The Thai economy likely grew at the fastest pace in a year last quarter, thanks to an increase in tourism as Pandemic restrictions eased, but the high cost of living and a slowdown in China are threatening the outlook, a Reuters poll showed.
The growth of the tourism-dependent economy is estimated to be 3.1% year-on-year for the second quarter, according to the median forecast of 16 economists who forecast between 8 and 11 aug. were cushioned, against 2.2% growth in the previous quarter.
However, on a quarterly basis, gross domestic product (GDP) grew by a seasonally adjusted 0.9%, slightly less than the 1.1% in the previous quarter, according to the median forecast of a smaller sample of 12 economists.
Forecasts ranged from 0.1% to 1.3%, underscoring uncertainties surrounding the recovery of Southeast Asia’s second-largest economy from the pandemic. The data will be published on 15 aug. divulge.
“The crucial Thai tourism sector is an important part of the economy and a faster-than-expected upswing should boost overall growth,” said Chua Han Teng, economist at DBS.
“That said, the tourism industry’s heavy reliance on Chinese tourists suggests that a full recovery to pre-pandemic numbers will be a long time coming, if China does not relax its zero-COVID policy.”
Thailand received 1.07 million foreign tourists in July, up from 767,497 in the previous month.
The government has estimated that the number of foreign tourists this year will reach 10 million. Prime Minister Prayuth Chan-ocha said the economy is expected to grow by 3.3% this year and 4.2% next year, helped by increased tourism.
But an ongoing COVID-19 situation in China, which is still pursuing a zero-COVID strategy, has fuelled fears that the return of Chinese tourists will be delayed. That, along with a slowdown in the world’s second-largest economy, increases the risk of a deep global recession.
“The increased fear of a global recession in an uncertain environment could put a brake on the Thai economy and pose a downside risk to our growth forecast,” added Han Teng of DBS.
A separate Reuters poll found that the Thai economy would grow by 3.4% this year and then accelerate to 4.1% in 2023, before slowing to 3.5% in 2024.
But inflation remains a concern. Overall inflation fell to 7.61% in July, but was still near June’s 14-year high and well above the Bank of Thailand’s (BOT) 1-3% target range.
“There are no clear signs that inflation will drop markedly or decrease significantly,” said Tim Leelahaphan, economist at Standard Chartered.