GDP growth target remains elusive
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GDP growth target remains elusive

Amid a host of challenges, pundits say expansion of 5% might be wishful thinking

An aerial view of downtown Bangkok at night. The World Bank recently cut its forecast for Thai economic growth this year and next.
An aerial view of downtown Bangkok at night. The World Bank recently cut its forecast for Thai economic growth this year and next.

The government led by Prime Minister Srettha Thavisin has set an ambitious target to raise annual GDP growth to 5%.

The premier delivered his policy statement to the heads of government agencies last week who gathered to discuss the fiscal 2024 budget.

Last week the World Bank also cut its growth forecast for Thailand to 3.4% this year, down from 3.6%, and trimmed its outlook for 2024 to 3.5% from 3.7%.

Amid the challenges of delayed budget allocation, a stagnant export sector and the recent blow to tourism with the shooting at Siam Paragon mall, growth of 5% could seem like wishful thinking, according to some industry leaders.


Aat Pisanwanich, director of the Center for International Trade Studies, said there is a slim chance the economy can expand by 5% during Mr Srettha's administration as during the past decade the economy grew by no more than 4%.

He said the Thai economy expanded at an average of 3% per year for nearly a decade, while potential GDP growth was 5%.

The ability to achieve such growth depends on management of the government's economic policies, said Mr Aat.

The planned stimulus measures include a 10,000-baht digital wallet scheme for people aged 16 and older, which requires an estimated budget of 560 billion baht; raising the daily minimum wage to 600 baht; and increasing the minimum salary for university graduates with bachelor's degrees to 25,000 baht per month.

These measures are expected to mean higher costs for business operators and subsequent inflation, reducing domestic spending and production capacity as costs increase, he said.

While the government is trying to stimulate the economy, if Thailand cannot expand exports -- which account for around 70% of GDP -- achieving 5% growth will be difficult, Mr Aat said.

The government's revised medium-term fiscal policy for fiscal 2024-27 as of September forecast GDP growth of 3.2% in 2024, 3.6% in 2025 and 3.4% in 2026-27, with a budget deficit of around 3% of GDP.

Public debt is expected to reach 64-65% of GDP in 2024-27.

The goal of the medium-term policy is to pursue an expansionary fiscal policy through budget deficits to support economic growth, according to the government.

The administration said it also wants to build resilience and fiscal soundness to ensure stability in the future.


Mr Aat said the problems in the export sector stem from a confluence of factors.

The first is Thailand's structural problems in terms of production costs in both the agricultural and industrial sectors, which are higher than that of regional competitors, especially fuel and electricity prices.

Second, Thai firms are less innovative than those in competitor nations, particularly Vietnam, as multinational corporations from Asia and Europe relocate their manufacturing bases to Vietnam for export, he said.

Vietnam is one of Thailand's top competitors in terms of attracting business and trade, and it actively implements the bio-, circular and green economic model, which aligns with current global trends as that nation targets a green economy by 2050, said Mr Aat.

Thailand also faces a shortage of skilled labour compared with Singapore, Vietnam and Malaysia.

Lastly, Vietnam manages its economy based on transparent standards through stringent regulatory adherence, which improves investor confidence, while it uses technology to deal with corruption, he said.

Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association, said the ambitious economic target might push state agencies to accelerate their work as the fiscal budget allocation has been delayed for months.

However, the 5% target might not be practical if key economic sectors still face obstacles, said Mrs Marisa.

She said it is challenging for tourism, which accounted for 18% of GDP prior to the pandemic, to generate the same level of revenue now as global tourism has become highly competitive.

Mrs Marisa said many hurdles are beyond the industry's control. The Chinese market is a good example, she said, because even excluding visa restrictions, its resumption relies on other factors such as the slow economy there and negative perception about safety in Thailand, while tourists with high purchasing power have plenty of other options.

Tourists browse street food at Yaowarat market in Bangkok. Industry chiefs think the government's target of 5% growth is lofty. Varuth Hirunyatheb

Chamnan Srisawat, president of the Tourism Council of Thailand, said the tourism sector also has problems regarding supply quality, which requires a major revamp, especially concerning national resources, tourist scams and illegal businesses.


Despite these challenges to GDP growth, Thailand should post expansion in the long term, fuelled by higher investment, said Jareeporn Jarukornsakul, group chief executive of WHA Corporation Plc, Thailand's largest developer of built-to-suit logistics facilities.

The 5% growth target is not new as the previous government set a similar goal based on foreign investors expanding their businesses to Thailand, especially in the Eastern Economic Corridor (EEC), she said.

