Thailand’s economic growth unexpectedly slowed in the third quarter as manufacturing slumped on weak exports, supporting the case for the government to proceed with its planned US$14 billion cash handout program.
Gross domestic product (GDP) in the three months through September rose 1.5% from a year earlier, the National Economic and Social Development Council (NESDC) said Monday. That is well below the 2.2% median estimate in a Bloomberg survey and 1.8% growth in the second quarter.
The economy expanded 0.8% quarter-on-quarter, against a median estimate of a 1.3% growth. For the first nine months, the economy improved just 1.9%.
The disappointing print prompted the NESDC to narrow its 2023 GDP growth forecast to 2.5% from a prior estimate of 2.5%-3%. NESDC chief Danucha Pichayanan said at a briefing that the government should try to create sufficient fiscal space to prepare for future risks.
Even as tourism — which is a key plank of Southeast Asia's second-largest economy — recovered and buoyed domestic activity, growth still lagged many of its neighbours amid a slump in exports and government spending.
Dismal domestic activity has prompted the administration of Prime Minister and Finance Minister Srettha Thavisin to push for a stimulus plan that’s being opposed by some central bankers and economists. Mr Srettha is aiming to accelerate annual growth, which has averaged below 2% in the past decade, to 5%.
The centrepiece of Mr Srettha’s strategy to lift the economy out of the cycle of low growth is a digital wallet program that will see 50 million Thais 16 years old and above receive a one-time handout of 10,000 baht ($285) starting May 2024.
On Monday, Mr Srettha said he was "very concerned" about the latest GDP data that was worse than expected and pointed to an economic crisis. Such a dire state of the economy underlines the need for the cash stimulus, he said.
The plan to fund the handout through borrowing has triggered a backlash, including from the opposition Move Forward Party, on concerns that move may widen the fiscal deficit and stoke inflation.
The baht, held gains of about 0.2% against the dollar after the release of the GDP data, while the benchmark SET stock index and 10-year sovereign bonds were little changed.
What Bloomberg Economics says...
Headline momentum in Thailand’s GDP was weaker than expected in the third quarter. But underneath the hood most of the key parts of the economy were humming. Household spending remained solid, and investment picked up. At the same time, there is little worry that this pace of growth will stoke outsize inflation pressures. This suggests the Bank of Thailand (BoT) is likely to leave interest rates on hold on Nov 29.
— Tamara Mast Henderson, Asean economist
Thailand’s GDP growth is expected to improve to 2.7%-3.7% next year, Mr Danucha said Monday, led by a recovery in exports, private investment, private consumption and tourism. The 2024 growth outlook has not considered the rollout of the cash handout program next year, he said.
The government maintained its estimates for the tourism sector this year at 28 million foreign arrivals and 1.03 trillion baht of revenue. Next year should see 35 million visitors from overseas estimated to bring in 1.3 trillion baht in revenue, according to the NESDC.
The BoT, which has sustained interest-rate increases this year and has taken borrowing costs to a decade high even as inflation was below target, will next decide on the key rate on Nov 29.