Thailand growth quickens even as US$14 billion stimulus hangs
THAILAND’S economy expanded at the fastest pace in five quarters, aided by tourism and exports, although a leadership change and uncertainty over a US$14 billion stimulus plan clouds the outlook.
Gross domestic product in the three months through June rose 2.3 per cent from a year earlier, the National Economic and Social Development Council (NESDC) said on Monday (Aug 19). That compares with the 2.2 per cent median estimate in a Bloomberg News survey and a revised 1.6 per cent pace for the first quarter.
The economy expanded 0.8 per cent quarter-on-quarter, compared with a median estimate for a 1 per cent growth and a revised 1.2 per cent rise in January to March period.
The faster-than-expected year-on-year expansion is no guarantee that the pace of recovery may sustain, given the fate of a cash handout plan to boost consumption is in doubt after a change in leadership. Thailand still lags neighbors with below-5 per cent annual growth, and the political leadership may revive calls on the central bank to lower borrowing costs.
The onus is on new Prime Minister Paetongtarn Shinawatra, daughter of former leader Thaksin Shinawatra, to find ways to continue reviving South-east Asia’s second-largest economy and lift its growth from the sub-2 per cent average in the past decade. Fiscal year 2025 budget will start on Oct 1 as scheduled, NESDC chief Danucha Pichayanan told the briefing in Bangkok, and will not be delayed by the change in government.
“The fate of the digital wallet is unlikely to affect the budget schedule,” Danucha said as he announced an estimate of 2.5 per cent GDP growth this year. “The government can use the budget to finance other stimulus projects if needed,” he said.
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The baht rose along with regional currencies on Monday, gaining 0.5 per cent against the dollar at 10.49 am local time, paring some losses this month from political upheavals. The main stock index was up as much as 1 per cent.
Paetongtarn – who succeeded Srettha Thavisin after he was ousted by the court last week – told reporters on Sunday that the cash handout plan needs further study to ensure its compliance with the law governing fiscal discipline. Under Srettha, the plan was to start handing out 10,000 baht each to adult Thais from November.
The ruling coalition led by Pheu Thai will meet soon and is expected to wrap up discussions on Cabinet formation this week, the new PM said separately on Monday. Paetongtarn is expected to inherit much of Srettha’s cabinet, although Krungthep Turakij reported on Friday that Finance Minister Pichai Chunhavajira is unlikely to join the new government.
The Bank of Thailand (BOT), which had been pressured by Srettha to cut interest rates and help spur the economy, is widely expected to stand pat on Wednesday and keep the policy rate at the highest since 2013.
The BOT has held the one-day repurchase rate at 2.5 per cent since the fourth quarter even as inflation remained way below the 1 to 3 per cent target.
Thai central bankers have pushed back against rate cut calls, citing potential price risks from the cash giveaway plan. The BOT also said looser monetary settings would complicate efforts to lower household debt hovering above 90 per cent of GDP.
“The government needs to maintain favorable political and economic environment,” Danucha said. “The Bank of Thailand will have to assess whether there’s a need to adopt looser monetary policy or not.”
Other highlights from the NESDC briefing:
- Tourist arrivals are seen at 36.5 million this year with spending forecast raised to 1.48 trillion baht.
- Current account surplus in 2024 projected at US$12.1 billion, with exports growth of 2 per cent and imports rising 3.6 per cent.
- Household spending expected to grow 4.5 per cent; the sector expanded 4 per cent in second quarter.
- Headline inflation is expected to average between 0.4 to 0.9 per cent, below the BOT’s target. BLOOMBERG
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