Thailand enters the countdown to the end of 2023 with an extremely troubled economy and gloomy outlook into 2024. Nothing can be taken for granted, even foreign tourism earnings, which are stunted.

Thailand’s economy is facing uncertainty on all fronts as the year draws to a close with a decline in the projected GDP growth for 2023 to only 2.7% and possibly as low as 2.2% due to concerns not only about the country’s export industry but now also a more sluggish rebound in foreign tourism than predicted with the Kingdom on target to generate only 61% of the level of income seen in 2019. This week, the Director of the Fiscal Policy Office at the Ministry of Finance warned that although Thailand should see something like 3.2% growth in 2024, it would be the middle of the year before anyone can be confident in a world of challenges and uncertainty.

A cautious survey of the Thai economy was given this week by Mr Phonchai Teerawech, highlighting the lack of income generated from foreign tourism in stark contrast to bullish projections for the Tourism Authority of Thailand (TAT). He also suggested the export industry continues to experience challenging conditions, which could see GDP growth as low as 2.2% this year.

The Director of the Fiscal Policy Office at the Ministry of Finance, Mr Phonchai Teerawech, has issued a stark warning about the performance of the economy in 2023 as his office predicts that growth could be as low as 2.2% with a projected growth rate of 2.7% and a possibility of expanding by 3.2% for the year. 

Mr Phonchai pointed to the continued lacklustre performance of Thailand’s export industry, which, despite a revival in recent months driven by agricultural output, is, according to the economic agency’s predictions, due to contract by 1.8% this year.

At length, export contraction will be higher than the 1% contraction now hoped for, on which a 2.7% GDP growth rate is predicted for 2023.

Warning on Friday from Bank of Thailand Governor Sethaput Suthiwartnarueput as the Fiscal Policy Office also issued a cautious assessment of the situation

The outcome is ahead of estimates from the industry of a 1% loss and an earlier projected contraction of 0.8%.

Thailand’s manufacturing and export sector accounts for 60% of its formal or on-book recorded economy.

The uncertainty regarding the Thai economy at this juncture was highlighted on Friday by reported comments of Bank of Thailand Governor Sethaput Suthiwartnarueput, who told a business seminar that planners could not take the country’s financial stability for granted looking into the future and it would require government action to preserve.

Officials at the Fiscal Policy Office also expressed concern about the recovery of foreign tourism, which appears to have stalled in October. They are projecting just 27.7 million arrivals for 2023, down from an earlier forecast of 29.5 million.

The Finance Ministry unit predicts an income from this activity of only ฿1.18 trillion for the year. 

Figures from the Finance Ministry contrast with the bullish data promoted by the Tourism Authority of Thailand (TAT), even for 2023 tourism earnings

This figure and outcome starkly contrasts with recent targets set by the Tourism Authority of Thailand, which this week, in a speech by newly appointed Governor Ms Thapanee Kiatpaiboon, projected an income of ฿2.5 trillion for 2024.

The newly revised forecast of only ฿1.18 trillion in foreign tourist income in 2023 is down from ฿1.25 million projected by the economic office in recent times due to a lack of response from the Chinese market to initiatives by Thailand, including a visa waiver, which has been only a limited success. 

The Kingdom’s prospects in China are being retarded by chronic economic difficulties in the Communist country and damage to Thailand’s reputation there due to perceived criminality and attacks on Chinese tourists, which have stoked fear among prospective visitors. 

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The senior official also expressed concern about when the country’s export industry will recover and whether the numbers of foreign tourists will improve as the country’s High Season gets underway in November.

Current Fiscal Policy Office projection is only 2.7% growth for 2023, and even this depends on good final months of foreign tourism and export growth

Mr Phonchai drew attention to the fact that the 2.7% projected growth rate is similar to that set by the International Monetary Fund and the Bank of Thailand, which is currently predicting a 2.8% GDP gain, which may be revised downwards at future meetings of the Central Bank’s Standing Committee as it reviews the country’s ongoing economic prospects. 

The 2.7% projection depends on strong foreign tourism performance in November and December and a continuous improvement in exports.

Among the more positive aspects of the 2023 economic story is a 5.8% recovery in private consumption, while private investment has increased by 0.9%. 

However, investment by the government and public sector has contracted by 3.4% due to this year’s election and political instability, preventing the formation of a government until September 5th.

