Maybank Downgrades Thailand's GDP Growth Forecast Amid Economic Challenges

Maybank IBG Research has revised its GDP growth forecast for Thailand, projecting slower economic expansion in the coming years. The research firm now expects Thailand's economy to grow by 2.4% in 2024 and 2.8% in 2025, down from its previous estimates of 2.9% and 3%, respectively.

Why this matters: A slowdown in Thailand's economy could have a ripple effect on the entire Southeast Asian region, impacting trade and investment flows. Moreover, a sluggish economy could exacerbate social and political tensions in Thailand, potentially destabilizing the country's fragile democracy.

The downgrade comes amid a confluence of economic headwinds facing Thailand, including faltering exports, a manufacturing slump, and an uneven tourism recovery. Industrial production in the country has fallen for 18 consecutive months, with a 5.1% year-on-year decline in March. Factory capacity utilization has slackened to 57%, with production sinking across key sectors such as automotive, semiconductors, appliances, and construction materials.

While tourist arrivals have reached 86.8% of pre-pandemic levels in the first three months of 2024, the recovery of Chinese tourist arrivals remains a key downside risk. Erica Tay, director of macro research at Maybank, noted, "We project first-quarter growth to come in at only 1%, in line with the central bank's projection, hampered by slumping government spending."

The Bank of Thailand's window for easing monetary policy this year is becoming limited, with Maybank seeing a higher than even chance of the central bank holding rates at 2.50% at its next meeting in June. Private consumption declined by 0.6% year-on-year in March, while private investment indicators contracted, led by weaker machinery sales.

Thailand's economy faces significant challenges in the near term, with weak domestic demand, sluggish exports, and a slow recovery in the crucial tourism sector. The downgrade in GDP growth projections by Maybank IBG Research underscores the economic headwinds buffeting the country. As Erica Tay summed up,"There is a higher than even chance the central bank will hold rates at 2.50% at its next meeting in June. "Policymakers will need to navigate these challenges adeptly to support a sustainable economic recovery in Thailand.

Key Takeaways

• Maybank IBG Research revises Thailand's GDP growth forecast to 2.4% in 2024 and 2.8% in 2025.
• Thailand's economy faces headwinds from faltering exports, manufacturing slump, and uneven tourism recovery.
• Industrial production has fallen for 18 consecutive months, with factory capacity utilization at 57%.
• Tourist arrivals have reached 86.8% of pre-pandemic levels, but Chinese tourist arrivals remain a key downside risk.
• Bank of Thailand may hold interest rates at 2.50% at its next meeting in June due to weak domestic demand.