Thailand economy likely picked up some pace in Q2

By Rahul Trivedi

BENGALURU (Reuters) -Thailand’s economic growth likely gathered a bit of pace in the second quarter thanks to higher government spending, but a tepid recovery in tourism and high household debt cloud the overall outlook, according to economists polled by Reuters.

Southeast Asia’s second-largest economy was forecast to expand 2.1% in the April-June period, median prediction in the Aug. 8-15 poll showed, up from 1.5% in the preceding quarter.

On a quarterly basis, gross domestic product (GDP) likely grew a seasonally adjusted 0.9% from 1.1% in the first quarter, a smaller sample of forecasts showed.

Forecasts for the data due on Aug. 19 range from 1.8% to 2.8%.

“For Q2, government spending and investment, which rapidly accelerated, should … drive economic growth. There could be some slowdown in private consumption amid high household debt, as well as in exports of services,” said Poon Panichpibool, a markets strategist with Krung Thai Bank.

“I still have some concerns about potential impacts from a global economic slowdown, especially in the case of (a) U.S. economic recession, which could hamper Thailand’s exports.”

The outlook darkened on Thursday with a court dismissing Prime Minister Srettha after less than a year in power, prospect of more uncertainty in a country dogged by coups and court rulings that have brought down multiple governments and political parties.

Last month, the World Bank downgraded Thailand’s 2024 GDP growth forecast to 2.4% from 2.8%, citing weaker-than-expected goods exports and public investments.

While exports rose only 0.3% year-on-year in June, they grew 5.8% in April and 7.8% in May.

Apart from weak global demand and a slowdown in China – the country’s major trading partner – Thailand’s vital tourism sector was also yet to recover to its pre-pandemic levels.

“The weak outlook for China’s economy will affect Thailand mainly through the tourism sector. A subdued domestic outlook has caused Chinese tourists to cut back on discretionary spending such as holiday expenditures,” said Eugene Tan, associate economist at Moody’s (NYSE:) Analytics.

Thailand’s economic growth was expected to average 2.6% for the year, according to a separate Reuters poll taken in July, a significant downgrade from 3.4% predicted at the beginning of the year.