Analysts have downgraded Thailand's economic growth forecast for 2023 after data indicated a much lower third-quarter GDP expansion than expected while there are uncertainties surrounding the controversial digital wallet policy.
Malaysia-based Maybank Securities lowered its estimate for Thai growth this year to 2.3% from 2.9%, citing "a weak showing and later than expected boost to government infrastructure spending".
BMI, a Fitch Solutions Company, said it is downgrading its 2023 Thai growth outlook from 2.8% to 2.5%.
"We have clearly overestimated the health of Thailand's economy this year and are revising downwards our 2023 forecast," the London-based research firm said on Tuesday, adding it predicts growth to pick up to 3.8% next year.
"The economy's underperformance means there is plenty of scope for catch-up growth. However, we still think the Bank of Thailand's projection of 4.4% and the government's target of 5.0% next year are far too optimistic," noted BMI.
Official data released on Monday indicated Thailand's real GDP growth slowed to 1.5% year-on-year in the third quarter, missing a consensus of 2.4% and BMI's forecast of 2.6%, down from 1.8% in the second quarter.
The economy expanded 1.9% for the first nine months of 2023.
"If we are right in expecting global growth to slow to 2.1% in 2024, then Thailand's exports will remain significantly constrained for a while longer, and the country's key tourism sector still has challenges to deal with," said BMI.
Maybank said Thailand's third-quarter GDP was "surprisingly weak as the manufacturing sector fell deeper into contraction".
Even though private consumption growth was buoyant at 8.1% year-on-year, it was offset by declining public investment of -2.6% and mild growth in private investment of 3.1%.
Public consumption slumped by 4.9% on fading Covid-related government spending.
The decline in manufacturing activity worsened to -4% in the third quarter from -3.3% three months earlier amid weakness across light industry, raw materials and capital and tech manufacturing, the brokerage said.
Looking ahead, uncertainty looms over the timing and execution of the digital wallet initiative.
"Legal challenges to the government's plan to borrow the 500 billion baht needed to fund the scheme could result in further delays and changes," said Maybank.
"Recipients' willingness to spend the largesse may also be reduced if it means their tax bills will be elevated in later years because of it."
The brokerage maintained its 2024 GDP growth forecast at 3.6%, without factoring in the digital wallet scheme.