Prime Minister Prayut Chan ocha expressed optimism about the economic situation on Tuesday saying the kingdom’s prospects had not been as good since 2017. However, it will still be next year before Thailand recovers its economic equilibrium after the disastrous 2020 setback when the economy contracted by 6.1%.

Things are beginning to turn upwards for the Thai economy as figures released this week show that Thailand, for the first time since 2020, saw more than 1 million arrivals into the country in July with exports also surging. On Tuesday, following a cabinet meeting, Prime Minister Prayut Chan ocha heralded the current economic outlook as the most positive for growth prospects since 2017 or 2018 as his government has also benefited from lower oil prices which have subsided since May. While business leaders on Wednesday issued a more cautious statement, the kingdom has the potential to reach and exceed 4% growth this year. Underpinning Thailand’s performance is the country’s robust financial system with foreign exchange reserves of over $218 billion, making it the envy of many other countries in Asia.

Prime Minister Prayut Chan ocha (right) on Tuesday said that the prospects of economic growth in Thailand were the best they’ve been since 2018 or 2017 after a cabinet meeting at which Minister of Finance Arkhom Termpittayapaisith (left) outlined the government’s borrowing plans up to the end of the fiscal year at the end of September with exports and household income all up substantially. It came just before figures announced by spokesman Thanakorn Wangboonkongchana revealed that Thailand hit over 1 million foreign tourists in July with the sector set to drive economic growth in the last half of the year which could see 10 million arrivals and an extra 2% in growth achieved on top of a projected 3.3% growth rate for the year.

Thai economic planners are optimistic that growth for the kingdom in 2022 could be anything up to or even beyond 4% as foreign tourists continue to arrive in higher numbers.

The latest figures for international tourist arrivals are beginning to buoy the government that things may finally be looking up for Southeast Asia’s second-largest economy.

Highest level of visitor number since early 2020 with over 1 million foreign tourists arriving a month

Figures released on Tuesday show that from the start of this year to the 26th of July the kingdom recorded 3.12 million visitors.

The figures, released by the Thai government spokesman Thanakorn Wangboonkongchana on Tuesday, if confirmed, suggest that there are now over 1 million visitors per month arriving in the kingdom for the first time since the pandemic crisis began with 1.09 million visitors from June 27th to July 26th being recorded.

This is the highest level seen since early 2020.

Growth in 2022 could hit between 4% and 5%, well ahead of current projections if export surge continues

Under current projections and trends, Thailand could be on target for 10 million visitors or more this year which economic experts suggest would raise the country’s GDP growth from a projected 3.3% to 4.9%.

This could be possible if exports continue to perform well and domestic economic confidence is not dampened by inflation which will only peak in the months to come.

The news is also coming amid more encouraging data from the economy with farming incomes reported to have risen by over 16% in the second quarter of 2022 and non-farm incomes up by 9.2% as the economy has gotten back in gear despite record high inflation of 7.66% reported for June.

The country is also projected to see export growth this year at 7% beating an earlier assessment, some weeks ago, of 6%.

Backdrop of external threats which could see another spike in energy costs and even higher inflation

The news is still coming against a backdrop of problems such as the price of foodstuffs and energy imperilled by the Russian-Ukraine war but gradually it appears the world economy is beginning to adapt to the situation with sliding oil prices now being seen as a major boon for the government’s efforts to manage and steer the economy to grow this year and to consolidate the recovery going into next year.

However, business leaders remain cautious because of the threat of inflation and a darker economic outlook outside Thailand.

On Wednesday, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) held firm on its projected GDP growth figure for 2022 at a range from 2.75% to 3.3% despite projecting an annual export growth of up to 8% for the year.

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It projected between 7 to 8 million foreign tourists which appears to be the key swing factor in terms of growth between now and the end of the year. 

China’s economic problems also a negative with less concern now about a gradual rise in interest rates

Disappointing economic news and general unease about the status of China’s economy have helped depress world oil prices with the cost of WTI (West Texas) Crude off by 5.5% this month and closing on Wednesday at $93.83, off from $121.29 in early May.

