UTCC cuts estimate of economic growth to 3%
Several economic factors are signalling a less optimistic outlook for the Thai economy, leading to a revised growth forecast for 2023, Thanawat Polvichai, rector of the University of the Thai Chamber of Commerce (UTCC), said this week.
Thanawat, who also serves as chief adviser to the UTCC’s Centre for Economic and Business Forecasting, said that the UTCC has now revised Thailand's economic growth rate for this year to 3% from the initial 3.6%. This adjustment is due to the decline in exports, an inflation rate of 1.8%, and household debt of 89.5%. The 0.6% decrease in the gross domestic product (GDP) is primarily a result of reduced exports, as well as diminished consumer spending, and reduced government expenditure due to decreased public sector investment. He noted, however, that Thailand's economy is fortunate to be receiving a boost from tourism.
Nevertheless, the government must closely monitor the remaining quarter of this year to decide on additional economic measures before the start of 2024. The government may aim to enhance confidence through investment promotion but how much confidence and competitiveness this would generate remains uncertain, given the volatile global economic situation.
The UTCC preliminary estimates suggest that the Thai economy in 2024 will perform better than this year, with a growth potential of 4.5-5% or an average of 4.8%. The general inflation rate is expected to be around 2.5-3%. This outlook is based on the assumption that the 10,000 baht digital wallet policy will inject about 560 billion baht into the economy during the second quarter of the next year, leading to multiple rounds of circulation due to increased public spending.
The 10,000 baht digital wallet policy is expected to further stimulate the economy by an additional 2%.
Additionally, tourism is expected to thrive, with an influx of 35 million tourists. The government's efforts over the next four years aim to reduce household debt to 80% of GDP and find ways to decrease expenses for farmers and businesses.
Thanawat felt the recent (September 27) raising of interest rate by the Monetary Policy Committee to 2.50% (an increase of 0.25%), was appropriate given the current market surplus and could help stabilise the rapidly depreciating Thai baht. The rate hike might address the rapid depreciation issue, support long-term savings, and narrow the gap between Thailand's interest rates and those of other countries, reducing the risk of capital outflows.
There is increasing confidence amongst the public that the economy will improve under the new government although concerns about political stability persist. Moreover, there are questions about how these policies will impact the actual cost of living, especially given the significant budget allocations. However, Thanawat stressed that it was essential to wait for the government's actions to see the real impact of these policies.
Key negative factors include a slower-than-expected economic expansion rate in the second quarter of this year, influenced by reduced exports and negative stockpiling. Additionally, Thailand's export value has decreased more than anticipated. The country's major markets are still at risk due to the sluggish global economy and inflation concerns. Consequently, Thailand's overall exports for the year are expected to decline by 2%. Lastly, the drought and subsequent excessive rain after the El Nino phenomenon are impacting Thailand's critical agricultural output, Thanawat said.
On a more positive note, the Thai economy continues to benefit from an increase in foreign tourists. The estimated number of foreign visitors has risen to around 29 million from the initial estimate of 22 million.