Thailand’s growth quickens, even as $18.4 billion stimulus plan hangs in balance

BANGKOK - Thailand’s economy expanded at the fastest pace in five quarters, aided by tourism and exports, although a leadership change and uncertainty over a US$14 billion (S$18.4 billion) stimulus plan cloud the outlook.

Gross domestic product (GDP) in the three months to June rose 2.3 per cent from a year earlier, said the National Economic and Social Development Council (NESDC) on Aug 19. That compares with the 2.2 per cent median estimate in a Bloomberg News survey and a 1.5 per cent pace reported earlier for the first quarter.

The economy expanded 0.8 per cent quarter on quarter, compared with a median estimate for a 1 per cent growth and a revised 1.2 per cent rise in the January to March period.

The faster than expected year-on-year expansion is no guarantee that the pace of recovery may sustain, given that the fate of a cash handout plan to boost consumption is in doubt after a change in leadership. Thailand still lags its neighbours with below 5 per cent annual growth, and the political leadership may revive calls on the central bank to lower borrowing costs.

The onus is on new Prime Minister Paetongtarn Shinawatra, daughter of former leader Thaksin Shinawatra, to find ways to continue reviving South-east Asia’s second-largest economy and lift its growth from the sub-2 per cent average in the past decade. The fiscal year 2025 budget will start on Oct 1 as scheduled, NESDC chief Danucha Pichayanan told a briefing in Bangkok, and will not be delayed by the change in government.

“The fate of the digital wallet is unlikely to affect the budget schedule,” Mr Danucha said as he announced an estimate of 2.5 per cent GDP growth in 2024. “The government can use the budget to finance other stimulus projects if needed,” he added.

The baht

rose along with regional currencies

on Aug 19, gaining 0.5 per cent against the US dollar at 10.49am local time (11.49am Singapore time), paring some losses in August from political upheavals. The main stock index was up as much as 1 per cent.

Ms Paetongtarn – who succeeded

Mr Srettha Thavisin after he was ousted by a court last week

– told reporters on Aug 18 that the cash handout plan needs further study to ensure its compliance with the law governing fiscal discipline. Under Mr Srettha, the plan was to start handing out 10,000 baht (S$380) each to adult Thais from November.

The ruling coalition led by the Pheu Thai Party will meet soon and is expected to wrap up discussions on Cabinet formation this week, the new Prime Minister said separately on Aug 19.

The Bank of Thailand (BOT), which had been pressured by Mr Srettha to cut interest rates and help spur the economy, is widely expected to stand pat on Aug 21 and keep the policy rate at its highest since 2013.

The BOT has held the one-day repurchase rate at 2.5 per cent since the fourth quarter, even as inflation remained way below the 1 per cent to 3 per cent target.

Thai central bankers have pushed back against rate cut calls, citing potential price risks from the cash giveaway plan. The BOT also said looser monetary settings would complicate efforts to lower household debt hovering above 90 per cent of GDP. BLOOMBERG