Thailand’s economic outlook for 2024 and 2025 focuses on stability. Cabinet-approved budgets reflect prudent fiscal measures, projecting a deficit of ฿693 billion for 2023-2024. Despite global economic headwinds, exports are proving resilient with November’s 4.9% surge fueled by a 17.5% rise in US sales. The baht has gained significantly against the dollar since October.

As the cabinet finalised its budget plans for 2024 and 2025 this week there was encouraging news from the foreign tourism and export front. Thailand is poised to reach 28 million visitors in 2023. At the same time, the contraction in exports for the year may well be at or below the 1% level. Figures were boosted by late export gains in November and December. The good economic news is being driven partly by an export surge to the United States up by 17.5%. Simultaneously, the US Federal Reserve continues to hold off on further interest rate hikes. The Thai baht has risen with the dollar losing 7.2% against the Thai currency since early October. It shows the Thai economy, while still beset by low growth, suffering from chronic problems and ravaged by the pandemic, settling in for a period of stability.

Prime Minister Srettha Thavisin appeared visibly more relaxed and cabinet after Tuesday’s cabinet meeting, which approved budgets for 2024 and 2025. There is good news on the export front, with a 4.9% rise in exports in November driven by a 17.5% surge in US output, while the country is on target to reach 28 million visitors in 2023.

The Cabinet meeting on Tuesday approved increasing expenditure not only for the 2024 budget which is only expected to come into force in May 2024 because of this year’s General Election but also for the spending plans for 2025.

The government expects in the year 2023-2024 to spend a total of ฿3.48 trillion and run up a deficit of ฿693 billion. 

This is up by ฿100 billion from the ฿593 billion forecast in the previous draft budget proposed by the government of General Prayut Chan Ocha before the May 14th poll. 

Government’s 2024 deficit up by ฿100 billion from that planned by the government of General Prayut Chan Ocha before the May 14th General Election

The expenditure plans and budgets project a public debt-to-GDP ratio of 63.73% at the end of the 2025 fiscal year.

Of course, this would be September 30th 2025. According to Deputy Finance Minister Julapun Amornvivat, the budget assumes an inflation rate of somewhere between 1% and 3% or more particularly between 1.5% and 2.5%.

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20.5% of the 2024 budget or ฿715.4 billion will be earmarked for public investment to help develop the economy, while 3.4% of the budget or ฿118.36 billion will go to boost Thailand’s treasury reserves. Undeniably, a prudent step by the government. 

Tuesday’s post-cabinet press conference saw Prime Minister Srettha visibly more at ease in his new role. Running a business is a bit different he admitted

The cabinet meeting on Tuesday came as Prime Minister Srettha Thavisin has begun to ease into the role of Prime Minister.

After the meeting, speaking to reporters, he spoke about carrying on in the job for the next four years. However, he admitted that running a country was quite different to running a business.

Prior to entering politics before the May 14th General Election, Mr Srettha was the Chief Executive Officer of a national property development firm. Indeed, he was only touted for the role in October 2022 having previously had no political experience.

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The news comes as reports from the tourism front suggest that Thailand may see up to 28 million or more foreign tourists by the end of the year on December 31st.

In brief, it represents a last-minute boost in incoming numbers.

November exports up by 4.9% but figures for the first 11 months are down by 1.5%. Export contraction coincides with China’s economic slump in 2023

At the same time, preliminary data suggests that these numbers are driven by Asian visitors on short-term holidays.

In the meantime, there was also more positive news on the export front, with output for November rising by 4.9%. These were driven by a significant 17.5% boost in sales to the United States. 

Whereas output to China shrunk in November by 3.9%, industry insiders suggested that there was hope that exports to the mainland would pick up in January. They claim to see signs that the Chinese economy is recovering. 

Indeed, the sump in 2023 exports can be attributed significantly to a decline in the Chinese economy.

Officials at the Ministry of Commerce gave a presentation on the figures. 

At the present time, they accepted that exports for the first 11 months of the year were down by 1.5%.

However, there was some hope that the final figures for December would make things look better. Officials suggested the annual figure for exports may show a contraction of less than 1%. 

Thailand’s export output fall in 2023 was the lowest in the Asian region according to a top Ministry of Commerce official who presented the data on Tuesday

A top official at the Ministry of Commerce, Mr Keerati Ratchano, pointed out that the contraction in Thai exports this year was the lowest in the Asian region. He gave data in this respect.

