KASIKORN RESEARCH CENTER (KResearch) has slashed its Thai economic growth projection for 2023 to 2.5 percent from the previous forecast of 3.0 percent. The downgrade is due to impacts of the persistent global economic slowdown, especially the faltering Chinese economy amid property woes.

Mr. Burin Adulwattana, Managing Director and Chief Economist, KASIKORN RESEARCH CENTER Co., Ltd. (KResearch), said, “The global economy is slowing down, impacting global trade. This is reflected in the deceleration of the manufacturing sector worldwide, especially in China and Germany, which are both heavily reliant on exports. In addition, the Chinese economy remains hindered by its ailing property sector, which has hurt domestic demand. Meanwhile, the US Federal Reserve (Fed) has assessed that the US economy remains in good shape, which means the Fed is likely to keep interest rates high in 2024. However, the financial market sees a chance that the Fed may start cutting its policy rate during the first half of 2024."

The Thai economy is projected to grow slower than expected in 2023. KResearch, therefore, has downwardly revised our growth forecast for the Thai economy in 2023 to 2.5 percent, from the previous estimate of 3.0 percent, due to the global economic downturn. The steady decline in the Chinese economy, in particular, may affect the overall number of international tourist arrivals in Thailand. KResearch is of the view that the total number of foreign holidaymakers in Thailand during 2023 may reach only 27.6 million, although Thai merchandise exports are projected to contract by 1.3 percent, an improvement from our previous estimate of a 2.5-percent decline. Additionally, domestic demand may continue to be affected by the fact that Thai tourism has not yet fully recovered, together with the persistent slowdown in the manufacturing sector and hefty household debt, as reflected in the contraction of domestic car sales for several consecutive months and core inflation that remains below the Bank of Thailand's target. KResearch expects that the Thai central bank has already ended its interest hike cycle, leaving its policy rate at 2.5 percent.  

In 2024, the Thai economy is projected to grow 3.1 percent, thanks to public investment and consumption, plus projected growth in merchandise exports of 2.0 percent. Moreover, the number of international tourist arrivals may increase to 30.6 million, from the 27.6 million projected for 2023. If the Thai government's digital wallet measure goes ahead, it is expected that the Thai economy would grow by 3.6 percent. The inflation rate may stay at 0.8 percent in 2024 as global oil prices are projected to average USD 72.5 per barrel.

In the context where global trade protectionism remains evident, and the automotive industry is in a transition due to the increasing popularity of electric vehicles (EVs), Thailand has the opportunity to develop as a regional EV production hub. Additionally, as the country is likely to benefit from the relocation of manufacturing bases in other industries, such as electronics, this would result in new mechanisms to drive the economy in the near future.