Summary Uncertainty ahead for Thai economy - TDRI: Thailand Development Research Institute tdri.or.th
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One Line
Thailand's economy is projected to experience moderate growth in the coming years, but potential challenges introduce uncertainty for policymakers and businesses.
Slides
Slide Presentation (8 slides)
Key Points
- The Thai economy is forecasted to grow by 3.5% in 2023.
- Recession in major economies and geopolitical tensions are key headwinds for the Thai economy.
- Rising energy prices and supply chain disruptions are expected due to geopolitical tensions.
- Relocations from China to Southeast Asia, including Thailand, are increasing due to geopolitical tensions.
- Thailand needs to position itself as a leading digital infrastructure provider and a green and low-carbon production base to attract foreign investments.
Summaries
32 word summary
Thailand's economy is expected to grow by 3.2% in 2022 and 3.5% in the following year due to various factors. However, challenges may hinder this growth, creating uncertainty for policymakers and businesses.
56 word summary
Thailand's economy is projected to grow by 3.2% in 2022 and 3.5% in the following year, driven by household consumption, tourism remittances, exports to China, and private investments. However, challenges such as a recession in major economies, geopolitical tensions, high prices, and interest rate hikes may hinder this growth. Uncertainty lies ahead for policymakers and businesses.
200 word summary
Thailand's economy is expected to face a mix of positive and negative factors in the coming year. The recovery from the Covid-19 pandemic in 2022 led to a 1.5% real GDP growth, and it is projected to grow by 3.2% in 2022 and 3.5% in the following year. Household consumption, tourism remittances, exports (especially to China), and private investments (particularly in high-tech production relocation from China) are expected to drive this growth. However, challenges such as a recession in major economies, geopolitical tensions, high prices, and interest rate hikes may hinder this growth. The US and EU economies are anticipated to slow down, affecting Thailand's major export markets. Geopolitical tensions, particularly the Russia-Ukraine conflict, will contribute to higher energy prices and supply chain disruptions. Price increases are expected to continue but at a lower rate in 2023. China's reopening could boost Thai exports and tourism, but there are risks associated with it. To attract foreign investments, Thailand needs to leverage its strengths as a digital infrastructure provider and a green and low-carbon production base. Overall, 2023 is expected to be a year of uncertainty with various downside risks that policymakers and businesses need to navigate for sustainable recovery and development.
456 word summary
The Thai economy is predicted to experience a combination of positive and negative factors in the upcoming year, influenced by global economic conditions and geopolitical tensions. After a contraction of over 6% in 2020, the economy slowly recovered from the Covid-19 pandemic in 2022, with a real GDP growth of 1.5%. It is expected to grow by 3.2% in 2022 and a further 3.5% in the next year. This growth is projected to be driven by household consumption, tourism remittances, exports (especially to China), and private investments (particularly in high-tech production relocation from China to Thailand).
However, there are several challenges that could hinder this growth. The Thai economy may face headwinds such as a recession in major economies, geopolitical tensions, high prices, and interest rate hikes. The US and European Union (EU) economies are expected to experience a significant slowdown, impacting Thailand's major export markets. The US is likely to continue aggressive interest rate hikes to combat inflation, potentially reaching a rate of over 5% by the end of next year, which would dampen demand. The EU is facing elevated inflation due to the sharp rise in natural gas prices, limiting purchasing power.
Geopolitical tensions, particularly the Russia-Ukraine conflict, will contribute to higher energy prices and disruptions in supply chains, especially in the energy and semiconductor markets. Natural gas and oil prices are expected to remain high due to supply disruptions from Russia. Additionally, semiconductor shortages are expected to persist until 2024, impacting Thailand's recovery as the country heavily relies on energy and semiconductor imports.
Price increases are also expected to continue in 2023, although at a lower rate compared to 2022. Headline inflation in Thailand is forecasted to average 2.5% next year, compared to 6.5% in the current year. Local interest rates are also expected to rise, with the policy rate projected to reach 2% by the end of 2023, leading to an increase in commercial banks' deposit and loan rates.
