Thailand risks economic collapse: strategies for survival
The Thai economy is currently facing a period of significant uncertainty, with a series of significant challenges on the horizon. According to official data, the country’s Gross Domestic Product (GDP) increased by 1.5% in the third quarter compared to the previous year. However, this result is significantly below economists’ expectations of 2.4% growth and represents a slowdown from the 1.8% expansion recorded in the previous quarter.
The fact that this is the second consecutive quarter of slowed economic growth in Thailand raises concerns among analysts, who fear the persistence of this trend.
Chua Han Teng, an economist at DBS Bank, highlighted that “public spending, inventories, and exports have acted as a brake on the outcome, despite stable private consumption and the tourism sector.” He also warned that populist policies are narrowing the space for public spending.
After a period characterized by political stalemate and fluctuations in the stock markets, Srettha Thavisin was elected Prime Minister of Thailand at the end of September. However, economists believe that long-term economic recovery could prove challenging.
Analysts at Bank of America Global Research pointed out that “continued quarters of weak GDP growth indicate a weaker Thai economy than suggested by market sentiment, despite solid consumption growth.” They also predicted that restrictive monetary policies could have a more significant impact in the future.
The Bank of Thailand raised its key interest rate for the eighth consecutive time during the September meeting, emphasizing that economic growth and inflationary pressures should increase over the next year. However, Nomura analysts predict a pause in the actions of the Thai central bank during the next meeting scheduled for November 29, with a similar outlook for 2024. However, Nomura highlighted the persistent risk of interest rate cuts as early as the second quarter of 2024, adding that “it is important to note that the weak third-quarter GDP result could intensify the government’s push towards a broad digital portfolio allocation, despite uncertainties related to financing.”
Extended inactivity or the possibility of interest rate reductions by the Bank of Thailand might bring about adverse effects on the Thai baht, which has already seen a 1.3% depreciation against the US dollar within the current year and appears destined to mark its fourth successive year of decline. Vigilant oversight of Thailand’s economic condition becomes imperative as the nation endeavors to surmount its present challenges and steer back onto a trajectory of enduring growth.
The Thai baht’s prolonged depreciation against the US dollar and potential interest rate cuts by the Bank of Thailand could not only impact international trade but also challenge the country’s economic stability. Maintaining a watchful eye on these developments is essential as Thailand seeks effective strategies to address its current economic hurdles and reestablish a sustainable growth trajectory for the benefit of its citizens and global partners.