Thai economy expected to improve from July-Dec but concerns remain

The business sector is closely monitoring factors that could impact the economy and business activities for the remainder of 2024. These include the Constitutional Court's upcoming ruling on Prime Minister Srettha Thavisin’s appointment of Phichit Chuenban as Minister of the Prime Minister's Office despite his being disqualified from holding a ministerial post.

Another is the case of the Move Forward Party, accused of attempting to overthrow the constitutional monarchy.

Business leaders are also closely watching the US presidential election, which will take place in November.
Other critical issues to which businesses must pay attention are geopolitical conflicts in the Middle East, Asia, and Europe, which could affect investment flows, energy prices, and shipping costs.

Domestically, the economy faces risks from pressures to restructure the economic and industrial sectors, as well as from household debt problems that impact consumption. But while some are concerned that political uncertainties could undermine confidence, others believe the economy could show improvement in the second half of the year.

Among these is Jareeporn Jarukornsakul, chairman and CEO of WHA Corporation, who believes the economy will be boosted by tourism and budget disbursements for fiscal year 2024-2025. She also noted that the US presidential election could influence global dynamics as both candidates view China as a threat and aim to counter China to gain political support. This could lead to a significant shift in the production base towards Thailand.

Thailand's position as a hub for electric vehicle (EV) manufacturing is also expected to attract more investment in the electronics and semiconductor sectors from both Chinese and US investors. The initial investment wave is expected in the EV sector, followed by supply chain relocations, including the electronics and semiconductor industries, positioning Thailand as the world's third-largest producer of electronic circuit boards (PCBs).

Nonetheless, political stability remains a significant concern for investors, who are keen to understand the direction of Thai politics. Although political outcomes should have no impact on investment laws or foreign business ownership, strong government support is crucial to capitalise on this golden opportunity for investment, ensuring a sustainable growth ecosystem aligned with global trends.

“I hope to see continuity in government policies. The government understands the issues but often fails to execute them effectively due to bureaucratic rigidity. Many outdated regulations should be discarded to facilitate progress,” said Jareeporn.

Sanan Angubolkul, chairman of the Thai Chamber of Commerce, is less optimistic, noting that foreign investors are increasingly uncertain about the direction of Thai politics, as reflected in the capital markets and the pending court cases involving Srettha and the Move Forward Party have led investors to pause their investments in Thailand. 

“That said, the second half of the year should be better than the first half. The government should implement measures to stimulate tourism, particularly in secondary cities. During the rainy season, incentives to attract tourists from the Middle East, who favour this weather, could be effective,” Sanan added.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said the government needs to restructure the production sector, as the industrial production index has been negative for 18 months, highlighting issues in competitiveness. Traditional manufacturing sectors are declining and are no longer in demand.

“The FTI, overseeing 46 industrial sectors, is working to transform traditional industries into future-oriented ones. The government needs to support infrastructure, reduce energy costs, and improve logistics to reduce high transportation costs,” Kriengkrai noted.

The FTI is pushing for future-oriented industries that enhance competitiveness, reduce costs, and improve efficiency sustainably and environmentally. The focus is on low-carbon products to achieve net zero and comply with trade barriers, including new industries like EVs, hydrogen, electronics, and semiconductors.

Krit Imsang, CEO of IRPC, stated that the economy, driven by the tourism sector, requires government support for services, hotels and transportation, especially in managing costs efficiently. Wage issues could affect certain service sectors. The key, he added is to channel funds to SMEs, particularly in the service sector, to support tourism growth.

“When the service sector thrives, it stimulates consumption, benefiting the manufacturing and industrial sectors. We need to restructure significantly to compete with new products,” Krit remarked.

Jirayut Srupsrisopa, CEO of Bitkub Capital Group Holdings, emphasised the need to monitor the US presidential election closely, as the outcome will impact global geopolitical conflicts, such as the Russia-Ukraine and China-Taiwan issues, affecting global supply chains.

With the US managing inflation, the Federal Reserve is likely to lower interest rates in the second half of the year and inject new funds into the economy. This could benefit the ASEAN region more than other areas, leading Thailand into a “golden era.” The “Digital Green Revolution” concept discussed at the World Economic Forum is seen as a long-term direction, presenting an opportunity for Thailand.

In the short term, the focus is on strengthening domestic resilience, especially for SSMEs and SMEs, which constitute 80-90% of Thailand’s GDP. These businesses face high liquidity issues and household debt.

Jirayut emphasised the importance of upskilling and reskilling within the business sector to align with long-term global trends. The government should support an open education platform for continuous nationwide learning.

Chaichan Charoensuk, chairman of the Thai National Shippers' Council, highlighted the need to monitor external factors affecting exports in the second half of the year, including the economic slowdown in key trading partners like China and Japan. Thailand's exports to China have declined by 6% over the past four months due to supply chain disruptions, Chaichan pointed out.

Shipping costs are also rising sharply, with some routes seeing a 30-40% increase in just one month, reflecting the challenges faced during the Red Sea crisis. Exporters must closely coordinate with importers to manage deliveries, and the Commerce Ministry should monitor the situation to mitigate impacts.

Sutida Mongkolsuthree, CEO of Synnex (Thailand), also believes the economy will likely improve in the second half of the year. However, concerns remain about budget allocations and the need for infrastructure development.

Purchasing power remains stable, but technological advancements, especially in AI and wearable health products, are driving demand. High-end products continue to perform well, and the digital wallet initiative is expected to boost spending further.

Kessara Thanyalakpark, managing director of Sena Development PCL, expressed hope that government measures would boost the economy in the second half of the year through budget spending and investment, but emphasised the need for long-term structural solutions to enhance competitiveness.

“We need to reduce debt levels by increasing income, as direct debt reduction could lead to irresponsible borrowing. The government should address short-term issues to pave the way for long-term competitiveness,” she concluded.