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Wednesday, July 24, 2024

Thailand’s Economic Growth Forecast and Challenges Ahead

Thailand’s economic growth trajectory is forecasted to stabilize around the three-percent mark over the coming half-decade, marking a downturn from the approximately 3.5% average observed in the pre-Covid era, as per insights shared by Bank of Thailand governor Sethaput Suthiwartnarueput.

From 2004 to 2013, Thailand’s economic growth potential averaged 3.8%, outstripping the actual GDP growth rate of 4% per annum. This figure tapered off to 2.7% from 2014 to 2023, with corresponding GDP expansion slowing to 2.8% annually.

Mr. Sethaput underscored the gradual economic recuperation from pandemic-induced disruptions, albeit at a notably slower pace compared to neighboring economies. The nation’s heavy reliance on tourism has notably hindered its rebound relative to other sectors.

Structural impediments, particularly in manufacturing, coupled with substantial household indebtedness, have further curbed economic prospects, emphasized during a recent press briefing.

“Long-term enhancement of Thailand’s economic potential necessitates structural reforms,” Mr. Sethaput stressed.

Despite ongoing recovery indicators, Mr. Sethaput highlighted lingering challenges such as rising inflation impacting household budgets, notably escalating prices of fuel, fresh produce, and essentials like gasohol 95, vegetable oil, and eggs, which have surged by 40%, 32.5%, and 25% respectively over five years.

“The projected 3% economic growth potential falls short of offsetting these escalations,” he cautioned.

Recent Bank of Thailand surveys revealed a 8.9% rise in incomes among non-agricultural employees and a 9.2% increase for freelancers in the first quarter, contrasted by a 7.15% uptick in the consumer price index during the same period.

Regarding short-term economic stimulation, Mr. Sethaput commented on the government’s 500-billion-baht digital wallet initiative, noting its immediate benefits while underscoring its limited impact on long-term economic fortification.

Despite a stronger-than-expected 1.5% growth in the first quarter, down from 1.7% in the previous quarter, the BoT’s growth projections stand at 2.6% for this year and 3% for the following year, lagging behind regional counterparts.

While calls persist for the central bank to lower its 2.5% policy interest rate to spur growth, Mr. Sethaput emphasized the importance of assessing future economic outlooks rather than solely relying on current data.

“The current interest rate aligns with economic recovery needs while anchoring inflation within target bounds,” he affirmed.

Consequently, the BoT’s Monetary Policy Committee (MPC) has opted to maintain a stable policy rate, with adjustments contingent on evolving economic conditions, pending the next MPC review slated for August 21.

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