SCB EIC cuts this year's GDP to 3.1% due to falling exports. Believe that free visas for Chinese tourists will help stimulate tourism. It is expected that the digital wallet policy may support GDP in 2024 to grow 5%, worried that public debt will go through the ceiling.
Dr. Somprawin Manprasert, Deputy General Manager Chief Executive Officer, Economic Intelligence Center (EIC) Group and Deputy General Manager Chief Executive Officer Corporate Strategy Group Siam Commercial Bank revealed that SCB EIC lowered its economic forecast for 2023 to 3.1% from the previous 3.9% based on actual data for the second quarter that was much lower than expected and merchandise exports that continued to contract sharply. But there are still main drivers from private consumption and the tourism sector. Foreign tourist arrivals to Thailand are recovering well according to an estimate of 30 million people, especially Middle Eastern tourists who are accelerating and are a new target group of tourists. As a result, the service sector will continue to recover, reducing fragility in the labor market.
General inflation is expected to accelerate from the fourth quarter of this year but remains within the target range of 1.7% and 2% in 2023 and 2024, respectively, due to the trend of higher energy and food prices. Meanwhile, core inflation will remain stable at 1.4% and 1.5% this year and next, respectively. It is expected that Thailand's policy interest rate will be raised one more time at the Monetary Policy Committee (MPC) meeting at the end of the month. September to the highest point of the interest rate cycle (Terminal rate) this time at 2.5% following the Thai economy that is likely to continue expanding towards its potential level. and inflation still has pressure from energy and food prices that tend to increase. This will allow the real policy interest rate to turn positive. Helps create long-term economic and financial stability from the accumulation of financial imbalances during a period of low interest rates for a long time.
For the global economic perspective, different countries will likely not recover at the same time. (Unsynchronized) In 2023, SCB EIC forecasts that the world economy will expand to 2.4% and will remain close to the same level next year. In the past, the world economy expanded better than expected. But it will likely continue to be fragile into next year as a result of high inflation and rising interest rates in developed countries. Including excess savings that are beginning to deplete. In addition, the Chinese economy is likely to slow down significantly in both the short and long term due to factors structural factors that put pressure on recovery
For Chinese tourist visa free policy which will be used on 1 October, it is seen that it will help stimulate some tourism because the economy within China is still uncertain. As a result, now there are only Chinese tourists with high purchasing power. Travel to Thailand But the Thai tourism industry still needs tourists from other groups of China as well, as this year the target is for 4.8 million Chinese tourists to travel to Thailand, while next year the target is to increase to 10 million from the total number of foreign tourists that is likely to continue to recover. There are 37.7 million people and it is expected that the Thai economy in 2024 will grow at an accelerated rate of 3.5%.
However, the Thai economy still faces high uncertainty from important pressures, including the slowdown in Chinese economic growth, affecting Thai exports of certain product groups that are highly dependent on the Chinese market. and is part of the Chinese supply chain, including the impact on FDI from China may slow down somewhat ,drought crisis which may be the most severe in 41 years in many areas As a result, the production of important economic crops such as off-season rice and sugarcane is likely to decrease somewhat. and government policy If major spending stimulus measures such as digital wallets are enacted, the Thai economy next year may expand temporarily beyond 5%, but this must come at the cost of long-term fiscal costs. Massive spending stimulus money of hundreds of billions of baht can be used to raise the potential of the Thai economy. To find a new economic engine in a time when the Thai economy is facing challenges from the scars of the post-Covid crisis. including adjustments to global supply chains and climate change
In addition, the use of large amounts of government money to stimulate the economy in the short term. It will undermine fiscal sustainability in the long run. As a result, public debt will exceed the debt ceiling of 70% of GDP faster than approximately 2 years, which may affect the fiscal space to accommodate the uncertainties ahead and the country's fiscal stability.
SCB EIC views that economic policy in the future should focus on (1) increasing competitiveness both inside and outside the country. including spreading economic opportunities Through promoting competition to increase the actual effectiveness of the Trade Competition Act. and push Thailand to join the Organization for Economic Cooperation and Development (OECD) to promote
Allowing the Thai business sector to benefit from exporting more goods and services and increasing its importance in the global supply chain, and (2) promoting sustainable long-term growth of the Thai economy. through tax restructuring To reduce the inequality of the tax system that distorts the incentives of businesses and households.
Source: Thai News Agency