The Bank of Thailand which in recent months has made clear its goal and policy of insulating and protecting the country’s growth by holding off on interest rate hikes and even afterwards, promising only a gradual upward movement to ward off inflation.

The central bank, which will probably raise interest rates on August 10th by 50 basis points and later in the year by a further 50 to 75 points, projects that annual inflation in Thailand will peak at a rate of 7.5% in the third quarter while beginning to fall back to 4.1% in the first quarter of 2023 moving downwards to 2.5% by June 2023 and settling at 1.7% later next year which would be in line with the bank’s targets.

The bank’s governor, Sethaput Suthiwartnarueput, has also signalled that the forthcoming rise in interest rates will not so negatively impact borrowers in the kingdom as 60% of Thailand’s loans are at fixed rates while the interest rate increase being passed on to the market will be only in the order of 0.5% by the end of 2022.

Central bank boss urges borrowers to consider taking on debt more carefully going forward as rates rise

He did concede that it would be prudent for prospective new borrowers to think carefully before taking on loans as the bank is trying to rein in the country’s chronically high levels of household debt. 

Bank of Thailand governor emphasises that interest rates and liquidity are not issues, private sector debt is

‘New borrowers would be affected by a rising interest rate, so they should consider income and debt payment capability before applying for a new loan,’ Governor Sethaput explained.

The bank has consistently pointed out that despite the widening spread between interest rates in the kingdom and Federal Reserve rates in Washington, capital has not taken flight from the country which maintains strong and sound financial fundamentals.

There is also an increasing belief that the Federal Reserve may moderate its hawkish stance although it will certainly raise interest rates by up to 1.5% more this year thus widening further the spread between the Thai rate. 

However, the impact on the Thai baht may be offset by rising foreign tourism numbers and exports as well as the fact that the market had already built in the Federal Reserve’s stance into its price.

Thailand’s strong financial position and banking system underpins stability making it the envy of other Asian countries as it embarks on its recovery 

This week, Mr Sethaput also pointed to a $3.5 billion capital inflow to the Thai markets in the last year.

Thailand’s current account deficit for June came in at $1.9 million following a $3.7 billion figure for May and $3.06 billion for April 2022.

It remains to be seen if the figure for July will show a marked improvement with higher foreign tourist arrival numbers so far, a stronger export performance and reduced import costs.

The kingdom also still retains a healthy foreign exchange reserve, the envy of many other Asian countries at this time, which on the 27th of July 2022 stood at $218 billion although it fell from $258.5 billion on the 22nd of January 2022.

The robust fundamentals at the heart of the country’s well-managed financial system leave it positioned as a financial haven while other countries in Asia such as Sri Lanka, Laos and Pakistan experience economic turmoil in the world economy which has seen capital suddenly pulled out of emerging markets with rising US interest rates.

The Thai baht has also performed well from Thursday 21st July to August 3rd with a gain of nearly 2% with the dollar falling from ฿36.76 to ฿36.29.

Minister of Finance on Tuesday outlined borrowing plans to cabinet with end of the fiscal year in sight

At a cabinet meeting Tuesday, the Thai Minister of Finance Arkhom Termpittayapaisith outlined the government’s borrowing and refinancing plans for the year ahead telling his cabinet colleagues that debt to GDP by the end of the financial year on the 30th September 2022 will be 61.33%, lower than the 62.76% already projected.

He told fellow ministers that the government would borrow a further ฿14.2 billion raising the public debt level to ฿1.429 trillion or $38.96 billion.

Prime Minister expressed optimism on Tuesday even though the economy has a long road back to 2019

This led to Prime Minister Prayut Chan ocha briefing reporters later at Government House as he reiterated that the Thai economy would grow by at least 3.3% this year with only a 4.2% rate projected for 2021.

The PM pointed out that these figures were the highest level of growth seen since 2017 and 2019 although it must be noted that in 2020, Thailand’s economy contracted by 6.1% and will only gain equilibrium from that setback sometime next year.

The government leader, who could well be fighting an election at the end of the year, highlighted that his figures were based on 6 million foreign visitors being seen in Thailand which now looks like it will be 10 million at least, an outcome which will generate a further 1.6% in GDP growth terms.

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