The Thai economy is expected to grow by 4.1% in 2024, thanks to political stability and stimulus policies, despite the gloomy outlook for the global economy, according to a report by InnovestX Securities.
The report, titled “Cloudy global skies, sunshine for the Thai economy”, said that the Thai economic outlook has improved after months of post-election uncertainty. The formation of a new government led by Prime Minister Prayut Chan-o-cha has increased confidence among investors and consumers, as well as paved the way for the implementation of key economic policies.
The report cited the government’s announcement of a 10,000-baht digital wallet scheme, which will provide cash handouts to low-income earners and farmers, as one of the main drivers of domestic demand. The scheme is expected to boost consumption and stimulate the rural economy, which has been hit hard by the Covid-19 pandemic and drought.
The report also mentioned other policies that will support economic growth, such as the increases in the minimum wage and monthly salary of bachelor’s degree holders, the suspension of debt and interest payments for some groups, and the energy price reductions. These measures will help ease the cost of living and increase disposable income for households.
Stimulus policies add 1% to GDP growth
The report estimated that the government’s stimulus policies will add an additional 1% to GDP growth in 2024, after taking into account the multiplier effects and fiscal multipliers. The report said that the fiscal stimulus will have a positive impact on both consumption and investment, as well as generate spillover effects on other sectors of the economy.
The report projected that private consumption will grow by 3.8% in 2024, up from 2.5% in 2023, while private investment will expand by 6.2%, up from 4.1%. The report also forecasted that public investment will increase by 8.5%, up from 6.7%, as the government accelerates its infrastructure projects and public-private partnerships.
The report said that the stimulus policies will also help improve the income distribution and reduce inequality in Thailand, which has been one of the main challenges for the country’s long-term development. The report suggested that the government should continue to implement structural reforms and enhance social protection systems to ensure inclusive and sustainable growth.
Global economy faces headwinds
While the Thai economy is showing signs of recovery, the report warned that the global economy is facing significant headwinds, especially from the US, Europe and China. The report said that the global economy slowed down significantly in the third quarter of 2023, and will continue to decelerate in the fourth quarter and enter a recession in early 2024.
The report attributed the global slowdown to three main factors: synchronised slowdown, higher for longer, and US and the rest. The synchronised slowdown refers to the weakening of economic activity across major economies, as reflected by the declining purchasing managers’ index (PMI) figures. The higher for longer refers to the prolonged period of high interest rates and inflation in the US, which will lead the Federal Reserve to maintain its policy rate at 5.4% until the end of 2023. The US and the rest refers to the divergence between the US economy, which is still growing, and other economies, especially Europe and China, where growth will slow significantly.
The report said that Europe is already at risk of a recession because of the continued tightening of monetary policy by the European Central Bank (ECB), while China is facing a risk of a “deflationary cycle” due to its structural problems and debt issues. The report revised its growth forecast for China down to 5% in 2023 and 4.7% in 2024.
The report also highlighted some of the external risks that could affect Thailand’s economic performance, such as trade tensions, geopolitical conflicts, natural disasters, and new variants of Covid-19. The report advised that Thailand should diversify its export markets and sources of foreign direct investment (FDI), as well as strengthen its domestic resilience and competitiveness.
