Fresh data shows Thailand’s economy struggles as private consumption, investment and foreign tourism income drop. Manufacturing output slipped, and car production fell 27%. With tightened credit and external challenges, GDP growth expectations for 2024 are now uncertain.
Fresh data released just days before the end of 2024 may dampen expectations for the final GDP growth figure for 2024. In short, manufacturing output slipped in November. At the same time, the economy itself slowed down with a fall in private consumption and investment. Basically, the Thai economy finds itself struggling to pick up growth as banks rein in credit and external conditions become more hostile and unpredictable. Certainly, the foreign tourism economy continues to expand, but even this showed lower income in November after a fall in the Russian tourist trade.
Fresh data just released by both the Office of Industrial Economics (OIE) and the Bank of Thailand spells bad news for the government. In short, the temporary boost from the ฿145 billion Digital Wallet first-phase splurge ended abruptly in November.
Certainly, while consumer confidence still remains high, the economic indicators are heading south. Firstly, manufacturing output in November fell by 3.58%. The Manufacturing Production Index (MPI) for November ended up at 93.41.
This came at a briefing given by Office of Industrial Economics (OIE) Director-General Passakorn Chairat.
Thai car production drops 27.2% in November as factory output declines 1.78% overall for 2024 to date
Mr. Passakorn blamed this downturn on a precipitous drop in the sale of new cars and vehicles in Thailand. Manufacturing of cars fell by 27.2%. Indeed, the overall output of Thai factories for 2024 to November 30 fell by 1.78%.
The manufacturing sector suffered not only from a drop in export demand in some sectors but also cheaper competition in certain sectors from China. This comes despite more robust efforts by the Ministry of Commerce to tackle the problem.
In particular, November saw a fall in demand for electronics abroad and a 34.5% fall in demand both at home and abroad for palm oil products. Production of integrated circuits and boards simultaneously fell by 8.6%.
At the same time, Thailand is already feeling the pinch in the US export market. This comes even before incoming President Donald Trump takes office.
Export declines worsen for Thailand in the US market as trade war pressures increase and tariffs shift
However, exports to the United States in many products decreased, including machinery and equipment, electronic products, and electrical appliances, especially solar panels, which were partly affected by the United States’ adjustment of import tariffs to counter dumping.
The country’s utilisation capacity in November was only 57.6%.
Certainly, Thailand’s exports increased in value in November. However, there was a particularly sharp drop in supply to the United States. In brief, this is Thailand’s largest and most profitable export market.
Exports of plant and machinery to America fell sharply, particularly the sale of solar panels to that market. At length, this occurred because of new tariff adjustments to counteract dumping by China.
In effect, the US-China trade war is already having a growing impact on Thailand even before Trump takes power. In essence, this is set to continue with the ASEAN economic area—including Thailand—becoming a release valve as China desperately tries to uphold its export-led economy.
Thai tourism revenue declines in November despite higher arrivals as private consumption slows sharply
On Friday, a Bank of Thailand briefing revealed that the Thai economy had slowed down in November.
Significantly, a key takeaway point from this briefing is that foreign tourism income in November was down even as the sector expanded with high arrivals. This was explained by fewer arrivals of higher-spending Russian tourists. Furthermore, flooding in the South impacted arrivals from Malaysia.
In the meantime, private consumption slumped sharply just one month after the government stimulus giveaway. At the same time, private investment fell markedly as well, consistent with declining construction activity.
While inflation rose due to higher food costs, the economy remains in a moribund state with even lower growth. Final data for November is awaited from the National Economic and Social Development Council (NESDC). This will determine whether the economy grew at a sharply reduced rate or even contracted.
This is concerning as Thai banks substantially reduced credit availability to the economy. Figures just released show that for the first time in 15 years, Thai bank loans for this period have contracted.
Bank of Thailand curbs household credit as loans shrink for the first time in 15 years in debt reduction drive
Indeed, this is part of a managed effort by the Bank of Thailand to rein in credit and debt as part of a systematic effort to reduce household debt.
The problem for Thailand’s economic planners is that they must try to keep the economy afloat in the meantime.
The briefing on the economic performance in November on Friday came from Macroeconomic Director Ms. Pranee Sutthisri of the Bank of Thailand.
She underlined that the economic situation nevertheless was stable. Inflation was rising due to energy costs and foodstuffs.
Thailand’s tourism and financial sectors show stability despite ongoing challenges in key export markets
At the same time, Bank of Thailand officials noted that the service sector was doing well. This is driven by the continued expansion of the foreign tourism sector.
At the same time, the country’s current account surplus rose in November. This was driven by a fall-off in imports, a strong trade surplus and retained income from foreign tourism.
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Ms. Pranee also emphasized that the country’s capital and financial markets were also functioning properly. Significantly, the efforts to rein in credit, particularly in the consumer lending sector, are aimed at reducing household debt, while problems in the small business lending sector have already been addressed.
In short, the Thai economy is muddling through as the country tackles its chronic household debt problem.
Meanwhile, it continues to be challenged by external trade developments, chief among these are any potential changes with US President Trump as he takes power on January 20th 2025. In addition, Thailand must continue to defend itself against rising Chinese competition and dumping.
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Further reading:
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Paetongtarn’s government set to tackle the evil of chronic debt in Thailand as the tide still rises
Srettha’s crisis is not just an economic one, it is a ‘3D debt crisis’ that is strangling GDP growth
Zombie Thai firms holding back economic growth as they struggle just to pay interest on bank debt
Incoherent government economic policy clashes with Bank of Thailand’s efforts to rein in debt
