AN upswing in tourism from China’s reopening will help boost Thailand’s economy, but it is not sufficient to restore growth to pre-pandemic levels just yet, said analysts.

Thailand’s gross domestic product (GDP) will probably expand by 3.7 per cent this year, based on the median estimate in a recent Bloomberg survey of economists. While that will make it the fastest expansion in five years, it is still a ways off from the 4.2 per cent growth seen in 2017 and 2018.

That is because economists expect Chinese tourist arrivals to be about half of the 10 million that the government predicts will visit the “Land of Smiles” this year. Nine of the economists surveyed saw Thailand’s tourism sector staging a full recovery to pre-Covid levels from 2024.

About 28 per cent of Thailand’s 40 million annual visitors before the pandemic were from China. Tourism accounts for at least 12 per cent of the Thai economy and a fifth of jobs, while private consumption makes up 50 per cent of the GDP. Along with exports that are equal to more than half the output, they form the lifeblood of the Thai economy.

While inbound travellers are likely to surpass the government’s initial estimate of 25 million this year, shipments abroad are seen to languish as the global economy dims and the baht rebounds to near a 10-month high. A general election by May is also seen as a boon and a bane.

“It’s not clear how much rising travellers will boost GDP growth,” said National Economic and Social Development Council Secretary-General Danucha Pichayanan, who added that the agency would likely review its growth projection when it reports fourth-quarter GDP on Feb 17.

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“Weak global demand will hurt our exports significantly and will drag our GDP growth. We have both push and pull factors to consider.”

The Thai National Shippers Council expected exports to grow 1-3 per cent in 2023. They worry that the currency’s 5 per cent gain, which has made it the region’s best performer so far this year, will erode price competitiveness. The baht has risen more than 15 per cent since plunging to a 16-year low in October, buoyed as well by the prospects of China’s return to the tourism market.

Thailand is estimated to have welcomed at least 11.5 million foreign travellers last year, surpassing the initial 10 million estimate. It has been luring guests with longer-term visas, looser requirements and come-ons such as the legalisation of weed for medical use. Inflation that hit a 14-year high in 2022 is expected to cool this year, and will likely convince the central bank to pause rate hikes shortly.

Still, tourism is not expected to inflate the economy fast enough amid weak global growth and prospects of slower government spending after the election, which Nomura Holdings said on Jan 13 is “an under-appreciated risk”. A “fragmented outcome” of the vote could delay government spending, it added.

Election-related spending of at least 40 billion baht (S$1.6 billion) could boost GDP by as much as 0.3 percentage point, according to the University of the Thai Chamber of Commerce.

“A number of parties will campaign heavily, from poster printing to promotional cars,” said Thanavath Phonvichai, the university’s president. “The money will mainly go to low-to-middle income people, who will spend almost 100 per cent of what they earn. The money will circulate quickly and double the impact on the economy.” BLOOMBERG