Thailand’s economic growth has not reached its full potential, though there are some signs of recovery, according to Paopoom Rojanasakul, a caretaker deputy finance minister.
Southeast Asia’s second-largest economy is likely to grow between 2.3% and 2.8% this year, Mr Paopoom said at the Thailand Focus 2024 seminar held by the Stock Exchange of Thailand on Wednesday.
He said the growth rate had not reached its full potential due to complex factors, including global geopolitical tensions, volatility in global financial markets and domestic factors such as the political situation and delays in budget spending.
“Despite these challenges, we have confidence in the resilience and adaptability of the Thai economy, and we are seeing signs of economic recovery,” Mr Paopoom said.
Data released this week showed Thai exports grew at their fastest rate in 28 months in July as demand rose in key markets. The collar value of shipments rose 15.2% from a year earlier, according to the Ministry of Commerce.
Critically, new investment is needed to maintain the country’s competitiveness, Mr Paopoom said.
The economy grew at a faster pace of 2.3% in the second quarter, compared with a year earlier, beating analysts’ forecasts, but last year’s growth of 1.9% lagged that of regional peers.
Bank of Thailand governor Sethaput Suthiwartnarueput told the forum that the central bank was ready to adjust interest rates if needed to help the economy, but it needs to maintain policy space for unexpected risks.
“We are not dogmatic. We need to be pragmatic and flexible. We will be guided by behaving in a prudent way,” he said.
Mr Sethaput noted the current policy interest rate of 2.5% was among the lowest in the world, and reiterated his view that structural factors were holding back the country’s economic growth.
Policymakers are closely watching the deterioration in credit quality and how it affects liquidity and the broader economy, although at this point, they don’t expect it “to fall off the cliff”, he said.
Thai banks’ non-performing loans (NPLs) rose slightly to 2.84% of outstanding credit at the end of June from 2.80% at the end of March, the central bank said on Tuesday. However, mortgage NPLs rose to 3.7% from 3.5% in the previous quarter.
Mr Sethaput also expressed concerns over the widening gap between growth in consumption and manufacturing that is hurting from imports, especially from China.
These issues may pose additional hurdles to an economy that has expanded below 2% annually in the past decade, unlike neighbours that have regained their pre-pandemic growth rates of 5% or higher.
The BoT expects the economy to grow by 2.6% this year and 3% in 2025, noting the recovery has been uneven.
“It’s not a great number,” he said.
“We’re not happy with a long-term growth rate at that reduced level … and not enough to lead to an increase in living standards and welfare that is necessary.”
The central bank last week held interest rates steady for a fifth straight meeting, despite persistent calls from the government for a rate cut. The next rate review is on Oct 16.
