Nursing a fragile economy
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Nursing a fragile economy

As several of Thailand's trading partners stumble, the new government takes its tentative first steps

Chinese tourists dip lotus bulbs in a water bowl at the Grand Palace in Bangkok earlier this month. Tourism is viewed as a quick win for the economy as Thailand prepares to grant visa exemptions for Chinese visitors for the first time in history. 
Chinese tourists dip lotus bulbs in a water bowl at the Grand Palace in Bangkok earlier this month. Tourism is viewed as a quick win for the economy as Thailand prepares to grant visa exemptions for Chinese visitors for the first time in history. 

With recession looming in many countries, fears over economic contraction remain in Thailand, particularly when the key contributor of exports still faces a stark outlook because of the weak economies of our trade partners.

The government was grilled last week by opposition parties during a two-day policy debate in parliament, followed by heavy criticism from the private sector over the vague the 43-page policy statement.

To be exact, the policy statement only occupied 14 pages, while a longer appendix was attached. The statement "completely lacked any details on how to to effectively fix the slow economy", said business leaders.

Big questions remain about how the government will manage to secure funding for its massive stimulus projects, such as the 10,000-baht digital wallet scheme that is estimated to require a budget of 560 billion baht.

The tourism industry, which has been praised as the lone economic bright spot following the pandemic, is recovering gradually.

A string of stimulus measures ushered in during the first cabinet meeting might ease concerns to some extent, but a fragile economy with a high household debt level exceeding 90% of GDP may take a toll on the Thai economic recovery over the next few years.


Somjai Phagaphasvivat, an independent political and economic analyst, said there are no signs of a recession in the Thai economy.

A recession is defined as the economy contracting for two consecutive quarters.

Thai GDP fell by 6.1% in 2020 because of economic shock from the pandemic, the largest contraction since the Asian financial crisis. Real GDP then grew by 1.5% in 2021 and 3.2% in 2022.

The economy is projected to expand by 3% this year, driven by a rejuvenated tourism sector.

Foreign arrivals are projected at 28-29 million this year, rising to 30 million next year, then nearing the 2019 tally of almost 40 million in 2025.

The tourism sector, including both domestic and foreign tourists, accounts for 23% of GDP.

The export sector was flat in the first half of this year, but is predicted to recover in the second half as the global economic recovery gains momentum.

For instance, the US economy is expected to post 1% growth this year despite previous concerns of a recession, according to economists.

The Chinese economy is expected to expand by 4% as mobility and activity pick up after the country reopens, while European economies are projected to post 0% growth.

Global growth is predicted to slow from 3.4% in 2022 to 2.9% this year, then rebound to 3.1% in 2024, say research houses.


In fiscal 2024, the Thai government has accrued investment expenditure of up to 600-700 billion baht, of which 150 billion is carried over from the fiscal 2023 budget, which should help to propel the economy, said Mr Somjai.

"The chance of a recession is very low unless there is an economic crisis, such as a rapid surge in energy prices," he said.

Mr Somjai said the government's economic stimulus measures, namely the 10,000-baht digital currency handout scheme, will add 1% to GDP growth next year.

In the absence of stimulus measures, he predicts next year's GDP to expand by 3%. With the stimulus measures, Thai GDP will grow by 4% in 2024, said Mr Somjai.

The National Economic and Social Development Council downgraded its economic growth forecast for 2023 to 2.5-3% from 2.7-3.7% because of the impact of the global economic slowdown.

In the second quarter of 2023, the Thai economy expanded by 1.8%, down from 2.6% in the previous quarter. In the first half of 2023, the economy grew by 2.2%.

A truck transporting fruit stops at a checkpoint in Vietnam's Lang Son province en route to China's You Yi Guan checkpoint. Analysts expect Thailand's export sector to recover in the second half of the year, as global economic recovery gains momentum.


Tourism has been viewed as a quick win for the country's economy as it prepares to grant a visa exemption to Chinese visitors for the first time in history.

The government recently set a new goal to increase foreign tourism receipts to 3 trillion baht, up from 1.9 trillion registered in 2019.

Vason Temsiripong, president of the Association of Chonburi Attractions, said he believes Thailand will not slip into recession as the tourism segment continues to rebound.

The visa-free policy for Chinese arrivals lasting five months should support tourism growth, said Mr Vason.

