Thailand’s economic growth quickens in Q2 on tourism, consumption

Thailand's economic expansion accelerated in the second quarter on the back of stronger consumption, tourism, and exports, but analysts said policy uncertainty following a change in government clouds the outlook.

Data from the National Economic and Social Development Council (NEDC) showed that GDP during April-June grew 2.3% against the same period last year, versus an upwardly revised 1.6% in the first quarter and beating 2.1% forecast in a Reuters poll.

Growth in the Southeast Asia’s second-largest economy was driven by improved government consumption, export of goods and services, as well as private consumption, while public and private investments contracted, the NEDC said in a statement.

On a quarterly basis, GDP grew a seasonally adjusted 0.8% in the second quarter, slower than an upwardly revised 1.2% expansion in the previous three months and 0.9% growth forecast in the poll.

Shivaan Tandon, a markets economist at Capital Economics, said the Thai economy’s growth will slow down a bit further in the coming quarters as the boost from tourism fades and with uncertainty around fiscal policy now elevated, predicting interest rate cuts from October.

The central bank left its key interest rate unchanged at a decade-high of 2.5% for a fourth straight meeting in June, and is expected to hold the rate again at its meeting on August 21.

Thailand’s economy is facing high household debt and borrowing costs, as well as sluggish exports amidst a slowdown in top trading partner China.

The outlook is further clouded by political turmoil after last week’s court dismissal of former Prime Minister Srettha Thavisin. Thai King Maha Vajiralongkorn on August 18 endorsed Paetongtarn Shinawatra as Prime Minister but she has yet to form a cabinet.

The new PM faces several challenges, with the economy floundering, and the popularity of her Pheu Thai party dwindling, having yet to deliver on its flagship “digital wallet” cash handout programme worth 500 billion THB (14.5 billion USD).

The NESDC expects the country’s GDP growth between 2.3% and 2.8% this year, narrowing from its previous forecast range of 2.0% to 3.0%.

Last year, the economy grew 1.9%.