Kiatnakin Phatra lowers Thailand’s GDP growth forecast for 2023 to 2.8%

In its report released on Thursday, KKP Research predicts 2.8% growth for this year, lower that its previous projection of 3.3%, and 3.3% for next year, down from 3.6%.

KKP Research explained that the lowering of its economic projection was based on the poorer-than-expected economic performance of the kingdom during the first half of this year. It believes that Thailand’s exports would continue to be hit by the global economic slowdown, and the return of foreign tourists would not be enough to offset the negative factors.

In the report, KKP Research noted that the growth in private consumption was high while the growth in the manufacturing sector was very low and this was a bad signal for the overall economy.

During the first half, spending expanded by 6.7% mainly because of growth in private consumption and the service sector that benefited from the recovery in the tourism sector.

However, KKP Research said the manufacturing GDP fell to 1.8%. In particular, industries’ GDP dropped to 2.1% and agricultural sector to 0.5%.

KKP Research noted that growth in spending could slow down in the second half of this year because workers in the industrial sector could be affected by the sluggish exports.

It noted that industrial workers constituted 16% of all employment while workers in the tourism sector constituted 11%.

It also noted that although consumption had expanded, figures from giant retailers showed a trend of slowing down and VAT collection also appeared to slow down. This indicated that consumption could slow down in the second half.

KKP Research noted that the household debt in Thailand was very high so banks may tighten loan approvals and this could affect spending in the second half.

As a result, KKP Research predicts that consumption will slow down in the second half to 4.5% for the entire year in contrast with 7.8% in the second quarter of this year. It predicts consumption growth next year at 3%.

KKP Research cited three major factors to lower the GDP growth forecast:

▪︎ The tourism sector may recover at a lower-than-expected pace because of fewer Chinese tourists.

▪︎ The export sector would continue to be hit due to China’s economic slowdown as Thai exporters rely a lot on the Chinese market.

▪︎ High policy interest rate would continue to maintain pressure on the global financial situation, causing a tight money situation. This would prevent Thailand from lowering its policy interest rate to stimulate the economy and the baht would continue to fluctuate.

KKP Research said Thailand’s current account balance would continue to be low this year and next year, a factor that would prevent the baht from strengthening.

KKP Research added that it expected the Bank of Thailand to maintain the policy interest rate at 2.25% and would not increase the rate during the next meeting of the Monetary Policy Committee because the inflation rate in Thailand had been lower than expected.

KKP Research said it expected the new Pheu Thai-led government to implement three key policies during its first year in office, which would have a significant impact on the economy. They are:

▪︎ Handing out 10,000 baht in digital money for purchase of goods. The government would need a budget of 550 billion baht. If implemented, it would increase next year's GDP by 1% or 1.2% from the earlier projected growth.

▪︎ Debt moratorium for farmers. The government would need a budget of 20 billion baht to implement it.

▪︎ A policy to reduce the cost of living by lowering power bills and diesel oil prices.