Thailand lowers its growth forecast for 2024, despite a strong first quarter, as weak exports weigh

Southeast Asia’s second-largest economy grew 1.5% in the first quarter from a year earlier, data from the National Economic and Social Development Council (NESDC) showed. This exceeded analyst expectations for growth of 0.8%, according to a Reuters poll.

In the last quarter of 2023, gross domestic product (GDP) grew by 1.7% year-on-year.

On a quarterly basis, GDP grew by 1.1% seasonally adjusted, after a revised contraction of 0.4% in the last quarter of 2023, avoiding a technical recession. Economists had forecast growth of 0.6% from the previous three months.

Growth was driven by exports and private consumption and investment, but public investment and government spending shrank, state planning agency NESDC said in a statement.

“The Thai economy recovered in the first quarter and we expect steady, if unspectacular, growth this year, driven by a further recovery in tourism and strong government spending,” Capital Economics said in a note.

The NESDC now expects GDP growth of between 2.0% and 3.0% for 2024, slightly lower than its previous forecast of 2.2% to 3.2%. Last year growth was 1.9%.

The downgrade is due to major external risks, particularly rising trade protectionism, geopolitical conflicts and volatility in the global economy, NESDC Secretary General Danucha Pichayanan told a news conference.

Thailand’s economy has lagged behind the region’s as it faces high household debt and borrowing costs, as well as weak exports, amid an uneven recovery in key trading partner China.

The strong first quarter GDP figures could weaken the government’s case for a rate cut, although new Finance Minister Pichai Chunhavajira has said he is more concerned about people’s access to finance than the level of interest rates.

For months, Prime Minister Srettha Thavisin has pushed for a rate cut, saying it would help the economy. The central bank has not yielded to the pressure and has kept its policy interest rate at the highest level of 2.50% in more than a decade. The next rate revision is on June 12.

The agency forecast that exports would rise 2.0% in 2024, lower than the previously seen increase of 2.9%.

Headline inflation was 0.1% to 1.1%, lower than an earlier forecast, and compared with the Bank of Thailand’s target of 1% to 3%.

Thailand received 13.16 million foreign tourists from January 1 to May 12, up 39% year-on-year, with Chinese visitors topping the list at around 2.6 million. Before the 2019 pandemic, there were record numbers of almost 40 million foreign tourists.

Last month, the Finance Ministry cut its 2024 growth forecast to 2.4% from 2.8%, but said it could reach 3.3% if the 500 billion baht ($13.8 billion) household stimulus program continues as planned would be deployed in the fourth quarter.