Thailand’s Economic Growth Accelerates Amid Uncertainty

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK (Reuters) – Thailand’s economic expansion accelerated in the second quarter due to stronger consumption, tourism, and exports, but analysts noted that policy uncertainty following a government change clouds the outlook.

Gross domestic product (GDP) grew 2.3% in the April-June quarter from a year earlier, as reported by the National Economic and Social Development Council (NESDC). This is up from an upwardly revised 1.6% in the first quarter and surpassing the 2.1% forecast in a Reuters poll.

The growth in Southeast Asia’s second-largest economy was fueled by improved government consumption, the export of goods and services, and private consumption, although public and private investments contracted, according to NESDC.

On a quarterly basis, GDP grew a seasonally adjusted 0.8% in the second quarter, slower than an upwardly revised 1.2% expansion in the previous three months and below the 0.9% growth forecast.

Shivaan Tandon, markets economist at Capital Economics, predicted further deceleration in the coming quarters as the tourism boost fades and fiscal policy uncertainty remains elevated, anticipating interest rate cuts starting in October.

Thailand’s main stock index increased by 1.2% at 0526 GMT, and the baht strengthened by 0.5% against the dollar.

The central bank has kept its key interest rate unchanged at a decade-high of 2.50% for four consecutive meetings, with expectations of maintaining the rate during the meeting on Aug. 21.

The NESDC now forecasts GDP growth between 2.3% and 2.8% for the year, narrowing from an earlier range of 2.0% to 3.0%. The economy displayed a 1.9% growth last year.

Challenges persist as Thailand’s economy has been trailing regional peers due to high household debt, borrowing costs, and sluggish exports affected by a slowdown in its top trading partner, China.

The political landscape is further complicated by a recent court ruling that removed former Prime Minister Srettha Thavisin for constitutional violations regarding a cabinet appointment.

Paetongtarn Shinawatra, a political novice and daughter of former Prime Minister Thaksin Shinawatra, was endorsed as prime minister but has yet to form a cabinet amidst dwindling party popularity and an unfulfilled 500 billion baht stimulus program.

Danucha Pichayanan, head of the NESDC, indicated that the government must implement stimulus measures to address economic challenges and improve people’s livelihoods.

The NESDC maintained its export growth forecast at 2% for the year. The economy has been buoyed by tourism, with 21.8 million foreign tourists recorded from the start of 2024 to Aug. 11, a 33% increase from last year. The agency maintains expectations for 36.5 million foreign tourists this year, aiming to reach the nearly 40 million record set in 2019, prior to the pandemic.

($1 = 34.43 baht)