Finance Ministry talks up projected GDP figure for 2024 as exports fall and car production dips. Tourism and debt concerns persist as the government battles rising economic headwinds.
The Thai Ministry of Finance on Thursday attempted to talk up the country’s economic prospects for 2024. It came ahead of official figures due for Quarter Two which are expected to disappoint. At the same time, Thursday saw an unexpected fall in exports announced for June. In addition, automobile production fell by 17.39% for the opening six months of the year. The Thai economy has come head to head with the intractable problem of private sector debt. In turn, this has stymied purchasing power. With concerns about average foreign tourist spending, the government is struggling to avoid another disappointing year for GDP growth.
Thailand’s exports for June disappointed on Thursday. The news came at the same time as Deputy Minister of Finance Paophum Rojanasakul insisted that exports for the year would still rise higher than expected.
However, on Thursday, the Trade Policy and Strategy Office Chief at the Ministry of Commerce, Poonpong Naiyanapakorn, confirmed a 0.3% dip year on year for the kingdom’s exports.
Nonetheless, Mr. Poonpong also highlighted some good news.
Exports rose 2% in the first half of the year with promising prospects for July and record export potential
Notably, exports rose 2% in the first six months of the year. The senior official also suggested that July looked promising. In particular, he said that Thailand may be on track for a year of record exports.
“This could be a record year if we hit 10 trillion baht ($277 billion),” he detailed at the media briefing.
Certainly, if it does, the country’s top export market this year remain the United States. The stateside economic performance continues to defy projections. In turn, Thailand’s exports to the market rose 5.4%. In contrast, exports to both Japan and China contracted by 12.3%.
Thai rice exports surge 78.7% in June but the overall market fails to meet expectations
A key performer for Thailand’s exports in June was Thai rice, which boomed with a 78.7% year-on-year increase.
However, the market was disappointed with the result, with a Reuters poll before the announcement indicating a projected 2.6% increase.
Certainly, the trade appeared buoyed overall by the agriculture sector’s first half performance. Chaichan Chareonsuk of the Thai National Shippers’ Council noted that a weaker baht had helped. Additionally, there were lower freight costs.
In brief, the kingdom recorded a trade deficit for the opening six months. This was driven by a 3% rise in imports. The deficit was confirmed at $5.24 billion.
Trade data reveals unpredictability with a significant drop in auto production and exports
Underneath, the key takeaway from the trade data in June is that things remain unpredictable. It should be noted that Thailand’s exports include agricultural produce and manufacturing products.
Economic analysts are more concerned about the latter.
This week also, the Federation of Thai Industries (FTI) through its Automotive Industry Club reported disturbing data.
In brief, auto production in Thailand is significantly down. The Chairman, Mr. Surapong Paisitpatanapong, slashed this year’s target from 1.9 million to 1.7 million units, a 10.5% decrease.
However, the picture for the opening six months of the year is considerably worse. Output is down by 17.39% from 2023.
Auto industry decline driven by lower domestic production, credit crunch and EV market disruption
This is caused primarily by a fall in production of cars for domestic use. The total number of cars produced in the opening six months was 308,027, down by 24.16%. Worryingly, that trend intensified in June, falling by 26.04%.
The spectacular decline in the auto industry has been caused by a variety of factors. Certainly, one of them is the disruption caused by EV cars, even though sales here are also in decline.
However, the main reason is the declining purchasing power among Thai consumers. For instance, the kingdom is currently in the midst of a credit crunch, with retail banks and lenders putting the brakes on loans.
The Bank of Thailand is responding to critically dangerous levels of household debt at 90% of GDP. Additionally, the profile of Thailand’s working population is ageing. In short, wage levels are not rising fast enough to allow for repayment of existing levels of personal debt.
Economic standoff persists as government struggles to boost growth amid high US interest rates
The result is the country’s economic standoff, which is frustrating efforts by the government to boost growth.
Meanwhile, efforts by the government to convince the Bank of Thailand to reduce interest rates are falling on deaf ears. Already, Thailand’s 2.5% interest rate is 3 full points below those in the United States.
Furthermore, the prospects of more than one interest rate cut by the Federal Reserve in 2024 are petering out. Certainly, this was evidenced on Thursday when growth in the US in the second quarter came in at 2.8%.
Economy faces a liquidity crisis as the property and manufacturing sectors nosedive impeding growth
Top Thai insurer says no more new policies for EV cars. Later, it emphasised renewals case by case
The strength of the American economy amid record-high interest rates has confounded pundits and Wall Street.
In turn, higher returns are luring money stateside and away from Asia. That means outflows from Thailand, including its bond and stock market.
Digital wallet launch and stimulus plan aim to boost growth amid weak economic indicators
Despite this, Deputy Minister of Finance Paophum Rojanasakul on Thursday suggested that the launch of the ฿450 billion Digital Wallet in the fourth quarter of 2024 would boost Thailand’s growth prospects from 2.4% to 2.7%.
His boss, Minister of Finance Pichai Chunhavajira, has been targeting 3% growth this year. The government is pinning its hopes on rebounding exports, accelerated tourist arrivals and a boost to the domestic economy through its stimulus plan.
Meanwhile, we await Quarter Two’s economic data, which is expected to disappoint. Furthermore, there are concerns about the level of spending from incoming foreign tourists, with a consistent conflict between Bank of Thailand data and figures provided by government agencies.
Tourist spending figures reveal discrepancies and challenges for Thailand’s economic recovery
Certainly, government agencies are quoting an average spend in excess of ฿47,000, while a recent report from the Tourism Authority of Thailand (TAT) suggested substantially lower figures for Asian and Indian visitors.
For instance, Indian visitors were reported as spending ฿38,000 per trip, while Asian visitors including Taiwanese and Japanese were estimated at ฿40,000 per trip.
Meanwhile, a recent report from the Bank of Thailand suggested an average of ฿33,903. For instance, last year’s spending per tourist was estimated at ฿40,100 by analysts. This is significantly behind the ฿47,739 achieved in 2019.
In brief, Thailand, unlike other countries with large tourist industries, has not fully recovered from the pandemic.
A key reason for this is that global airline routes and capacity have not fully returned to pre-pandemic levels.
However, another reason is the damage caused by the country’s abrupt extended shutdown in 2020.
The draconian measures imposed on the industry severely damaged confidence and perception of Thailand abroad.
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Further reading:
Economy faces a liquidity crisis as the property and manufacturing sectors nosedive impeding growth
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New plan for the Thai economy could see an elite foreign visa scheme generate up to 6% of GDP
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IMF urges government to loosen nation’s purse strings as finances tighten with the tax take down
Plan to allow high tech and skilled foreigners to live and work in Thailand for up to four years
