The Fiscal Policy Office (FPO) announced GDP expanded by only 1.8% in 2023, lower than the previous forecast by almost 1 percentage point, attributed to many negative factors affecting the economy, says director-general Pornchai Thiraveja.
Growth was projected to increase to 2.7% in 2023 according to the previous projection in October last year.
The lower than expected growth is attributed to the contraction of exports and the manufacturing sector as reflected by the Manufacturing Production Index (MPI), which fell by 4.7% year-on-year, particularly automotive products which contracted for the 23rd consecutive month, electronics for the 15th month and rubber products for the ninth month.
The FPO predicts the value of exports will drop by 1.5%, compared with the earlier estimate in October of 1.8%, due to the slowdown of major trading partners.
The lower MPI caused GDP to expand by only 1.4% in the fourth quarter of last year compared to 2.6% in the first quarter, 1.8% in the second and 1.5% in the third.
Mr Pornchai said in order for economic growth in 2023 to reach 2.7% according to the estimate in October, GDP in the fourth quarter of 2023 must expand by 4-5%.
He did not say the Thai economy is in a state of a crisis as there is no specific definition of an economic crisis.
The FPO expects the economy to grow by 2.8% in 2024. The value of export goods is expected to expand 4.2% in line with global market demand.
International tourists, mainly from China and Malaysia, are forecast to reach 33.5 million, up from 28 million in 2023. Tourism revenue is put at 1.48 trillion baht, up 23.6% from last year.
Mr Pornchai said the factors affecting the economy include geopolitical tensions such as the Russia-Ukraine and Israel-Palestine conflicts and tensions in the Red Sea, elections in large economies such as the US, Russia and India which may affect global trade, the volatility of money markets worldwide and China's slowdown which may affect exports and tourism.
He said the growth estimate for 2023 of 1.8% is free from any political will. Moreover, it is also close to the 2% estimate of the private sector.
Foreign investors see a high chance of Thailand facing a recession due to its low economic growth.
According to the latest consensus by foreign investors about recession worldwide for the next 12 months, Thailand has a 15% probability of a recession.
This marked an increase from 5% in the survey conducted three months ago.
Despite the heightened possibility of recession, Thailand's chances are far lower than those of other countries, such as 65% for Venezuela, 60% for the UK, 50% for the US and 20% for Singapore. On the other hand, Malaysia has a 5% probability of a recession, said Kobsidthi Silapachai, head of capital markets research at Kasikornbank (KBank).
Mr Kobsidthi said the greater possibility of a recession would be on the back of lower GDP growth from 1.8% in the second quarter of 2023 to 1.5% in the third quarter.
Moreover, KBank has trimmed its economic growth estimate for 2023 to 2.5%.
In 2024, Kasikorn Research Center (K-Research) assesses GDP growth of 3.1% under its base-case projection.
The possibility of a recession in the US would lead to the Federal Reserve cutting rates this year, causing the dollar to depreciate.
KBank forecasts the baht will move according to the weakening dollar and Fed rate cuts, finishing at about 34 to the greenback by the year-end.
However, KBank predicts the Thai currency to weaken throughout this month and next in a range of 35-36.49 baht to the dollar.
Furthermore, KBank anticipates the Bank of Thailand would cut its policy rate in the second half this year.