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Thailand is currently going through a phase of fragile economic recovery, marked by contrasting signals. After a significant contraction due to the pandemic and internal political tensions, the country is showing more modest growth than expected. Public consumption and investment show encouraging signs, while private consumption and the sector sightseeing are struggling to return to their pre-crisis level. While current trends point to opportunities, structural challenges remain, affecting long-term economic dynamics.
Thailand is currently at an economic turning point, showing a growth of 3% in the third quarter of 2024. Although this represents an improvement compared to the previous quarter, this recovery remains fragile and uneven. The Thai economy, which has experienced significant challenges, including declining private consumption and a tourism sector still in recovery, faces multiple obstacles to regain a sustainable balance.
Growth stimulated by public consumption
During the first nine months of 2024, Thailand recorded a growth of 2.3%, exceeding the 1.9% of the previous year. This recovery is mainly fueled by a significant increase in public consumption, which has progressed by 6.3% in the third trimester, as well as by a solid investment, up by 5.2%. However, private consumption is showing signs of weariness, only growing by 3.4% this quarter, compared to 4.9% in the previous quarter.
Foreign trade, a key factor
THE foreign trade continues to play a vital role in Thailand’s economic dynamics. This quarter, the exports of goods have grown 11.2%, surpassing the 10.5% imports. It should be remembered that almost 65% of Thai GDP depends on exports. However, the year 2023 was marked by a contraction in exports, which affected economic performance overall.
Mixed inflation
The current situation is also colored by issues ofinflation. After an increase in 6.1% in 2022, the numbers dropped to 1.2% in 2023, oscillating between deflation and disinflation. In November 2024, the price index increased slightly, reaching 0.9% year-on-year. However, this inflation remains well below the target range of 1-3% fixed by the Bank of Thailand.
Challenges for monetary policy
Faced with this dynamic, the Bank of Thailand (BoT) appears to be limited in its ability to ease its monetary policy. Its key rate was lowered to 2.25%, a level which could cause capital flight and pressure on the exchange rate if a further decline was envisaged. The institution has succeeded so far in stabilizing the baht, but concerns remain.
A tourism sector in difficulty
The sector of tourism, essential for the Thai economy, is struggling to recover. In 2023, the country hosted approximately 28 million tourists, up compared to 2022, but still 30% below 2019 levels. Although tourism receipts are recovering, they remain below 60 billion dollars before the pandemic, representing only 30 billion last year. The slow recovery of Chinese visitors, as well as the drop in per capita spending, is making the situation worse.
Government initiatives for recovery
To stimulate consumption, the Thai government launched a program of monetary distribution, planning to grant 10,000 baht (approximately 292 dollars) close to 50 million Thais. This initiative, although costly, could provide a temporary boost to GDP, but does not resolve structural problems such as household debt which has almost reached 90% of GDP.
Economic outlook and future challenges
Despite a growth forecast of 2.6% for 2024, several risks weigh on the Thai economy, in particular the deterioration of international demand. To restore sustainable growth, the country must reduce its dependence on tourism and address the structural challenges of its economy, thus combining a growing middle class with balanced internal and external consumption.
- Growth : 3% in Q3 2024, improvement compared to 2.2% in Q2 2024.
- Public consumption : Increased by 6.3% in Q3 2024.
- Investment : Progress of 5.2% in Q3 2024.
- Private consumption : Slowdown, +3.4% in Q3 2024.
- Exports : Increase of 11.2% y.y. in Q3 2024.
- Inflation : 0.9% in y.a. in November 2024, slightly increasing.
- Key rate : Lowering to 2.25%, pressure on the currency.
- Tourism : Around 26 million visitors between January and September 2024.
- Tourism income : New challenges, reaching only $30 billion in 2023.
- Government assistance : Planned monetary distribution of 10,000 baht to 50 million Thais.
FAQs on Thailand’s economic recovery
How will the Thai economy grow in the third quarter of 2024? Thailand recorded a growth of 3% in the third quarter year-on-year, compared to 2.2% in the previous quarter.
How has public consumption and investment behaved in Thailand? Public consumption saw an increase of 6.3% in Q3, just like investment which increased by 5.2% in the same quarter.
What are the trends in private consumption? Private consumption showed signs of slowing, with an increase of 3.4% in the third quarter, down from 4.9% in the second quarter and 6.1% in the first.
How does foreign trade influence the Thai economy? Foreign trade supports the economy with exports up 11.2% in g.a. this quarter, surpassing the increase in imports by 10.5%.
What is the state of inflation in Thailand? Inflation decelerated considerably, from 6.1% in 2022 to 1.2% in 2023, with the consumer price index increasing by only 0.9% in November 2024.
What is the Bank of Thailand policy rate and what are the implications? The key rate was reduced to 2.25% in October, a level already lower than that of the Fed, making monetary easing delicate.
What is the impact of the pandemic on the tourism sector in Thailand? In 2023, Thailand hosted approximately 28 million tourists, a figure up but still below 30% compared to 2019 levels.
How has tourism spending evolved? Tourism-related revenues only reached 30 billion dollars in 2023, when they were almost 60 billion dollars in 2019, due to lower spending per visitor.
What is the Thai government’s strategy to stimulate the economy? The government launched a monetary distribution program, planning to grant 10,000 baht to around 50 million Thais to stimulate consumption.
What structural challenges does the Thai economy face? The economy must face problems such ashigh household debt, which borders on 90% of GDP, and excessive dependence on the tourism sector.