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Thailand’s economy may continue to languish in the months ahead despite the potential for a slight uptick in the 2nd half of the year, as many external factors continue to put pressure on the various growth engines especially exports.
Thailand, which has one of the slowest economic growth among the 10 member Asean grouping, is likely to see a little stronger economic growth in the 2nd half of the year as budget disbursement and the 10,000 Baht ‘digital wallet’ starts to have an impact on the economy.
But despite these positive factors, the economy faces many structural challenges in the months ahead as high household debts, rising non-performing loans in the corporate sector, falling consumption and slowing global economy – especially China, are likely to play a big role in the way the economy performs.
China has been a key driver for many of the sectors on which Thailand has relied for its economic momentum such as inbound tourism and on the exports. Chinese tourists account for the single largest group of tourists entering Thailand reaching beyond the 3.7 million as of last week from the just over 18 million that had visited Thailand since the start of this year.
The latest data released by the Chinese authorities indicates that the situation in China has not yet stabilized and that the economy there continues to remain fragile.
China’s economy grew at its slowest pace in more than a year. The Q2 2024 GDP growth came in below expectation at 4.7% year-on-year, 0.7% quarter-on-quarter seasonally adjusted, while 1st half 2024 growth averaged 5.0%.
Ho Woei Chen, economist at UOB says that the nominal GDP is estimated to have expanded by 4.0% year-on-year in Q2 2024 compared to 4.2% year-on-year in Q1 2024. Despite coming below the real GDP growth for the 5th consecutive quarter, the gap between the nominal and real growth rate has narrowed, she says.
Ho Woei Chen however cautioned that weak demand would continue to keep price pressures muted. The moderation in June’s activity indicators, particularly the retail sales continue to indicate an uneven recovery. As such, it will be challenging to maintain the growth momentum in the second half of the year.
“We revise down our GDP growth forecast for China to 4.9% for 2024 from 5.1% previously, with risks that growth could be slightly lower than the official target of “around 5%”. More stimulus measures including monetary and fiscal support will be needed in 2nd half of 2024. The Politburo meeting later this month is expected to discuss the economic headwinds,” she said.
Thailand’s Problems
Thailand, which is not immune to China’s economic problems could face more problems than it expects due to the slower than expected growth in a market that accounts for the single largest export destination of Thai goods (22% of the trade volume was with China in 2023).
China’s economy grew at its slowest pace in more than a year. The Q2 2024 GDP growth came in below expectation at 4.7% year-on-year, 0.7% quarter-on-quarter seasonally adjusted (Bloomberg’s estimated: 5.1% year-on-year, 0.9% quarter-on-quarter) from 5.3% year-on-year, 1.5% quarter-on-quarter in Q1 2024.
The slowdown in China could add further problems to the plans by the Prime Minister Srettha Thavisin to kick start the economic momentum.
Srettha, who held his economic minister’s meeting yesterday, came out to say that his government was focusing on addressing economic issues but noted that solving these challenges will take time.
He stated that immediate economic recovery isn’t feasible, so the government is prioritizing short-term solutions to ease public financial burdens, particularly from high household debt.
The latest figures from the economic cabinet’s meeting reveal the following as of May 2024: household debt at 13.6 trillion Baht, SME business debts at 1.5 trillion Baht, and government debt at 64.3% of GDP, which remains within the public debt limit and is expected to ease by 2026.
Key measures discussed include adjusting residential debt structures with extended loan terms, prioritizing support for motorcycle and pickup truck owners facing repossession and addressing credit card debt issues. Specific actions involve debt relief initiatives, loan restructuring, and implementing new credit scoring for vulnerable groups and SMEs.
Apart from this Prime Minister Srettha’s directives included accelerating solutions for housing and credit card debts with bank cooperation, expediting resolutions for student loans, reassessing agricultural challenges affecting farmers, tightening import scrutiny, and expediting BOI investment projects.
He said that out of the 24 million issued credit cards, approximately 1.1 million are more than 90 days late on their payments, with about 200,000 more expected to face similar issues.
The government has introduced guidelines to aid credit card debtors through the Debt Relief Clinic project, which involves halting additional debt accumulation and extending repayment timelines.
He urged the Bank of Thailand to collaborate with credit card providers and encourage their participation in the program, emphasizing the long-term benefits for both debtors and providers.