The EEC, which covers parts of Chon Buri, Rayong and Chachoengsao, is expected to become a high-tech industrial hub hosting 12 targeted S-curve industries, including next-generation car production and smart electronics.

New investors continue to seek opportunities in Thailand, especially those from China and Taiwan, said Ms Jareeporn.

US tech firms are expected to be next in line, following talks between Mr Srettha and companies during his trip to the 78th UN General Assembly in New York last month.

"The business sector always supports the government's investment roadshows abroad and continues to develop infrastructure in industrial estates to serve investors," she said.

"Combined with the prime location of Thailand in Southeast Asia, these factors will help prospective foreign investors make the decision to invest in Thailand."

Ms Jareeporn acknowledged the country is struggling with high levels of household debt and its foreign direct investment value is lower than that of neighbouring countries, but she said she believes Thailand can overcome these issues.

One indication the country can expect bullish growth is increasing industrial land sales, she said.

The Industrial Estate Authority of Thailand (IEAT) recorded strong industrial land sales, which skyrocketed by 182% year-on-year to 5,693 rai in fiscal 2023.

The numbers exceeded the IEAT's target of 2,500 rai for the fiscal year from Oct 1, 2022 to Sept 30 this year.

Investment in electric vehicles (EVs) and battery manufacturing, especially from China, continues to rise following the government's policy to promote the EV industry here, said Ms Jareeporn.

Mr Aat says the Thai export sector faces several hurdles in the short term.


KKP, the research unit of Kiatnakin Phatra Bank, predicts the combined government stimulus measures require a budget of up to 3.6% of GDP, but they would stimulate economic growth by only 1%.

"Distribution of money via handouts usually stimulates spending, but the impact of this digital wallet project on expanding the economy may be less than the cost of the government budget based on many factors, including people spending the money on goods that have a high level of imported content," KKP said in a research note.

In addition, the growing fiscal deficit and higher interest rates could cause public debt to reach the ceiling of 70% sooner than expected, in less than 10 years, said the research house.

High public debt is a major economic risk, said KKP.

The digital handout could have a negative indirect impact on the economy and financial markets in many dimensions, and this impact is already apparent in the stock market, noted the research unit.

"Investor concerns are reflected in the depreciation of the baht. The growing budget deficit has greatly raised their concerns over the government's fiscal discipline, which increases the risk of a downgrade for Thailand's credit rating," said KKP.

"A greater fiscal burden means more borrowing will be needed in the future. This will cause the capital market, which is already facing tight liquidity, to have rising financial costs amid higher interest rates. That could result in a decrease in private investment."

Instead of spending 560 billion baht on the digital wallet scheme, the government should allocate this budget to long-term structural reform projects that could generate sustainable economic benefits, said the research unit.

Asia Plus Securities (ASPS) said the government's planned stimulus measures are "expensive".

Thailand's economic recovery is largely fuelled by domestic consumption and tourism, while both household and government debt are skyrocketing, said the brokerage.

However, compared with the period from January 2021 to October 2022, when the baht weakened to 38 to the dollar, Thailand's economy is "now healthier with a better current account balance", ASPS said.

Thailand's financial position is now stable and foreign reserves remain high.

The household debt ratio in the second quarter was lower than during the pandemic period, said the brokerage.

A woman works in a restaurant in Bangkok on Sept 11. The new government is hoping stimulus measures can rev up the economy. REUTERS


The Thai Chamber of Commerce views the government's target of 5% annual growth as attainable, contingent upon robust collaboration between the government and the private sector.

The collaboration can serve as a driving force for the economy in the short, medium and long terms in a serious and concrete manner, said Sanan Angubolkul, chairman of the chamber.

He said the government must prioritise political stability to ensure continuity of work, while expediting restoring foreign investor confidence and speeding up finalising free trade agreements with various countries, especially negotiations that are ongoing.

The government also needs to explore new potential markets in strategic countries such as China, Saudi Arabia, Vietnam and India, while retaining existing investors from Japan and the US, said Mr Sanan.

"The key issue the government must address immediately is the El Niño weather phenomenon, which is expected to have an impact on the agricultural sector in the near future," he said.

In the short term, the Agriculture and Cooperatives Ministry is surveying water supply and coordinating with relevant agencies to ensure sufficient supply for agricultural, industrial and consumer use.

In the long term, it is necessary to streamline nationwide water management plans, said Mr Sanan.

This shift involves the integration of public sector operations to ensure water management is aligned, allowing for efficient allocation of water for consumption, especially in critical areas such as the EEC and the Northeast, he said.

If the government invests in immediate corrective actions, it will not only address the problem, but also stimulate job creation and investment in each area, said Mr Sanan.

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