Thailand’s economy is slowing, and it could mean trouble

Residents relaxation in entrance of a fan in Bangkok, April 25, 2023.

Andre Malerba | Bloomberg | Getty Photographs

Thailand’s financial system grew at its slowest tempo in virtually a yr within the third quarter, and analysts say the development is right here to remain.

Thailand’s gross domestic product grew 1.5% year-on-year for the quarter ending September, official information on Monday confirmed. That is far beneath expectations of two.4% by economists polled by Reuters, and decrease than the 1.8% enlargement within the second quarter.

The studying marked the second straight quarter of easing progress in Thailand’s financial system.

“Public spending, inventories and items exports dragged, regardless of agency non-public consumption and tourism,” stated Chua Han Teng an economist at DBS Financial institution, warning that the room for public spending was narrowing amid populist insurance policies.

After months of political impasse and inventory market volatility, Srettha Thavisin was elected Thailand’s prime minister in late September, amid expectations from economists that long-term financial restoration may show difficult.

“The consecutive quarters of weak production-side GDP sign a Thai financial system weaker than market sentiment suggests, however the strong progress in consumption,” stated analysts at Financial institution of America International Analysis in a be aware.

“Anticipating a extra pronounced influence from tightening financial insurance policies sooner or later,” they stated.

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The Bank of Thailand raised its key interest rate for an eighth consecutive time at its September coverage assembly and stated financial progress and inflationary pressures ought to decide up subsequent yr.

However analysts at Nomura count on a pause by the Thai central financial institution at its subsequent assembly on Nov. 29 and thru 2024.

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“Nonetheless, we proceed to see a danger of price cuts as early as Q2 2024,” Nomura stated.Importantly, the weak Q3 GDP outturn will probably intensify the federal government’s push for a big digital pockets handout, regardless of the uncertainty across the financing plan.”

A protracted pause or potential cuts in the BOT’s coverage price may additionally imply dangerous information for the Thai baht, which has shed 1.3% in opposition to the greenback to this point this yr and is headed for its fourth yearly decline.

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