Mr Enrico Tanuwidjaja, Economist at Global Economics and Markets Research, UOB, said "The country's key growth driver is the external demand, coupled with resilient household consumption and an increase in government spending. This will continue to support the employment and income of workers, in particular those in the services sector, which is likely to support private consumption while the improvement in the services exports will result into a stronger baht."
Thailand should benefit from more foreign direct investment (FDI) inflows, evidenced by the surge in applications submitted to the Thailand Board of Investment (BOI) . This trend is largely driven by ongoing supply-chain diversification amidst geopolitical tensions and is expected to further stimulate private investment activities, aligning the overall economic recovery.
"Overall, we project a stronger GDP growth of 3.6 per cent for this year bolstered by a sustained rebound of the foreign demand for Thai goods and services, resilient private consumption, and fiscal stimulus on the back of political and macroeconomic stability. However, the recovery could be derailed by downside risks stemming from geopolitical conflicts, a sharper-than-expected slowdown of the global economy and China's uncertain economic recovery," said Mr Enrico.
Tourism recovery and merchandise exports to be key growth drivers
According to UOB research, the full-year number of foreign tourists in 2023 reached 28.2 million, or 70 per cent of the pre-COVID level in 2019. The sustained recovery of the tourism sector will continue to support economic activity and drive growth in 2024.
This has been reflected by a healthy pace of expansion of the Service Production Index (SPI). UOB expects the government's visa-exemption policy along with some remaining pent-up demand and the normalisation of air travel, to boost the number of foreign tourist arrivals to Thailand which is estimated to reach 33 million (or 83 per cent of the pre-pandemic level). On exports, despite a weak performance in 2023, the anticipated pick-up in the global trade should boost Thailand's merchandise exports this year, most notably in electronic products, motor vehicles and parts as well as processed food.
Inflation to remain subdued
Thailand has recorded negative inflation rates for three consecutive months since October 2023 owing primarily to the government's subsidies for energy and electricity prices on the back of favorable supply conditions of agricultural and food products. However, UOB expects the negative inflation trend will fade once the government's remaining subsidies and other short-term measures expire by April 2024.
Although, the government has planned to introduce fiscal stimulus measures, particularly the digital wallet scheme to boost aggregate demand which could induce upward pressures on prices, UOB expects headline inflation to average at 1.6 per cent in 2024 against the backdrop of the gloomy global outlook, easing global oil prices, and a softer domestic demand[ See Marcro Note: Thailand: Disinflation Continued In Dec Amid Ongoing Subsidies]
Stronger Thai baht against US dollars
UOB forecasts that the Thai baht is likely to be one of the outperformers among regional currencies in 2024. Taking into account the plan to ease the monetary policy by many central banks, Thailand's favorable underlying factors including an improved growth outlook, current account surplus, a stable interest rate profile, and a sustained tourism recovery will support Thai baht to appreciate against the US dollar. Our USD/THB forecast is 34.80 for the first quarter before strengthening towards 33 by the year end[ See Marco Note: Quarterly Global Outlook Q12024].
Source: UOB Thailand