Krungthai COMPASS, Krungthai Bank, assesses that the Thai economy will still grow limitedly for the rest of the year, indicating that private consumption may weaken, private investment will slow down, and exports will be pressured by geopolitical conflicts, trade wars, and Chinese products hitting the market.
The National Economic and Social Development Board (NESDB) reported that the economic growth figures in the second quarter of 2024 grew by 2.3% YoY or expanded when compared to the previous quarter by 0.8% QoQSA, higher than the analysts’ forecast of 2.1% YoY. In the first half of the year, GDP expanded by 1.9% YoY. The NESDB adjusted the estimated range of the GDP growth rate for 2024 to 2.3-2.8% (midpoint at 2.5%) from the original range of 2.0-3.0% in May 2024.
Krungthai COMPASS sees the Thai economy as still fragile in the future, estimating that the figures for government consumption and government investment in the past reflect the 2024 budget that could not be disbursed as usual. However, since
the beginning of the third quarter of 2024, there have been signs of government budget disbursement accelerating and it is expected to return to being an important engine driving the economy. However, the Thai economy still has challenges that may affect consumption, investment, and exports in the remaining period of the year, as there are downside risks that will put pressure in the future. (1) Private consumption may weaken as purchasing power is pressured by high household debt, while consumer confidence has adjusted downward, with the latest index from the Ministry of Commerce in July being below 50.0, marking the first time in 20 months that it has entered the undecided level. (2) Private investment tends to slow down as entrepreneurs are facing multiple obstacles, including high labor and logistics costs, as well as structural problems that affect competitiveness. This resulted in the private investment figures for the second quarter of 2024 returning to negative for the first time in over two years (10
quarters). There are also signs that private investment in the future will be weaker due to negative figures for capital goods imports, while the industrial production index continues to contract. (3) Exports still face downside risks that will put additional pressure, including geopolitical conflicts, an intensifying trade war, and the market penetration of Chinese products.
If we analyze the impact of China’s market penetration into Thailand and ASEAN to sell off excess products amid escalating geopolitical issues, we will find that the market share of Thai industrial products in ASEAN has decreased, especially in important industrial products such as electrical appliances and automobiles, where the proportion of products from Thailand has decreased. Electrical appliances decreased from 12.7% (1Q/66) to 11.5% (1Q/67), while automobiles decreased from 20.9% (1Q/66) to 18.7% (1Q/67), as a result of China exporting more products to compete in the ASEAN market. The above factors will have a negative impact on
production, exports, and private sector investment, and may also put pressure on the momentum of Thailand’s economic recovery going forward
Source: Thai News Agency