In light of notable deceleration in China’s economic growth, predominantly due to severe issues in its real estate sector, shedding light on fears of an economic stagnation, a word of caution comes from the National Economic and Social Development Council (NESDC). The council’s concerns specifically pertain to Thailand, given the close economic ties between the two Asian nations.
Danucha Pichayanan, the NESDC secretary-general, has remarked on China’s situation with a discerning sentiment, saying it’s crucial to remain attentive, even though the extent of the influence on Thailand’s economy is yet to be quantifiably observed. He issued these remarks at the release event of Thailand’s economic outlook for the following quarter, emphasizing the interconnected nature of global economies.
Pichayanan explained, “While the specifics are not completely visible at this juncture, it is important to consider the potential repercussions if China’s economic situation deteriorates. Any setback for the global and Thai economies is unavoidable under such circumstances, necessitating support and measures.”
The recent NESDC report paints an unsettling picture of Thailand’s export sector, which is witnessing a slowdown amidst a global recession and geopolitical uncertainties. Thailand, being an export-reliant country, will definitively feel the impact of China’s sluggishness coupled with the global downturn, leading to a noticeable dip in Thailand’s inbound trade and tourism revenue.
The report further elucidates that in the first half of this year, the Chinese economy registered an underwhelming 5.5% growth, the lowest seen over the past two years. China’s growth trajectory has been lackluster, hindered by multiple factors.
Four specifics have been identified by Danucha as responsible for restraining China’s growth. These encompass reduced investment volumes, particularly in the real-estate sector; decreased local consumption correlating with high unemployment rates among younger generations; strict import and export restrictions imposed by western nations; and a staggering 51.5% public debt relative to the nation’s gross domestic product (GDP).
Worryingly, Danucha indicated that China is inching towards deflation, reflected by the gradual decrease in food and fuel costs. The falling product prices may thrust the Chinese economy into a deflationary spiral, particularly if consumer demand doesn’t pick up.
Interestingly, he observed that domestic consumption in China has shown a disappointing expansion, demonstrated by a 2.5% increase in the retail trade value in July, down from 3.1% in June.
Nonetheless, Danucha remained hopeful, indicating that the Chinese economy could recover with strategic interventions. He noted that an accommodative monetary policy from the People’s Bank of China, aimed at enhancing liquidity, paired with fiscal stimulus measures could work favorably to reinforce the economy.