As we cast our gaze to the shimmering horizons of 2024, Thailand’s economy is set to continue its graceful ballet of growth, pirouetting to the tune of a 3.0% increase. With the drumbeat of global trade resounding affirmatively, Thai exports are poised to leap forth with vigor. The nation’s private investment is stretching upwards, invigorated by an export resurgence, a burgeoning influx of investment applications, and government policies that are akin to an energizing tonic for investment zeal.
Yet, even in this crescendo of economic activity, a note of caution whispers. The recovery’s pace in 2024 could waltz to a slower tempo than anticipated, as the high octane of private consumption witnessed in the prior year simmers down, and household income, particularly among the humblest earners, tiptoes back with more reticence than we’d hope. Chinese tourists, too, may linger on the threshold longer than forecasted, their return to Thai shores proceeding with delicate steps.
Meanwhile, the clockwork of public investment in Thailand may tick with measured restraint, attributed to a delay in the eagerly-awaited 2024 Budget Act. The fiscal wizards at SCB EIC have peered into their crystal balls and foresee that the Thai policy rate will maintain its current perch at 2.5% throughout the year—a neutral roosting spot that harmonizes with the potential for long-term prosperity and keeps inflation nestled comfortably within its target.
This equilibrium is not only melodious to the economy’s rhythm but also brings harmony to Thailand’s financial ecosystem. As the real interest rate burgeons into positivity, it curtails households’ temptation to pile on debt and mitigates rash underpricing of risks in an environment that’s been lulled by persistently low rates.
However, let us not forget the spice of life—inflation—which is expected to dance with a bit more pep due to supply-side pressures that nudge businesses to pass on their ballet of costs. Concurrently, the Digital Wallet scheme could shimmy economic growth past its potential, sprouting demand-side inflationary buds. Despite this, the jubilation is believed to be a fleeting fiesta with the economy expected to settle back into its natural groove, keeping inflation’s samba confined within 1-3%.
The Thai baht, that enigmatic dancer, is anticipated to twirl tenderly within the 35-36 baht per USD range for the waltz through this year. Looking to the grand finale of 2024, the baht might just pirouette to a stronger stance—32-33 baht per USD—as the Thai economy’s recovery crescendos, and global economic conductor’s baton, the Fed, softens its tempo.
Glancing out to the wider stage, the global economy’s 2024 performance may dial down its tempo slightly, a decrescendo to 2.5% growth from the prior year’s 2.7%, as the echo of monetary policy tightening amongst the economic maestros of developed nations loses its reverb. And amid this global dance, the enigmatic Middle Kingdom—China—prepares for its own ballet slowdown, bending under weighty structural pressures.
As the curtain lifts on a new act, we find the austerity waltz winding to a close. The Fed and the ECB orchestrate earlier than anticipated rate cuts by the second quarter of 2024, in response to inflation’s decline, while the PBoC flourishes its easing baton, propping up China’s economic choreography. The BOJ, too, plans a routine change, floating away from its easing stance and bowing out from negative rates in the latter half of the year.
But lurking in the wings is a longer-term concern by SCB EIC—a fear that the Thai economy could find itself in a pas de deux with a declining potential growth rate. For a prolonged interlude, Thailand, addressed structural conundrums with the grace of a ballerina—the resulting scenario wherein Thailand takes cautious steps to recover from the Covid pandemic’s harsh spotlight.
The nation’s economic foundation, however, remains as delicate as a house of cards, with recovery spreading unevenly across households and businesses, particularly those small enterprises who valiantly waltz with the burden of debt. And with the backdrop of a world stage set with uncertainties—from climate’s unpredictable choreography to the grand geopolitical theatre to domestic policies in need of a director’s firm hand—vigilance is key.
In an orchestration aimed at resolving these structural quandaries, SCB EIC composes a symphony of “four enhancing policies”—measures designed to bolster the nation’s resilience. From crafting robust safeguards for households to fortifying the competitive edge of Thai businesses, from charting a forward-thinking national investment strategy to nurturing the sustainability of Thailand’s economic fabric, these measures are the choreography meant to carry the nation through an ever-evolving global dance.
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