
Expansion would be driven by domestic demand, domestic tourism recovery, and exports growth. However, high inflation, slowdown in China, and uncertainty over the Russia-Ukraine war would create growth fragile growth.
Exports would remain Thailand’s main economic engine this year, with 7.3 per cent growth forecast. Meanwhile, private consumption and private investment are expected to increase by 3.9 per cent and 3.5 per cent respectively. Public investment is projected to rise by 3.4 per cent.
Headline inflation is estimated in the range of 4.2-5.2 per cent and the current account is projected to record a deficit of 1.5 per cent of GDP.