Thailand’s top economic agency surprises analysts with higher-than-expected quarter-one GDP growth driven by a 24.8% rise in tourism and a 6.9% spike in consumer spending. However, the report warned of a manufacturing decline and potential Chinese product dumping.

Thailand’s top economic agency surprised the markets on Monday with a higher-than-expected GDP growth figure for the first quarter. Growth was 1.5%. Despite this, however, the details in the report make for disturbing reading. In short, they point to a faltering manufacturing economy. At the same time, the Secretary-General of the National Economic and Social Development Council (NESDC) specifically warned about the dumping of products on Thailand’s market by China. The figures showed growth driven by a 24.8% rise in foreign tourism from 2023 and a consumer spending boom with an eye-popping 6.9% growth figure. Later on Monday, the Budget Office announced that the government was increasing its expenditure by ฿122 billion, bringing the annual 2024/2025 budget to ฿3.6 trillion.

National Economic and Social Development Council (NESDC) Secretary-General Danucha Pichayanan (centre) produced a surprise on Monday. The head of the country’s economic agency revealed GDP first quarter growth of 1.5%. However, the top economist’s report was full of disturbing data showing lowering manufacturing output. In addition, it raised the threat posed by industrial-scale dumping from China.

Thailand’s independent economic agency, the National Economic and Social Development Council (NESDC), reported on Monday regarding the country’s first-quarter GDP performance. Danucha Pichayanan, the Secretary-General, surprised most economists and analysts by revealing a growth figure of 1.5%.

Last week, a Reuters poll had signalled a growth figure of 0.8%. This was based on standard economic models taking into account top-line data.

Massive splurge by consumers seen in the opening three months despite Bank of Thailand’s curbs and a credit crunch. Reported spending was up by 6.9% 

The reason for the discrepancy, according to the agency, was a significant boost in consumer spending.

Indeed, the economic agency reported a 6.9% spurt in the first quarter. This came despite an intense credit crunch by the Bank of Thailand to rein in lending. However, it may have been driven by buoyant foreign tourism revenue.

The National Economic and Social Development Council (NESDC) reported a 24.8% rise in tourism industry receipts for the period compared to last year.

In turn, the government’s economic watchdog reported a rise in the Consumer Confidence Index for the quarter. Its figures showed it rising to 57.2 from 55.2 in the last quarter of 2023.

Significantly, the agency reported 9.37 million foreign tourists in the three-month period. The average spend per tourist was ฿33,903, well below the figures quoted by Thailand’s tourist board. Indeed, the expenditure is markedly lower than the ฿47,739 spend per tourist seen in Thailand in 2019.

That represents a 29% fall in income generated. Certainly, this suggests a fundamentally altered foreign tourism industry since the country reopened after the pandemic.

Buoyant foreign tourism industry in Qtr 1 yet the per capita tourist spending since 2019 is down by 29% according to the latest figures released on Monday

In addition, Thailand is still only projected to see 37 million visitors in 2024, still below the 2019 figure. At the same time, arrivals and traffic in the low season this year have been disappointing.

Meanwhile, the country’s export sector appears to be suffering from both short-term and long-term problems.

In particular, on Monday, Mr Danucha warned of the effects of the continued tensions between China and the United States on Thailand’s export performance.

The economic agency, furthermore, warned that Thailand faces a threat of dumping from China.

In short, China’s command-and-control economy cannot deal with the reduction in access caused by US tariffs.

The result is the dumping of excess production across a range of products from steel to EV cars on the Thai market.

Warning over dumping from China as the Communist country’s manufacturing base produces products that cannot be sold on the world market due to import tariffs

In the meantime, this movement of goods may threaten Thailand’s business relations with the United States as well as the European Union if efforts are made to circumvent tariff measures between Western markets and China.

Nonetheless, March was a particularly disastrous month for Thai exports.

Despite an improvement in output in the first two months of the year with a 2.9% rise, output plummeted by 10% in the last month of the quarter. Therefore, exports fell by 2% overall.

On this basis, it is now predicted that exports will only grow 2% in 2024.

Thailand’s goods exports increasingly trending, for a while now, towards low-tech products as its manufacturing base becomes more obsolete

In addition, there are rising concerns about the profile of Thailand’s exports.

Certainly, in contrast to other Southeast Asian economies, output from Thailand has become decidedly low-tech as the kingdom’s manufacturing base has lagged technologically.

In turn, this has been caused by a lack of investment. Not only are manufacturing lines in Thailand becoming moribund but those that are producing are making obsolete, low-tech products.

For instance, in the opening quarter, Thailand’s industrial production fell by 3%.

Moreover, this was the sixth consecutive quarter of decline in manufacturing. Agricultural production declined by 3.5% while the exports of goods and services dropped by 2.5% and 6.9% respectively.

The decline in exports was especially seen in lower amounts of air conditioners, pickups and trucks. Despite this, there were rises in rice, rubber, computer products and steel.

Trade surplus in Quarter One. Projected current account surplus of 1.2% of GDP for the year. This compares to an average of 8% for the years 2015 to 2018

Thailand still recorded a trade surplus for the period of $1.6 billion and is on track for a current account surplus for the year of 1.2%. 