"Hotels of all sizes and attractions still have sufficient capacity to welcome more tourists and large tour groups," he said.

Mr Vason said the cabinet approving a lower electricity fee and diesel price should help reduce costs for tourism operators. These measures can also encourage locals to travel more if they have fewer daily expenses, he said.

Though high household debt remains an issue that needs to be monitored, Mr Vason believes people are still eager to travel.

People with a limited budget might opt for nearby provinces or take one-day trips, he said.

However, tourism operators still have concerns over the minimum wage hike as this measure remains unclear, said Mr Vason.

He said the cabinet should provide a clear timeline for a wage hike and provide relief measures to assist operators in reducing costs to an appropriate level, such as taxes or subsidies for worker training programmes.

Prime Minister Srettha Thavisin leaves after a weekly cabinet meeting at government house in Bangkok on Wednesday.  Chanat Katanyu


Chaichan Chareonsuk, chairman of the Thai National Shippers' Council, said Thailand does not meet the criteria for an economic recession.

He characterised the current condition as a technical recession or short-term slowdown limited to this year.

Mr Chaichan recommended monitoring of the economy because it is highly vulnerable, particularly scanning the pace of the Chinese economic recovery in the fourth quarter, the El Niño drought conditions, and Thailand's export performance in the final quarter.

The monitoring should include the export performance of the automotive and electronics industries as well as oil prices during the quarter, he said.

Mr Chaichan said a recession should be defined as a significant and sustained economic downturn, with a prolonged decline in economic activities.

Such a decline prompts cautious consumer spending and increased savings, further contracting the economy, he said.

Mr Chaichan acknowledged the Thai economy grew for the first two quarters this year, albeit slowly.

"The economy this year is sluggish, in a slow-growth phase, but has not reached a recession," he said.

Mr Chaichan said if the global economy remains highly uncertain, special measures to stimulate the domestic economy may be needed.

These can include measures to increase private sector consumption, promote domestic tourism, or directly stimulate investments to increase non-farm job opportunities, he said.

These measures could enhance skill development, which will further stimulate private sector consumption and increase monetary circulation within the economy on a sustained basis, said Mr Chaichan.

He applauded several measures recently rolled out by the cabinet, noting they should help ease the cost of living and prop up the domestic economy in the short term.

However, Mr Chaichan pointed out there is a distinct lack of direct measures from the cabinet to stimulate trade, particularly exports, which are a key driver of the country's economy.


The lukewarm domestic economy has raised fresh concerns among businesses, but the conditions are not so severe they should cause a recession, said the Employers' Confederation of Thai Trade and Industry (EconThai).

The Thai economy will undoubtedly be affected by the slowdown in other countries, especially the US and Europe, said Tanit Sorat, vice-chairman of EconThai.

He said he based his view on two key economic indicators: GDP and inflation.

"With Thai GDP expected to grow by more than 2% this year, we are not that worried," said Mr Tanit.

Following its meeting earlier this month, the Joint Standing Committee on Commerce, Industry and Banking said it decided to slash its growth forecast for this year from 3-3.5% to 2.5-3%.

The downgrade was attributed to GDP growth of only 1.8% in the second quarter this year, missing the private sector's projection of 3.1%.

The committee also adjusted its inflation assessment from 2.2-2.7% to 1.7-2.2% for this year.

"Inflation rates tend to keep decreasing. They are projected to fall to a range that can be considered under control," said Mr Tanit.

But he cautioned the government not to be complacent, paying attention to weaker export and manufacturing sectors.

Last month, the Office of Industrial Economics (OIE) downgraded its forecast for Thailand's manufacturing production index (MPI) this year to a contraction ranging from -2.8% to -3.8%.

The office also cut its outlook for industry GDP growth to a range of -1.5% to -2.5%.

The revision is the result of the global economic slowdown, the decline of the export sector and a tourism segment that has yet to fully uplift the domestic economy, according to the office.

Earlier this year, the OIE predicted MPI growth of 0-1% and industry GDP growth of 2.5-3.5%.

Given these economic circumstances, the government should consider issuing an emergency loan decree to support its efforts to deal with economic problems, said Mr Tanit.

During 2020 and 2021, the Prayut Chan-o-cha government issued two emergency loan decrees to borrow 1.5 trillion baht in order to mitigate the impact of the pandemic on the public and the economy.

Lamonphet Apisitniran

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