Thailand has been hit hard by the fall out from the US-China trade war and its insipid growth rate of 2.8% as projected by the Bank of Thailand stands in marked contrast to the 7.3% just revised growth rate for Vietnam in the 2nd quarter of the year.

Thailand’s central bank governor on Monday said that the Thai economy is not yet in crisis and that while it has performed below its potential in 2019, the bank did see and upward movement in growth for the third quarter.

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Bank of Thailand Governor Veerathai Santiprabhob told reporters on Monday that the Thai economy was not yet in crisis and that the bank had detected an uptick in growth in the third quarter. He also pointed out that the central bank stood ready to ease monetary policy if the situation should worsen as the Thai economy moves into the last quarter of the year as ministers make an all-out effort to push for a 3% revised target growth rate with a focus on problems within the tourism industry which has been sending mixed messages all year.

It comes as economic ministers announced plans for meetings in October to address problems in the country’s tourism sector and to give impetus to the economy as it moves into the last quarter and the government seeks to achieve a 3% growth rate for the year overall.

The Governor of The Bank of Thailand, Veerathai Santiprabhob, said on Monday that the bank foresaw growth in the third quarter should come in higher than that of the second quarter which saw Thailand’s growth rate tank to 2.3%.

Figures for August showed a widening trade surplus

His comments came as the bank revealed its figures on imports and exports which saw August exports down by 2.1% but a widening trade surplus of $3.58 billion due to a bigger fall off in imports. Private consumption was up marginally for the month by 0.3% but the corresponding figure for investment was down by 2.2%.

Bank of Thailand left rates unchanged last week

Last week, the bank left key interest rates unchanged at 1.5% at its monthly meeting after its surprise decision to cut the rate in August. However, the Bank of Thailand boss suggested that the central bank may yet act if the economic situation continues to deteriorate. 

For now, however, he insisted that the Thai economy was not yet facing a crisis situation. ‘The economy is not in a crisis yet,’ he told reporters.

The Bank of Thailand is independent of the Thai government and charged with maintaining the country’s economic stability and financial sector. Mr Veerathai did describe the Thai economy this year as performing below potential.

Thailand has been hit surprisingly hard by an export downturn sparked by the trade war

The country has been hit hard by a dive in exports caused by a rising Thai baht and the upheaval caused to established supply chain networks by the brutal and still escalating US-China trade war.

US President Donald Trump was reported on Friday to be strongly considering taking executive action aiming to delist Chinese firms such as Ali Baba from the US stock exchange despite questions raised by legal experts suggesting that such a move may be a step too far even for the all-powerful US presidency.

Chinese foreign minister warns of world recession

Nevertheless, the value of shares dropped on Wall Street on Friday and in particular in Chinese related stocks. Last week at the UN, the Chinese Foreign Minister Wang Yi warned about the lessons of history and the devastating impact of the US president’s actions on the global economy and in particular on supply chains. ‘They may even plunge the world into recession,’ he said.

Some in the US think America has the upper hand

However, in spite of this, there is a growing body of opinion in the US that now believe that America has got the upper hand in the trade war and others who believe that the root of the bellicosity in world trade lies in China’s increasingly assertive ambitions.

Thailand caught unawares, exposed to trade war

It is clear however that Thailand has been caught unawares and exposed by the trade moves and counter moves between its two key trading partners. As the country’s growth rate of 2.3% was confirmed for the second quarter and the Bank of Thailand downgraded the overall rate of growth for the year to 2.8% this week, Vietnam was revising upwards its growth rate in the second quarter to 7.3%. Thailand’s eastern neighbour has achieved this even as its agricultural industry has been hit hard by a swine flu outbreak which resulted in 19% of its pig herd being culled.

Vietnam’s success at manufacturing and services

Vietnam’s growth has come from the manufacturing and service sectors.  ‘Manufacturing is the main driver of economic growth in the first nine months of the year. Followed by services,’ the head of the statistics office in Vietnam Nguyen Bich Lam proudly told the media this week.

Thailand’s tourism industry sending mixed signals

Vietnam has also seen a flourishing of its tourist industry as Thailand’s tourism sector is relaying mixed signals. Last week, the Bank of Thailand reported that Thai tourism was in decline while the Ministry of Finance touted a 7.4% growth in arrival numbers. 

Key meeting of ministers on October 7th to look at the economy and tourism as 4th quarter begins 

On Monday, it was announced by Kobsak Pootrakool a key point man at the Office of the Prime Minister that the Council of Economic Minister would be meeting on October 7th to address problems in the tourism sector in particular and to see what can be done to make the most of Thailand’s up and coming high season. 

Thai ministers are anxious to give the economy a last push into the fourth quarter in an effort to achieve the government’s revised goal of 3% growth for 2019 which has been quite a disappointing year so far for the kingdom.

Further reading:

Bank of Thailand governor warns about growing debt levels, calls for sufficiency economic thinking

Thailand may resume EU free trade talks as Commerce Ministry organises public hearings

Thai central bank boss introduces new ‘debt clinic’ as he urges action on kingdom’s high household debt

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