The Thai economy grew 4.5 per cent year on year in the third quarter of 2022, exceeding market expectations.
Gross domestic product (GDP) growth in the third quarter nearly doubled from 2.3 per cent in the first quarter and 2.5 per cent in the second, according to the National Economic and Social Development Council (NESDC), a state think-tank. The growth quarter on quarter was 1.2 per cent.
Private consumption and private investment as well as recovery of tourism contributed to the expansion of GDP.
Leap in private consumption
Despite high inflation and risk of global recession, private consumption grew 9 per cent year on year. It was the highest quarterly growth seen in nearly a decade, with the acceleration doubling from 3.5per cent to 7.1 per cent growth from the first and second quarters respectively. Expansion of consumer expenditure covers all categories.
Expenditure on services increased by 15.8 per cent, up from 14.1 per cent growth in the previous quarter, following the strong boost in spending on hotels and restaurants, and recreation and culture, according to the NESDC.
Expenditure on non-durable goods increased by 3.2 per cent, slightly up from 2.7 per cent growth in the previous quarter, following the boost in spending on food and non-alcoholic beverages.
Meanwhile, expenditure on semi-durable goods increased by 3.6 per cent, increasing from 1.9 per cent in the previous quarter, in line with an expansion of spending on furnishings and household equipment and clothing and footwear.
Spending on durable goods was up 18.2 per cent as more people purchased vehicles. This was in line with the rising consumer confidence index, according to the NESDC.
In the first nine months of 2022, private consumption expenditure expanded by 6.5 per cent, the NESDC said.
Government consumption expenditure, however, contracted 0.6 per cent in the third quarter, compared with a 2.8 per cent growth in the previous quarter. This was the first negative growth in 10 quarters due to a decrease in purchases of goods and services, specifically COVID-19 healthcare expenditure, according to the state think-tank.
Rising private investment
Total investment increased by 5.2 per cent, compared with a 1 per cent decrease in the previous quarter. This was mainly due to an expansion in private investment, which showed a robust growth of 11.0 per cent, accelerating from 2.3 per cent in the previous quarter.
Nonetheless, public investment has decreased for three consecutive quarters — by 7.3 per cent in the third quarter, compared to the 9 per cent contraction in the second quarter.
Decelerating export growth
Export value in the third quarter amounted to US$71.98 billion, demonstrating a 6.7 per cent growth, but slowing down from 9.7 per cent in the previous quarter.
The latest figures from the Commerce Ministry reveal that exports in October contracted 4.4 per cent year on year.
“It is not a surprise as the global economy is slowing down, so exports would not be the key engine of growth next year,” said Somprawin Manprasert, chief economist at the SCB Economic Intelligence Center (EIC).
Tourism support
The economy also has been supported by the improvement in domestic tourism and the significant increase in the number of international tourist arrivals.
In the third quarter of 2022, the number of tourist arrivals stood at 3.6 million, mainly owing to Thailand ending international travel restrictions and the normalizing of international travel, according to the NESDC.
The number of foreign tourists is likely to meet the 10-million target set by the Tourism Authority of Thailand. Based on the current trajectory, Somprawin predicts 28.3 million foreign tourists next year, considerably less than the 40 million before the COVID-19 pandemic hit Thailand in 2020.
“Next year, the theme of economic growth would be tourism and service sector recovery, as export growth decelerates,” said Somprawin.
Economic outlook
The NESDC and EIC projected GDP growth this year at 3.2 per cent, up from 1.5 per cent last year.
The NESDC forecast that the Thai economy in 2023 would expand within the range of 3 – 4 per cent. The growth will be mainly supported by the recovery of the tourism sector, the expansion of both private and public investments, the continual expansion of domestic demand, and the favourable growth of the agricultural sector. The EIC, however, is less optimistic and recently revised downward its GDP forecast for next year to 3.4 per cent from 3.7 per cent.
The challenge lies ahead as the global economy is expected to expand only 2.7 per cent, down from 3.1 per cent this year and 6 per cent in 2021, according to the International Monetary Fund (IMF).
Risk of global recession remains high next year as the war following Russia’s invasion of Ukraine drags on. Recently, the IMF chief said that the war in Ukraine is the single biggest risk to the world economy.
Inflation remains high
Full-year headline inflation is expected to be 6.3 per cent, according to the NESDC. It is projected to drop to a range of 2.5 to 3.5 per cent next year, which is still high, above the central bank’s inflation target of 1-3 per cent.
Oil prices recently fell below US$90 per barrel amid fears of a global economic slowdown, and worries over COVID-19 restrictions in China.
Oil price next year is forecast at around $90 dollar/barrel, but unlikely to spike further, said Praipol Koomsup, an independent economist specializing in energy. Oil prices, however, are vulnerable to high volatility due to war and the global economy and output cuts by Opec+ members, he added.
Sensitive groups
Despite consumer spending continuing to grow in the third quarter, the country’s household debt remains high, which will weigh on consumer spending going forward. Small and medium enterprises (SMEs) are still struggling to recover from the COVID-19 fallout. Many of them also have been facing high debt.
As the cost of living and business costs remained high, some households found expenses exceeding their income. Even firms recovering were on uneven ground, said Thitima Chucherd, head of economic and financial market research at EIC.
This was evident in an increase in the number of fragile households during the COVID-19 pandemic, estimated to be at 2.1 million households, up 24 per cent in two years, she added.
Interest rate trend
The EIC projects that the Bank of Thailand will increase its policy rate to 1.25 per cent this year and to 2 per cent next year. Therefore, fragile households and businesses would be confronted with high inflation, high interest rate and high debt, added Thitima.
By Thai PBS World’s Business Desk
