Thailand Economy Slows Down in Q2 as Exports Decline, Tourism Remains Resilient

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Thailand’s economy grew by 1.8% year-on-year in the second quarter of 2023, down from 2.6% in the previous quarter, according to the National Economic and Social Development Council (NESDC). The growth rate was lower than expected by most analysts, who had forecasted a 2.1% expansion.

The main factor behind the slowdown was the weak performance of exports, which contracted by 2.1% year-on-year, due to the sluggish global demand and the appreciation of the Thai baht. Exports account for about 60% of Thailand’s gross domestic product (GDP).

On the other hand, tourism and private consumption were the bright spots of the economy, as they continued to recover from the impact of the COVID-19 pandemic. The number of foreign tourists increased by 15.3% year-on-year, reaching 7.1 million in the second quarter, mainly driven by the return of Chinese visitors. Tourism contributes about 12% of Thailand’s GDP.

Private consumption grew by 4.3% year-on-year, supported by the government’s stimulus measures, such as cash handouts and tax incentives, as well as the improvement in consumer confidence and employment. Private investment also increased by 2.9% year-on-year, reflecting the expansion of machinery and equipment purchases and construction activities.

The NESDC revised down its GDP growth forecast for 2023 from 2.7-3.7% to 2.7-3.2%, citing the downside risks from the global economic slowdown, the trade tensions between major economies, and the domestic political uncertainty. The World Bank also lowered its growth projection for Thailand from 3.9% to 3.5%, while maintaining a positive outlook for 2024 and 2025.

The Bank of Thailand (BOT) raised its policy interest rate by 0.25 percentage points to 2.00% in June, citing the need to balance the economic recovery and inflation pressures. The inflation rate moderated from 3.9% in the first quarter to 3.4% in the second quarter, but remained above the BOT’s target range of 1-3%.

The BOT also implemented various financial measures to assist households and businesses affected by the pandemic, such as soft loans, asset warehousing, and debt restructuring. The ratio of non-performing loans (NPLs) to total loans slightly decreased from 3.01% in the first quarter to 2.99% in the second quarter.

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