3-10-2023 (BANGKOK) The World Bank has revised Thailand’s economic growth projections downwards for the year 2023 and 2024, citing expectations of a contraction in the country’s exports due to a softening in global demand. Key drivers of economic growth in Thailand are tourism and private consumption.
According to the World Bank’s East Asia and Pacific Regional Economic Outlook for October 2023, Thailand’s economic growth has been adjusted to 3.4% for 2023, down from the previous forecast of 3.6%. The outlook for 2024 is similarly dimmed, with economic growth being lowered by 0.2 percentage points to 3.5% from an April estimate of 3.7%.
This reduction in growth is attributed to expectations of a 2.1% contraction in Thailand’s goods exports in 2023, measured in US dollars, driven by decreased demand from major advanced economies.
Furthermore, economic growth in the second quarter of this year fell more than anticipated, registering at 1.8% year-on-year. The prolonged process of forming a new government is also expected to postpone public and private investments.
The World Bank’s forecasts for 2023 and 2024 hinge on the recovery of the tourism sector and robust private consumption. It is anticipated that foreign tourist arrivals will return to pre-pandemic levels by the end of 2024. The bank’s report also suggests that Thailand’s economic growth will reach 3.3% in 2025.
In terms of inflation, the World Bank foresees headline inflation at 1.5% in 2023, which is lower than most emerging market economies, owing to declining energy prices and ongoing price controls. However, there are still potential upward pressures on core inflation due to increased consumption and elevated global food prices.
Given the prolonged energy subsidies, fiscal consolidation progress has been sluggish, and as a result, public debt is expected to remain above 60% of GDP until the close of 2023. The current account balance, on the other hand, is predicted to shift from a deep deficit over the past two years to a positive position in 2023.
The anticipated decline in inflation should alleviate some financial strain on households, while the expansion of the state welfare card scheme is anticipated to contribute to poverty reduction in 2023.
World Bank East Asia and Pacific Vice-President Manuela V. Ferro highlighted that Thailand’s household debt ratio, standing at 90.6% of GDP, is of more significant concern than public debt. Public debt is expected to amount to 60.2% of GDP in 2023, gradually declining to 59.6% in 2024 and further to 59.5% in 2025.
As a result of these economic adjustments, the projected poverty rate, measured at the upper-middle-income poverty line (US$6.85 a day in 2017 PPP), is forecasted to decrease to 9.1% in 2023, and this trend is expected to persist throughout 2024 and 2025.
The World Bank noted that growth in the East Asia Pacific region continues to outperform other emerging market and developing economies. The region is now anticipated to grow by 4.6% in 2023, with China’s growth projected at 5.1% for the same year.
Mr. Ferro also commented on the future outlook, stating that sustaining high growth in the medium term will necessitate reforms, particularly in services. These reforms aim to maintain industrial competitiveness, diversify trading partners, and enhance productivity across various sectors, ranging from retail and finance to education and healthcare.
