Thailand: GDP growth accelerates in Q2, beats market expectations
The economy gathered pace in the second quarter, expanding 2.3% year on year and marking the fastest increase since Q1 2023. Q2’s reading was above both market expectations and Q1’s upwardly revised 1.6%.
On a seasonally adjusted quarter-on-quarter basis, economic growth lost momentum, cooling to 0.8% in Q2 from the previous period’s 1.2% expansion and surprising markets on the downside.
Domestically, the upturn chiefly reflected rebounding government spending, which rose 0.3% year on year in Q2 (Q1: -2.1% yoy); social transfers returned to growth and public-sector compensations continued to expand. Less positively, still-tight financing conditions continued to weigh on household budgets: Private consumption growth cooled to 4.0% year on year in Q2 (Q1: +6.9% yoy). Meanwhile, fixed investment fell 6.2% in April–June—deteriorating from Q1’s 4.2% drop and marking the worst reading in four years—as contracting private investment outweighed a softer decline in public investment.
On the external front, exports of goods and services increased 4.8% on an annual basis in the second quarter, which was above the first quarter’s 2.5% expansion; rebounding goods exports more than offset a downtick in momentum in services exports. Conversely, imports of goods and services growth waned to 0.5% in Q2 (Q1: +5.2% yoy). As a result, the external sector added impetus to the headline reading.
Our panelists expect the economy to continue to pick up steam in H2 on the back of a steady recovery in external demand. Overall in 2024, our Consensus is for economic growth to outpace 2023’s level and fall broadly in line with the National Economic and Social Development Council (NESDC)’s revised projection of 2.3–2.8%. That said, risks are skewed to the downside and include a protracted malaise in key export market China, a slower-than-expected government budget disbursement and political instability.
United Overseas Bank’s Enrico Tanuwidjaja and Sathit Talaengsatya commented:
“Despite persistent structural challenges, merchandise exports are expected to rebound gradually, supported by resilient global demand. Furthermore, despite recent political disruptions, we anticipate a smooth transition under the coalition government, with the new cabinet likely to take office by the end of 3Q24. As a result, the budget process is expected to proceed without significant disruptions. Accordingly, the growth trajectory and ongoing recovery should remain on course.”