Thailand trims 2024 growth forecast despite strong Q1, as weak exports weigh

Thailand has lowered its economic growth forecast for 2024, even though the country experienced stronger than expected growth in the first quarter of the year. The downgrade is due to concerns about weak exports, which are expected to grow at a slower rate than initially anticipated, primarily due to external risks.
Thailand’s economy grew by 1.5% in the first quarter of 2024, surpassing expectations and signaling a recovery from the impact of the ongoing COVID-19 pandemic. The expansion was higher than the projected 0.8% growth in a Reuters poll. In the fourth quarter of 2023, the country’s gross domestic product (GDP) expanded by 1.7% on an annual basis.
In the first quarter of 2024, the GDP grew by 1.1% on a quarterly basis, rebounding from a 0.4% contraction in the previous quarter. This growth exceeded economists’ expectations of a 0.6% expansion. The main drivers of growth were exports, private consumption, and investment. However, public investment and government expenditure declined during this period, according to the state planning agency NESDC. This positive growth has helped the economy avoid a technical recession.
Thailand’s economy showed signs of recovery in the first quarter, according to a note from Capital Economics. The country is expected to experience steady growth this year, driven by an increase in tourism and robust government spending. The National Economic and Social Development Council (NESDC) has revised its GDP growth forecast for 2024 to between 2.0% and 3.0%, slightly lower than its previous estimate of 2.2% to 3.2%. In 2020, Thailand’s economy grew by 1.9%.
Thailand’s economy has been downgraded due to rising external risks, according to NESDC Secretary-General Danucha Pichayanan. These risks include increasing trade protectionism, geopolitical conflicts, and volatility in the global economy. Thailand’s economy has been struggling compared to its regional counterparts, primarily due to high household debt and borrowing costs, as well as weak exports during China’s uneven recovery.
The latest GDP figures for the first quarter show a strong performance, which could complicate the government’s argument for an interest rate cut. Finance Minister Pichai Chunhavajira has expressed concerns about people’s access to finance rather than focusing on interest rates.

Prime Minister Srettha Thavisin has been advocating for a rate cut, claiming that it would benefit the economy. However, the central bank has resisted the pressure and maintained its key rate at 2.50%, the highest in over a decade. The next rate review is scheduled for June 12.
Exports in 2024 are expected to increase by 2.0%, which is lower than the previously predicted 2.9% growth. Headline inflation is forecasted to be between 0.1% and 1.1%, lower than the earlier projection and below the Bank of Thailand’s target range of 1% to 3%. The National Economic and Social Development Council (NESDC) has revised its estimate for foreign tourist arrivals this year to 36.5 million, up from the previous projection of 35 million.
Thailand has seen a significant increase in foreign tourist arrivals, with a 39% year-on-year growth from January 1 to May 12, totaling 13.16 million visitors. The majority of these tourists, approximately 2.6 million, were from China. This surge in tourism comes after a record-breaking year in 2019, when Thailand welcomed nearly 40 million foreign tourists.

However, the COVID-19 pandemic has had a significant impact on Thailand’s economy, leading the finance ministry to revise its growth forecast for 2024. The ministry now expects a growth rate of 2.4%, down from the previous estimate of 2.8%. However, if the government’s 500 billion baht ($13.8 billion) household stimulus scheme is implemented in the fourth quarter of this year as planned, the growth rate could potentially reach 3.3%.

The government’s stimulus scheme aims to boost domestic consumption and support the economy, which has been heavily affected by the pandemic and the absence of international tourists.