(Bloomberg) — Thailand’s economic growth unexpectedly slowed in the third quarter, prompting the new government to scale back its planned $14 billion cash distribution program.
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The National Economic and Social Development Council said on Monday that gross domestic product rose 1.5% in the three months to September from a year earlier. That’s well below the 2.2% average estimate in a Bloomberg survey and 1.8% growth in the second quarter.
The economy expanded 0.8% quarter-on-quarter, compared with the average estimate of 1.3% growth. The economy expanded by only 1.9% in the first nine months.
The disappointing print prompted the NESDC to cut its 2023 GDP growth forecast to 2.5% from an earlier estimate of 2.5%-3%. Council chief Danucha Pichainan said during the briefing that the government should try to create enough fiscal space to prepare for future risks.
Even as tourism – a key pillar of Southeast Asia’s second-largest economy – improved and domestic activity picked up, growth still lagged many of its neighbors amid declining exports and government spending.
The disappointing domestic activity has prompted Prime Minister Shretha Thavisin’s administration to push for a stimulus plan that is being opposed by some central bankers and economists. Shrestha aims to accelerate annual growth, which has slowed from an average of 2% to 5% over the past decade.
The centerpiece of Shreta’s strategy to pull the economy out of a cycle of low growth is a digital wallet program, in which 50 million Thais aged 16 and older will receive a one-time handout of 10,000 baht ($285) from May 2024.
The cash support plan will be financed by borrowing to boost spending, which could widen the fiscal deficit and fuel inflation, drawing criticism from many including Thailand’s opposition party.
The baht gained about 0.2% against the dollar after the release of GDP data, while the benchmark SET stock index and 10-year sovereign bond were little changed.
Danucha said on Monday that Thailand’s GDP growth is expected to improve to 2.7%-3.7% next year due to improvements in exports, private investment, private consumption and tourism. The 2024 development scenario does not consider the implementation of the cash handout program next year, he said.
The government has maintained a forecast of 28 million foreign arrivals and 1.03 trillion baht in revenue for the tourism sector this year. According to NESDC, 35 million visitors from abroad are expected to bring in revenue of 1.3 trillion baht next year.
The Bank of Thailand, which has continued to raise interest rates this year and pushed borrowing costs to a decade high despite inflation being below target, will next decide on the key rate on Nov. 29.
More details from the third quarter GDP print:
Private consumption +8.1%
Government spending -4.9%
Exports in value terms -2%
Imports in value terms – 10.7%
–With assistance from Tomoko Sato, Unfair Nguyen, Patpicha Tankasempipat, Cecilia Yap, Janine Phakditham and Ailing Tan.
(Updates with more details from the briefing.)
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