The government's policy of stimulating private consumption is reasonable to sustain Thailand's economic growth amid global uncertainties, says an economist with Standard Chartered Bank (Thai).
Private consumption in the country grew by 7% year-on-year in the first half of 2023.
Private consumption and the tourism sector are expected to be the key factors driving economic expansion in the second half of the year.
It is reasonable for the government to support domestic consumption through stimulus measures to maintain positive economic momentum, said Tim Leelahaphan, an economist at Standard Chartered Bank (Thai).
The bank is waiting to see more details about the government's stimulus measures, particularly the 10,000-baht digital handout scheme, including the source of funding, the timeline for the scheme's implementation, and the form of digital wallet to be used.
As the scheme requires a huge chunk of the government's budget, estimated at 560 billion baht, the fiscal deficit is projected to reach 4.0% of GDP in 2024, up from 3.8% this year, said Mr Tim.
The government is expected to focus more on financial and fiscal discipline over the next 4-5 years, which should decrease the fiscal deficit over the long term, he said.
The bank downgraded its 2023 Thai GDP forecast to 3.3% from 4.2% following marginal growth of 1.8% year-on-year in the second quarter.
The institution forecasts economic growth of 4.3% in the second half of this year.
"The projected uptick is attributed to a clearer political outlook, spending-friendly policies and a growing number of foreign tourist arrivals," Mr Tim said.
Tourist arrivals exceeded 17.5 million for the first eight months of this year, with a monthly average of 2.2 million arriving in the country.
With the tourism high season approaching, Standard Chartered Bank (Thai) expects monthly arrivals to increase to 3 million from late September, lifting total arrivals to 30 million for the full year.
Thailand welcomed nearly 40 million arrivals prior to the pandemic in 2019.
He expects the Bank of Thailand (BoT) to keep its policy rate unchanged at 2.25% at the upcoming meeting scheduled for next week as there is no inflationary or economic recovery pressure.
However, Standard Chartered Bank (Thai) forecasts the US Federal Reserve will reduce its policy rate in the first quarter of 2024, while the European Central Bank is expected to follow suit around the middle of next year, said Mr Tim.
"The idea of resuming rate hikes may emerge in the final quarter of this year, especially if inflation rises faster and more strongly than we currently expect," he said.