KKP Research, a reputable analyst firm, recently revealed an updated economic projection for the upcoming years, forecasting a 2.8% growth for this year and 3.3% for the forthcoming year, a prediction significantly lower than their earlier expectations. The modified outlook seems to be influenced significantly by Thailand’s subpar economic performance during the initial six months of this year.
According to KKP Research’s comprehensive report, Thailand’s exports are anticipated to continue being impacted by the global economic slowdown. Moreover, even the return of foreign tourism, which could potentially bolster the economy, might fail to counteract these negative elements. The analysts explain the dip in Thailand’s economic performance with a striking contrast between impressive private consumption growth and an alarmingly low manufacturing sector growth.
In the initial half of the year, a robust 6.7% increase in spending was witnessed, primarily attributable to the expansion in private consumption and the services sector, the latter benefiting from obvious improvements in the tourism sector. KKP Research cautioned that such a boost in spending might gradually decrease during the second half of this year, as the industrial sector’s workers might bear the brunt of faltering exports. This could notably curtail their purchasing power.
Illustrating this further, experts at KKP Research highlighted that out of the total employment, 16% comprised industrial workers, while only 11% were employed in the tourism sector. And while consumer expenditure surged, leading retail giants reported a contrasting slowdown in the numbers. Moreover, VAT collection rates seemed to decelerate, subtly indicating a potentially slowing consumer expenditure during the year’s latter half.
The agency also pointed out to the sky-high household debt rates prevailing in Thailand, a factor forcing banks to enforce stricter loan approvals potentially further shrinking the spending rate. In light of these factors, the firm currently predicts a slowdown of consumption to a mere 4.5% over this year.
This updated projection by KKP Research is primarily influenced by three central factors: the sluggish recovery pace of the Thai tourism sector owing to diminished Chinese tourist inflow, the export sector continuing to suffer because of China’s economy slowing down, and the high policy interest rate maintaining global financial pressure, thus creating a money shortage preventing Thailand from lowering its policy interest rate as a measure to revitalize the economy.
KKP Research furthers that Thailand’s current account balance would continue to fall short over this year and the next, suppressing the Thai baht’s potential to strengthen. Despite all these challenges, the firm has a hopeful outlook for the upcoming government’s plans. They anticipate the Pheu Thai-led administration to implement three impactful policies during its initial year, which could positively affect the Thai economy.
The key policies include a release of 10,000 baht in digital currency for purchasing goods, a likely debt moratorium for farmers and adopting measures to bring down living costs by reducing power bills and diesel oil prices. If these measures are implemented, it might revive Thailand’s economy from the current slump and drive an upsurge in the GDP by 1%-1.2% from the projected growth for the next year.