Economic planners in Thailand will now look to 2024, and analysts will start the year with a projection of 3.2% growth, although this figure will be challenged if exports do not improve dramatically in the coming months.

The Fiscal Policy Office predicts exports in 2024 to expand by 4.4% while private investment is expected to jump by 3.5%.

2024 depends on a 24.6% rise in tourist numbers 

However, the critical driver of next year’s economic gains is expected to be the tourism industry, with 34.5 million foreign tourists expected to travel to Thailand, representing a 24.6% gain from this year.

Nonetheless, this will only leave the foreign tourism industry generating an income of ฿1.49 trillion, based on current spending patterns, which is approximately 25% less than that achieved in 2019.

The reduced income from foreign tourists has been caused by a change in the market profile of visitors to Thailand in 2023, with the leading countries of origin being in Asia, with countries such as Malaysia, India and China leading the way on shorter trips.

Agency official ignores the controversial Digital Wallet plan, which is plagued by both financial and political uncertainty in his projection for 2024

‘The economic GDP growth figure for 2024 at 3.2% does not include the impact of any economic stimulus measures which are planned by the government sometime at the beginning of the year, especially the ฿10,000 digital wallet project, because the status of this initiative is as yet unclear such as the mechanism of the giveaway and the spending patterns,’ Mr Phonchai explained to reporters this week.

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‘Therefore, it is impossible to assess how this measure will affect the economy. I would like to wait for clarity on this first. The estimate of 3.2% is based on normal economic drivers that are still functioning.’ 

The senior official did not flinch from acknowledging the challenges being faced by Thailand’s economy as it strives to record anything above what has been anaemic growth since the US-China Trade War opened up in 2017, followed by the disastrous pandemic shutdown in 2020, which saw the country’s productivity take a nosedive, something it has not yet recovered from.

Thailand has fallen into the Middle-Income trap

After that, he said vital issues of concern would be possible complications arising from the conflict between Israel and Gaza, in particular, the danger of a regional escalation leading to higher oil prices. 

Thailand’s economy has been hit hard by geopolitical tensions since 2017, a situation aggravated by the virus crisis and chronic internal problems

Furthermore, the ongoing war between Russia and Ukraine continues to undermine world economic confidence, while deepening strategic competition between China and the United States has, since 2017, had a continued negative impact on the performance of Thailand’s economy, which appeared to have become linked to China’s inevitable growth pattern. 

All this has changed, leaving Thailand’s economy in a more precarious situation, with the previous government failing to find a productive and rewarding new direction.

Already, there are concerns that the government’s pursuit of the EV car industry may end up being the wrong one as the world and consumer marketplaces sour on the new vehicles, which have been linked to negative user experiences worldwide.

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The top Ministry of Finance official warned that there will continue to be ongoing changes and disruption to supply chains and international trade caused by these dynamic geopolitical tensions, which continue to grow.

Thai businesses must look at each market separately

At the present time, the Director pointed out that this means that economic planners and business operators in Thailand have to look individually at the prospects in each country while also taking into account fluctuations in the world’s financial markets, where the cost of money has been rising with elevated interest rates. 

Mr Phonchai also warned that there is the possibility of a global financial crisis developing as the impact of more expensive money puts pressure on already highly leveraged financial institutions, particularly in the United States and Europe. 

At the same time, China continues to experience severe economic difficulties, which must be seen now as a slowdown. The Chinese downturn has particularly affected the Thai economy in 2023 through its export performance.

In addition to these problems, there continues to be a threat from the weather, with the El Niño phenomenon threatening farmers’ incomes in Thailand. 

Officials press ahead on 2024/2025 budget; if Digital Wallet goes ahead, it may contribute to 1% extra GDP growth in 2024, but the outlook is uncertain

Director Phonchai highlighted the importance of the government, the Bank of Thailand and the Ministry of Finance working to prepare clear plans and budgets even into 2025, with the groundwork now being done for the 2024-2025 budget.

He said it would be the middle of 2024 before Thailand could be assured that the coming year will show an improvement in the country’s economy.

By the same token, matters should be transparent concerning the proposed stimulus package at a value of ฿400 billion, representing a potential 1% GDP gain. 

He highlighted that the government was looking at the conditions for this spending and stimulus package known as the Digital Wallet, including the target group and how much money would flow into the economic system.

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