Economic gurus slash GDP estimates after underwhelming Q1 growth

Economic analysts adjusted down their projection of Thailand’s growth this year, saying the economy is still vulnerable due to rising household debts and a weak manufacturing sector.

Earlier this month, the National Economic and Social Development Council (NESDC) reported that Thailand’s gross domestic product (GDP) only grew by 1.5% in the first quarter – the lowest in the region.

In line with this, NESDC lowered its estimation for this year slightly to 2-3% from 2.2-3.2% mainly due to risks posed by the ongoing US-China trade war and geopolitical conflicts.

Similarly, the Krungthai COMPASS research centre announced its adjustment of economic expansion estimates for this year on Tuesday. It brought its estimate down to 2.3% from 2.7% and predicted that the export sector in the rest of the year will only grow 0.5% instead of 1.8% as previously forecast.

The research house also believes that the Thai economy will continue relying on exports this year, which will account for about 60% of the overall economy.

“Trade wars and geopolitical tensions will continue to impact Thailand’s exports this year, while domestic products will still be battling cheaper imports from China,” the centre said.

Siam Commercial Bank’s Economic Intelligence Centre (SCBEIC) also adjusted its GDP estimates for this year down to 2.5% from 2.7%, despite the first-quarter growth.

SCBEIC predicts a slowdown in the export sector for the rest of the year, especially in the sale of electrical circuits, machine parts, and automotive components, due to Thai manufacturers’ inability to match rising global demand.

It added that the disbursement of government expenditure under the much-delayed 2024 fiscal budget in the second half of the year will not make up for the severe contraction in government spending in the first four months.

SCBEIC also said a worsening household debt situation, especially among those who earn less than 60,000 baht per month, will further slow down private consumption.

It said this forecast does not factor in the impact of the government’s digital wallet scheme, which is expected to be implemented this year to stimulate domestic spending.

Kasikorn Research Centre (KResearch) also lowered its 2024 economic prediction from 2.8% to 2.6%, citing lower-than-expected growth in exports, slow recovery of domestic and overseas demand and cheap Chinese products flooding Thai markets.

It added that from the second quarter, the farming sector will be impacted by the much wetter La Niña phenomenon, which will bring floods to several areas.

Kiatnakin Phatra Research Centre (KKP Research), however, maintained its prediction of GDP expansion this year at 2.6%, but remarked that the Thai economy is still weak and suffering from structural problems in the manufacturing sector.

KKP said that after the pandemic, Thai industrial sectors have experienced a vast difference in growth across different industries, resulting in the closure of factories that could not catch up with the changing manufacturing trend that focuses on high technology.

More than 1,700 factories have shut down since the start of 2023, compared to 1,100 in the same period the previous year, the centre said.

“The weak manufacturing index has resulted in a decline in employment compared to the period before Covid-19, which further contributes to household debt problems,” it added.