NESDC points to four major challenges for Srettha's govt
The political dust might have settled with the formation of a government headed by Srettha Thavisin, but economic challenges are on the rise, both domestically and internationally.
n its report on the economic and social situation, the National Economic and Social Development Council (NESDC) noted that the economy expanded by just 1.8% in the second quarter of this year, down from 2.6% in the first quarter, and is unlikely to grow by more than 2.5% and 3% this year, despite strong private consumption, continued recovery of the tourism sector, and sustained private and public sector investments.
The NESDC identified at least four major economic issues that Thailand will face this year.
1. Delayed budget preparation
The process of preparing the budget for fiscal 2024 is likely to be delayed, impacting the consideration and approval of legislation and regulations related to economic measures, especially those awaiting approval from the new government. The delay could affect business confidence, as the budget may not be approved until the third quarter of the fiscal year.
2. Global economic slowdown
The global economic slowdown is more significant than anticipated, with financial market volatility and risk conditions that need constant close monitoring and assessment. This includes such factors as the prolonged low interest rates set by major central banks to combat inflation, which can lead to tight financial markets and higher borrowing costs.
3. Slower China's economic recovery
China's economic recovery may be slower than expected, partly due to internal investment challenges, particularly in the real estate sector, and delayed internal spending. This could lead to negative inflation rates in July, the first time in 19 months. Persistent youth unemployment may also limit domestic consumption.
4. High household debt
High household and business debt burdens persist, exacerbated by increasing interest rates. Non-performing loans (NPLs) and special mention loans (SMLs) remain high at 7.4% and 12.2%, respectively, limiting the country's ability to recover. Additionally, the debt-to-GDP ratio for households in the first quarter of 2023 is still relatively high at 90.6%, though slightly lower than the previous quarter. This debt burden could hinder domestic recovery, especially for businesses and households with lower incomes.
In addition, the unpredictable weather patterns, including potential El Niño events in the Asia-Pacific region, could impact agricultural production. Thailand has already experienced higher-than-average temperatures, affecting rainfall patterns and potentially reducing agricultural productivity for the 2023/2024 planting season."
These challenges represent important economic considerations for Thailand in the coming year, and the new government will need to address them to ensure stable economic growth.
