Weak growth in Thailand hinders South-east Asia’s economic forecasts
Overall growth projection for the region is revised downwards by the Asian Development Bank despite positive prospects out of Singapore
MUTED growth in Thailand hit South-east Asia’s growth forecast for the year, thanks to weaker-than-expected public spending, private investment and merchandise exports.
The Asian Development Bank (ADB) cut the country’s gross domestic product growth estimate for this year to 2.3 per cent from 2.6 per cent.
This, coupled with weaker growth in Myanmar and Timor-Leste, led the bank to lower its forecast for this year to 4.5 per cent from 4.6 per cent for the South-east Asian region, which includes the 10 member nations of Asean and Timor-Leste.
In an update to its flagship outlook report published every April, ADB said on Wednesday (Sep 25) that the region remains on track to meet next year’s growth forecast, which stayed unchanged at 4.7 per cent, buoyed by robust domestic and external demand.
The bank also cut Thailand’s GDP forecast for next year to 2.7 per cent from 3 per cent, citing global economic uncertainty and domestic structural problems in export-oriented manufacturing.
The kingdom may not fully capitalise on accelerating trade volumes worldwide as several export products fail to meet the global demand shift towards high-technology goods, said ADB.
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Merchandise export performance could be further hampered by geopolitical uncertainty and rising production costs due to increases in daily minimum wage, electricity and energy prices, higher freight and surcharge costs, as well as a shortage of containers.
Nevertheless, services exports growth in South-east Asia’s second-largest economy is expected to remain strong.
Thailand’s private consumption is also forecast to slow next year due to high household debt, weak consumer confidence, stricter bank regulations and concerns over rising factory closures.
The kingdom’s digital wallet programme is not expected to impact private consumption significantly due to usage restrictions, said ADB.
On the public spending side, government investment is expected to accelerate in the remaining months of 2024, on the back of expedited disbursements following the approval of the country’s delayed fiscal budget.
But it is unlikely to compensate for the deep contraction in the first half of the year, said the bank.
Thailand aside, Laos, Myanmar and Timor-Leste have also had their growth forecasts downgraded.
In Laos, ADB believes continued limited refinancing options amid the nation’s considerable external debt maturities will lead to greater public sector reliance on domestic markets to raise funds. This, in turn, will limit recovery in the private sector, depress household spending, and dampen business confidence, said the bank.
Singapore’s growth engine – manufacturing
Singapore was the only country in South-east Asia to see an upward revision in its growth forecast.
ADB upped its GDP forecast for the city-state from 2.4 per cent to 2.6 per cent this year, on a par with 2025’s growth estimate, which remained unchanged at 2.6 per cent.
The bank foresees an improving manufacturing outlook in Singapore – primarily driven by the upturn in global electronics and better business sentiment – as well as strengthening financial services as interest rates gradually fall.
Easing inflation
Although inflation forecasts for 2024 and 2025 for the entire South-east Asian region were revised upwards, they were primarily driven by rising prices and currency depreciation in Laos and Myanmar.
Inflation estimates for Malaysia, Singapore, the Philippines and Thailand for this year were lowered, while that of Indonesia and Vietnam remain unchanged.
In Thailand, ample market supply translated into lower food prices, which are expected to creep up through the year with unfavourable weather conditions.
In Singapore, the stronger nominal effective exchange rate is expected to temper imported inflation in the coming months, with core inflation anticipated to moderate gradually as import cost pressures recede.
Food prices are expected to ease in the Philippines – where inflationary pressures are among the highest in Asia – due to reduced import duties on key staples such as rice.
Moderating inflation would also allow for further monetary policy easing, said ADB.
The Philippines kickstarted the region’s rate cuts ahead of the Federal Reserve in August with a quarter-point decrease to 6.25 per cent – its first reduction in almost four years. A second cut is expected by the end of this year.
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