Thailand Economic Forecast

Year-on-year GDP growth cooled more than expected in Q2. The slowdown came on the back of softer increases in fixed investment and exports, which suffered from the effects of higher interest rates and global headwinds. Growth should strengthen in the third quarter: In July-August, inflation stayed low, likely benefitting spending. That said, the PMI fell compared to Q2. In politics, Srettha Thavisin was appointed prime minister by Parliament on 22 August, heading a coalition of populists and pro-military parties. Some days later, he also assumed the position of finance minister. In early September, the government unveiled a series of measures it intends to deploy in order to support the economy and ease cost of living pressures. The measures include an almost USD 16 billion handout scheme for all citizens, subsidies for energy prices and the postponement of private debt payments.

Inflation rose to 0.9% in August from 0.4% in July, remaining below the Bank of Thailand’s 1.0–3.0% target range. Inflation is projected to be within the target this year on average, with positive real interest rates acting as a moderating force. Fluctuations in commodity prices and the extent of tourism inflows from China are key factors to watch.