Thailand Economic Outlook
The economy lost considerable steam in Q4 2022. The slowdown reflected deteriorations in private and public consumption, fixed investment and exports. Specifically, a significant decline in spending on durable goods, a deceleration in private investment growth, a notable post-Covid-19 contraction in medical spending and falling foreign sales of petro-chemical products and vehicle parts weighed on the economy. Moving into the current quarter, data for January points to improving economic conditions: Business and consumer sentiment strengthened—with the latter reaching a 26-month high—the manufacturing PMI moved further into expansionary terrain, and inflation declined again. Moreover, the reopening of the Chinese economy is likely supporting activity via tourism and trade. Meanwhile, in early February, Thailand and Malaysia announced stronger infrastructure, trade and investment cooperation.
Inflation slowed to 5.0% in January from December’s 5.9%, thus moving closer to the upper bound of the Bank of Thailand’s 1.0–3.0% target. Inflation should gradually ease and move within the Central Bank’s target by Q2 2023, limited by lower commodity prices and a tighter monetary policy stance. Volatile energy and food prices and China’s economic reopening pose risks.