Thailand experienced a faster-than-anticipated growth rate in the second quarter of 2024, supported by the tourism sector. However, uncertainties loom over the economic outlook following a recent change in leadership that has put a key stimulus program in jeopardy.
According to the National Economic and Social Development Council, the country’s gross domestic product (GDP) expanded by 2.3% year-on-year in the three months leading up to June. This exceeded the median forecast of 2.2% in a Bloomberg News survey, 2.1% from a Reuters poll and a 1.5% growth recorded in the first quarter.
In terms of quarterly growth, the economy saw a 0.8% expansion, falling short of the forecasted 1% growth. In the previous quarter, GDP had increased by 1.1%, as indicated in an earlier report.
Despite the improved performance in the last quarter, Thailand’s growth continues to lag behind the over-5% expansion observed in many other regional economies. The uncertainty surrounding the THB500 billion economic stimulus program, particularly under the new leadership of Paetongtarn Shinawatra, daughter of former Prime Minister Thaksin Shinawatra, may renew calls for the central bank to consider reducing borrowing costs.
Following the ousting of Srettha Thavisin and Paetongtarn assuming office, the fate of the cash handout plan is uncertain. Paetongtarn mentioned that further evaluation is necessary to ensure the plan adheres to fiscal discipline laws, contrasting with Srettha’s proposal to commence distributing 10,000 baht to eligible citizens starting November through a digital application.
The Bank of Thailand, previously pressured by Srettha to decrease interest rates to stimulate economic growth, is expected to maintain the policy rate at its highest level since 2013 during the upcoming meeting on Wednesday.
Despite inflation remaining below the target range of 1%-3%, the BOT has maintained the one-day repurchase rate at 2.5% since the last quarter. The central bank has resisted calls for rate cuts, expressing concerns about potential inflation risks associated with the cash handout program and the challenges of reducing household debt, which currently exceeds 90% of the GDP.
As speculation circulated around the survival of digital cash handout, sources from the economic team of Pheu Thai Party revealed that there could be an adjustment in the handout scheme, including a legal tender of THB10,000 to eligible Thais.
Meanwhile, sources from the Finance Ministry revealed that the offer of Vayupak state mutual fund worth THB100-150 billion could cover small and mid-cap stocks, which widens the upside of investment opportunities from earlier speculation that the fund would focus on large-cap stocks, especially a stated enterprises to lower the risk.
