Thailand’s economic outlook for 2024 appears less optimistic than initially projected, with growth potentially falling below the anticipated 2.9 percent. The Bank of Thailand governor, Sethaput Suthiwartnarueput, expressed concerns about downside risks to the previous forecast, citing a weaker-than-expected fourth quarter performance. Despite a government-initiated cash handout program designed to stimulate spending and boost growth, consumption remained sluggish. A significant portion of the funds disbursed were used to repay debts rather than driving consumer spending, dampening the program’s intended impact and raising questions about the effectiveness of such fiscal interventions. This underwhelming fourth-quarter performance, combined with other economic headwinds, could lead to growth closer to 2.7 percent for the year.
The government’s flagship “digital wallet” program, a cornerstone of their election campaign, enters its third phase in April. This initiative, which involves distributing funds directly to citizens via a digital platform, aims to significantly boost economic activity in the first quarter. The success of this next phase will be crucial in determining the overall economic trajectory for the year, particularly given the less-than-optimal impact of the previous cash handout scheme. Whether the digital wallet program can effectively stimulate consumption and overcome the debt repayment trend observed previously remains a significant question mark. The Bank of Thailand will be closely monitoring its impact to assess the need for further policy adjustments.
The Bank of Thailand maintains a broadly neutral monetary policy stance, with the current policy interest rate deemed appropriate given the current economic climate. Inflation is expected to rise to around 1.1 percent, remaining within the central bank’s target range of 1 to 3 percent. However, volatility in the Thai baht remains a concern for policymakers. While the central bank is prepared to adapt its stance based on evolving economic conditions, the current policy settings are considered suitable for balancing growth and inflation objectives. The upcoming policy review in February will likely involve a thorough assessment of the digital wallet program’s initial effects and the evolving global economic landscape.
The return of Donald Trump to the US presidency introduces a new layer of uncertainty into the global economic outlook, including for Thailand. While the potential ramifications for the Thai economy are still unclear, the Bank of Thailand acknowledges the potential for disruption. The unpredictable nature of the new administration’s policies adds complexity to forecasting and necessitates careful monitoring of developments in US trade and economic policy. Thailand, as a significant player in global supply chains, is particularly vulnerable to shifts in US trade policy, making the unfolding situation in the US a key factor in the country’s economic future.
Thailand’s central bank maintains a cautious approach toward cryptocurrencies despite the government’s exploration of their potential in the payment system. Governor Sethaput highlighted concerns regarding the inherent volatility of cryptocurrencies, scalability issues with underlying technologies, and the potential for fragmentation in the payment system. He contrasted this with the existing Promptpay digital payment platform, which he described as functioning effectively. While acknowledging the growing interest in cryptocurrencies globally, including in the US, the Bank of Thailand emphasizes the need for demonstrable benefits to outweigh the inherent risks associated with their adoption. The proposed sandbox environment on the island of Phuket will likely provide valuable data and insights into the practical implications of cryptocurrency usage in a controlled setting.
The Thai economy finds itself at a critical juncture, facing both internal and external challenges. The effectiveness of government stimulus measures, the volatility of the Thai baht, the uncertain global economic landscape, and the evolving digital currency landscape all contribute to a complex economic picture. The Bank of Thailand, tasked with maintaining stability and promoting sustainable growth, will need to navigate these complexities carefully. The coming months will be crucial in determining whether the projected growth targets can be achieved and whether the digital wallet program can deliver the desired economic boost. The central bank’s ability to adapt to changing circumstances and effectively manage risks will be vital in ensuring the long-term health of the Thai economy.