Nevertheless, this is significantly below previous figures and shows a weakening of the country’s position. Between 2015 and 2018, the average current account to GDP surplus was in the order of 8%.

Furthermore, the reason for this is primarily capital flight out of the country.

Certainly, this was in the mind of Mr Danucha on Monday. In his report, he warned that a reduction in bank interest rates may exacerbate the value of the baht. In turn, this may lead to higher import costs.

At the same time, the economic agency boss identified high borrowing levels and a lack of repayment capacity as key threats to the economy at this time.

Government spending in the opening months of 2024 was a whopping 27.7% down in the 2023 period. The delay in approving the 2024/2025 budget bill blamed

Certainly, the 1.5% GDP growth reported by the agency was due to foreign tourism receipts and simultaneously a 6.9% boost in personal consumer spending.

In contrast, government spending for the period was down by a whopping 27.7%. In short, this has been explained by the delay in passing the 2024/2025 government spending bill. Consequently, for the year, public investment is projected to fall by 1.8%.

At the same time, for the first quarter, private investment, remarkably, rose by 4.6%. Indeed, it is expected to rise 3.2% overall for the year.

It can only be assumed that this investment is linked to the buoyancy seen in the previous quarter in foreign tourism despite significantly lower spending.

Simultaneously to the latest GDP figures released on Monday, the government announced it was increasing its budgeted expenditure by ฿122 billion.

This was reportedly linked to the funding of the controversial Digital Wallet policy.

Mr Chalermphol Pensoot, the Budget Bureau chief, announced that the government will spend ฿3.6 trillion for the year.

Monday saw the Budget Bureau boss signal ฿122 billion extra in spending. This is seen as linked to the controversial ฿500 billion Digital Wallet plan

Despite this, in his report, the Secretary-General of the National Economic and Social Development Council (NESDC) played down the impact of the scheme on GDP for 2024. 

Firstly, he noted that the scheme would not be fully rolled out by the end of the year. Therefore, he only estimated a 0.25% gain in GDP if it goes ahead.

The plan is assiduously opposed by leading economists and at least two former Bank of Thailand governors. They point to the danger posed by the scheme to the government’s public finances.

Prime Minister Srettha still doggedly pushing his less than popular and legally perilous Digital Wallet plan

The Finance Ministry additionally wants to rejig public debt figures by offloading the 1997 financial crisis fund debt of ฿570 billion.

Concern that public debt level will rise sharply

Presently, Thai public debt stands at 63.4% of GDP. Not high by Western developed economy standards or even among Asian Pacific countries where the average public debt figure is 86.8% of GDP.

Last week, the Ministry of Finance proposed to transfer a ฿570 long-term liability from the 1997 Asian financial crisis off its books to improve the statistics somewhat.

Nevertheless, the feeling by prudent economists is that with a country experiencing chronic long-term problems, Thailand needs strong financial standing. 

In particular, given the heightened geopolitical risks that are being seen.

Fears Digital Wallet scheme may be open to public fraud such as was seen under the previous government’s schemes linked with pandemic-era stimulus measures

At the same time, the Digital Wallet scheme is seen as too broad by the Bank of Thailand. The complicated digital handout of ฿10,000 for 50 million Thai adults is also seen as prone to fraud. 

In the last government’s pandemic-era subsidy programs, fraud was difficult to prevent. Indeed, the elaborate and innovative efforts at fraud even surprised the country’s police agencies.

Police chief reveals massive fraud on We Travel Together scheme centred on a small Chaiyaphum resort

At this time, it is not clear what the implications are from today’s announcement by the budget office.

Previously, the Digital Wallet was proposed to be funded by the 2024 and 2025 budgets in addition to a loan facility from the Bank for Agriculture and Agricultural Cooperatives (BAAC).

Certainly, it may be that the government now plans to deliver the scheme entirely from its own purse over a two-year time period.

Economists wary about the economy’s prospects in 2024

In the meantime, the 1.5% growth recorded today stands as a surprise. Undoubtedly, the economy is not performing as well in the second quarter of 2024.

However, based on today’s figures and projections, Thailand’s economy is predicted to grow by 2.5% this year. The Ministry of Finance last month set the figure at 2.4%.

Many analysts would be more circumspect about the final outcome. Undoubtedly, the downside potential trend is stronger than the upside momentum at this time.

For example, consumer confidence fell in April to 62.10 from a March figure of 63. In today’s report for the first quarter, domestic manufacturing utilisation was quoted at 60%. Nonetheless, economic data from March 2024 showed it at 57%.

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Further reading:

Finance Minister meets central bank boss as Fitch research house questions Thailand’s direction and tourism trade

Finance Ministry wants to rejig public debt figures by offloading 1997 financial crisis fund debt of ฿570 billion

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Baht falls even after the Bank of Thailand’s intervention. It has lost 8.8% of its value in 2024 so far

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Central bank rate call a minor issue compared to the surge in fiscal spending and deficit planned in 2025

Economy unlikely to grow in first quarter as Thai manufacturing crumbles. Hard choices ahead

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Prime Minister Srettha still doggedly pushing his less than popular and legally perilous Digital Wallet plan

Digital Wallet plan blown out of the water by corruption body on Tuesday warning of illegality

Srettha outlines Digital Wallet as his government begins to flounder with a faltering economy and confusion