The economy has avoided a technical recession, with the National Economic and Social Development Council (NESDC) reporting on Monday that the country’s economy in the first quarter still grew by 1.5% compared with the corresponding period last year.
However, the state planning unit predicted that the economy would grow by only 2.5% for the whole year, down from the previous estimate of 2.7%, due to potential risks from the US-China trade war.
NESDC secretary-general Danucha Pichayanan said the key driver of Thailand’s economy in the first quarter was domestic consumption, which grew by 6.9% year-on-year during the period.
The Consumer Confidence Index in the first quarter stood at 57.2 points, up from 55.2 in the previous quarter. The tourism sector grew by 24.8%.
On a quarter-on-quarter basis, the economy grew by 1.1% over the fourth quarter of last year, which recorded a 0.4% contraction compared with the third quarter of 2023.
Therefore, the economy avoided a contraction for two consecutive quarters, which would have met the criteria for a technical recession, said Mr Danucha.
Regarding the export sector, which is crucial for the economy, shipments in the first quarter of this year shrank by 2%.
Although the first two months of the first quarter saw a good level of export growth, March experienced a 10% contraction, said Mr Danucha.
According to Mr Danucha, following the contraction in the first quarter, overall exports in US dollar terms are expected to grow by only 2% for the entire year, down from an earlier forecast of 2.9% made in February.
The decrease in export value was mainly from air-conditioners, pickups and trucks. In contrast, exports of goods such as rice, rubber, computers and steel increased.
The trade balance in the first quarter of this year still showed a surplus of US$1.6 billion, according to Mr Danucha.
Mr Danucha also mentioned that Thailand needs to restructure its production to boost exports, as it is evident that the structure of exports in 2023 had a relatively low proportion of high-tech products compared to other countries in the region, except Indonesia.
In the first quarter of this year, investment contracted by 4.2% due largely to a 27.7% reduction in public sector investment, stemming from the nearly seven-month delay in the implementation of the 2024 fiscal budget law.
However, private sector investment grew by 4.6% for the period.
Industrial production in the first quarter contracted by 3%, marking the sixth consecutive quarter of contraction. This was particularly pronounced in industries where 30-60% of production is for export.
Consequently, the domestic capacity utilisation rate in the first quarter was 60%, down from 64% in the corresponding period last year.
The number of international tourists in the first quarter was 9.37 million, an increase of 43.5% compared to the same period last year, generating 317 billion baht in revenue.
Domestic tourism saw 67.9 million trips in the first quarter, an 8.6% increase from the same period last year, generating 232 billion baht in revenue.
Regarding the risks to the economy this year, Mr Danucha said high household and business debt levels still pose a concern.
According to Mr Danucha, there are additional risks from climate volatility, geopolitical conflicts and the slower than expected adjustment of policy interest rates by major global economies.
There is also a need to watch for Chinese goods flooding the Thai market due to US trade restrictions on Chinese products, which could lead these goods to seek other markets.
He also commented on Thailand’s policy interest rate, noting that any reduction must be carefully considered, as it could affect the exchange rate, potentially leading to higher import costs, particularly for energy.
Regarding the impact of the digital wallet scheme, which the government aims to launch in the fourth quarter, the NESDC believes that the full 500-billion-baht budget will not be spent within the fourth quarter.
Therefore, if the project proceeds as planned, it is expected to contribute an additional 0.25 percentage points to this year’s GDP, said Mr Danucha.