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Thailand’s economic growth accelerated in the second quarter, bolstered by increased consumption and a recovering tourism sector, according to a Reuters poll. The country’s GDP rose by 2.3% year-over-year, surpassing analysts' expectations amid ongoing challenges like high household debt.
Thailand’s Q2 Economic Growth Exceeds Expectations, But Full-Year Forecast is Revised Downward
Official data released on August 19 show that the government's full-year growth forecast range was reduced. Increased consumption, tourism, and exports bolstered Thailand's economic growth in the second quarter.
According to data from the National Economic and Social Development Council (NESDC), the second-largest economy in Southeast Asia experienced a 2.3% increase in the April-June quarter compared to the previous year.
According to Reuters, this expansion exceeded analysts' expectations, anticipating a 2.1% expansion.
Gross domestic product (GDP) for the January-March quarter of 2024 increased by an upwardly revised 1.6% year over year.
GDP expanded by a seasonally adjusted 0.8% in the second quarter, lower than the upwardly revised 1.2% expansion in the previous three months and a poll forecast of 0.9% growth.
The state planning agency NESDC reported that private consumption continued to increase in the second quarter while public and private investments decreased.
The NESDC has revised its forecast range of 2.0% to 3.0% to anticipate GDP growth of 2.3% and 2.8% this year. The growth rate of the prior year was 1.9%.
Thailand's economy needs to catch up to that of its regional counterparts due to the high costs of borrowing and household debt, as well as the sluggish growth of exports in the context of a slowdown in its primary trading partner, China.
The forecast for planning agencies is that the export growth forecast for this year is 2%.
Thailand’s Q2 Growth Boosted by Government Spending, But Tourism Recovery and High Debt Cloud Outlook
Thailand's economic growth likely accelerated in the second quarter, driven by increased government spending. Still, according to a Reuters poll of economists, a slow recovery in tourism and high household debt have clouded the overall outlook.
Southeast Asia's second-largest economy was expected to expand by 2.1% in the April-June period, according to the median forecast in the August 8-15 poll, up from 1.5% in the previous quarter. Every quarter, gross domestic product (GDP) likely grew a seasonally adjusted 0.9%, compared to 1.1% growth in the first quarter. Forecasts for the GDP data, due on August 19, ranged from 1.8% to 2.8%.
"For Q2, government spending and investment, which rapidly accelerated, should drive economic growth. However, there could be some slowdown in private consumption due to high household debt, as well as in exports of services," said Poon Panichpibool, a markets strategist at Krung Thai Bank. He also expressed concerns about the potential impacts of a global economic slowdown, mainly if a U.S. recession hampers Thailand's exports.
The outlook became more uncertain on August 15 when a court dismissed Prime Minister Srettha after less than a year in office, raising the prospect of further political instability in a country frequently disrupted by coups and court rulings that have unseated multiple governments and political parties.
Last month, the World Bank downgraded Thailand's 2024 GDP growth forecast to 2.4% from 2.8%, citing weaker-than-expected exports and public investments. While exports rose just 0.3% year-on-year in June, they showed more robust growth of 5.8% in April and 7.8% in May.
In addition to weak global demand and a slowdown in China—Thailand's major trading partner—the country's crucial tourism sector has yet to recover to pre-pandemic levels.
"The weak outlook for China's economy will affect Thailand mainly through the tourism sector. A subdued domestic outlook has caused Chinese tourists to cut back on discretionary spending such as holiday expenditures," said Eugene Tan, associate economist at Moody's Analytics.
According to a separate Reuters poll conducted in July, Thailand's economic growth is expected to average 2.6% for the year, a significant downgrade from the 3.4% predicted at the start of the year.