China's reopening is seen as a potential boost for Thai exports and tourism in the coming year. Although exports to China contracted due to the country's Zero-Covid policy and travel restrictions, China is expected to relax its policy and allow international travel by April 2023. However, there are risks associated with this reopening, including the possibility of widespread Covid-19 outbreaks and disruptions to production if people fall ill and need to be quarantined.
To attract more foreign investments, Thailand needs to leverage its strengths as a leading digital infrastructure provider and a green and low-carbon production base. Despite the potential for growth, 2023 is expected to be a year of uncertainty with various downside risks. Policymakers and businesses need to navigate these uncertainties and adapt to changing circumstances for sustainable recovery and development.
605 word summary
The Thai economy is expected to face both headwinds and tailwinds in the coming year, largely influenced by global economic factors and geopolitical tensions. In 2022, the economy slowly recovered from the Covid-19 pandemic as lockdowns were lifted and international travel resumed. While the real GDP of Thailand grew by 1.5% in 2021 and 3.2% in 2022 after contracting by over 6% in 2020, it is forecasted to grow by 3.5% in the next year.
The anticipated growth will be driven by household consumption, tourism remittances, exports (especially to China), and private investments (particularly in high-tech production relocation from China to Thailand). However, there are several challenges that could hinder this growth. Recession in major economies, geopolitical tensions, high prices, and interest rate hikes are among the key headwinds for the Thai economy in 2023. The major export markets for Thailand are expected to face a recession, with the US and European Union (EU) economies experiencing a significant slowdown.
The US is expected to continue aggressive interest rate hikes to combat inflation, potentially reaching a rate of over 5% by the end of next year. This will likely dampen demand in the US. On the other hand, the EU is facing elevated inflation due to the sharp rise in natural gas prices, which limits purchasing power. Geopolitical tensions, particularly the Russia-Ukraine conflict, will also contribute to higher energy prices and disruptions in supply chains, especially in the energy and semiconductor markets. Natural gas and oil prices are expected to remain high due to supply disruptions from Russia. Additionally, semiconductor shortages are expected to persist until 2024, impacting the recovery of the Thai economy as Thailand heavily relies on energy and semiconductor imports.
Price increases are also expected to continue in 2023, although at a lower rate compared to 2022. Headline inflation in Thailand is forecasted to average 2.5% next year, compared to 6.5% in the current year. The Bank of Thailand predicts a gradual relaxation of prices as domestic purchasing power recovers. Local interest rates are also expected to rise, with the policy rate projected to reach 2% by the end of 2023. This will lead to an increase in commercial banks' deposit and loan rates.
China's reopening is seen as a potential boost for Thai exports and tourism in the coming year. Although exports to China contracted due to the country's Zero-Covid policy and restrictions on international travel, China is expected to relax its policy and allow international travel by April 2023. However, there are risks associated with this reopening, including the possibility of widespread Covid-19 outbreaks and disruptions to production if people fall ill and need to be quarantined.
Thailand has been a major recipient of multinational companies relocating from China to Southeast Asia since the US-China trade war in 2018. The country has attracted investments in high-tech sectors such as automobiles, electronics, petrochemicals, and information technology. To attract more foreign investments, Thailand needs to leverage its strengths as a leading digital infrastructure provider and a green and low-carbon production base.
Despite the potential for growth, 2023 is expected to be a year of uncertainty with various downside risks. The reopening of China and geopolitical developments pose challenges such as higher energy prices, disruptions in supply chains, and a deeper global recession. It is important for policymakers and businesses to navigate these uncertainties and adapt to changing circumstances.
Overall, the Thai economy faces a mix of opportunities and challenges in the coming year, influenced by global economic conditions and geopolitical tensions. While there are positive factors supporting growth, there are also significant risks that need to be addressed for sustainable recovery and development.