Regardless, at the pivotal end-of-year cabinet meeting, Thailand’s economic future took centre stage as policymakers addressed the budgets for two years ahead.

The 2024 budget will be presented in parliament with a first reading of the bill on January 3rd and 4th.

The data shows that the economic situation, while challenging, is at least stable. 

There are also hopes that with political stability and careful stewardship of the economy, things may improve.

The Thai economy is still very much emerging from the damage inflicted by the pandemic. Simultaneously it is navigating a very challenging global economic environment.

Cabinet approved Bank of Thailand’s mission to keep inflation stable and at a target rate of 1% to 3% in coming years. This is an economic imperative

The Bank of Thailand’s headline inflation target range of 1% to 3% for 2024 received cabinet approval.

It mirrors the goals set for the current year. This target, subject to annual review, serves as a linchpin for guiding monetary policy.

The decision coincides with recent data showing a consecutive two-month decline in headline inflation, reaching a 33-month low in November.

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The central bank is independent of the government. Friction between the Bank of Thailand Governor Sethaput Suthiwartnarueput and Prime Minister Srettha Thavisin appears to have eased. 

In short, Prime Minister Srettha appears to respect the bank’s independent mission and to be swayed by the top economist who leads it, a former advisor to General Prayut Chan Ocha.

The pair are understood to meet regularly.

Increased public debt levels for the next two years while the central bank may also play a role in stimulating economic growth and curbing household debt

As policymakers hold the inflation target steady, the central bank remains poised to deploy monetary tools.

It aims strategically to counterbalance economic pressures and stimulate growth. The decision reflects a delicate balance between supporting economic expansion and ensuring price stability.

The government is also engaged in an ambitious programme to counter informal debt.

This is expected to see ฿500 billion injected into the economy. As well as that, the central bank is aiming to curb wasteful borrowing.

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Looking ahead to fiscal 2025, the government has outlined ambitious financial plans, featuring a larger budget deficit of ฿713 billion and increased spending totalling ฿3.6 trillion.

This projection marks a 2.8% uptick from the envisioned deficit in 2024.

Growth of over 3% projected in both 2024 and 2025. The aim is for continued economic growth and stability in the kingdom while tourism and trade improves

Aiming to bolster economic growth, the government anticipates a GDP gain of 3.6% in 2025. Most analysts suggest a 3.2% rise in 2024 following what is expected to be 2.6% in 2023.

The repeated pattern of budget deficits represents a new norm. In view of the fact that the last surplus budget was the 2006 fiscal year, it underscores a new reality.

‘The government still needs a short-term deficit budget to support continued economic expansion and stability,’ asserted an official government statement.

This signals a strategic approach to fiscal policy, recognizing the imperative of government spending to propel economic recovery.

Thailand’s international trade dynamics come into sharp focus with the latest Ministry of Commerce exports report. 

This was presented by Mr Keerati Ratchano, the Permanent Secretary at the ministry.

Significantly, it showed exports for the first 11 months of 2023 were down. At length, output reached $261.77 billion, showing a marginal contraction of 1.5%. Imports during the same period registered a 3.8% decline, culminating in a trade deficit of $6.17 billion.

November’s exports up 4.9% as the baht gains

However, November 2023 witnessed a positive upswing in exports, growing by 4.9%.

Key contributors to this growth include the export of agricultural products, with significant increases in rice, fresh chicken, and rubber. This positive trend is encouraging against the backdrop of global economic challenges.

Comparatively, Thailand’s export performance outshone its regional counterparts, posting the lowest contraction rate at 1.5%. 

As the Ministry of Commerce charts a course for 2024, the goal is to achieve export growth of 1.99%, equivalent to around ฿10 trillion.

The strategy involves proactive economic diplomacy, negotiations for Free Trade Agreements (FTAs), and elevating the soft power of Thai products on the global stage.

Good news from the United States and its battle with inflation as the key to optimism at this point

Currency markets suggest that the Thai baht is gaining against the dollar with the end-of-year economic rally.

The Thai baht closed at ฿34.39 against the US dollar. This means the greenback has lost 7.2% against the baht since the 2nd of October 2023. Previously, at that time, it was valued at ฿37.04.

It comes with some hope for Thai planners that the US Federal Reserve may hold off on further interest rates in the United States with inflation stateside coming under control and employment at record high levels.

Indeed, with the November 17.5% surge in exports to America, the US economy is sending encouraging signals for the year ahead in 2024.

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