Thailand’s economy unexpectedly contracted last quarter tracking a slump in exports, prompting officials to rule out the possibility of a recession this year amid a rebound in tourism.
Gross domestic product (GDP) declined 1.5% in the December quarter compared with the previous three months, the National Economic and Social Development Council said on Friday (Feb 17). That compared with a median estimate for 0.6% growth in a Bloomberg survey.
On a year-on-year basis, growth slowed to 1.4% in the same period, compared with the median 3.6% expansion seen in the survey. That dragged the Southeast Asian economy’s full-year expansion to 2.6% in 2022.
While the performance raised fears about the Thailand’s outlook, the council’s Secretary General Danucha Pichayanan (pic) said the economy is not expected to contract again in the first quarter of this year because of rising tourist arrivals and government stimulus measures.
The nation, which relies on tourism and trade to pump up private consumption, is forecast to host about 28 million foreign visitors after China reopened its border, helping the nation buck a global slowdown, according to NESDC. The agency forecast 2023 GDP expansion to be in a range of 2.7%-3.7%, down from 3%-4% prior estimate.
“GDP data miss poured cold water on the optimism about the economic outlook on the back of tourism recovery,” said Stephen Chiu, chief Asia FX & rates strategist at Bloomberg Intelligence in Hong Kong.
The baht extended decline against the US dollar, falling as much as 0.7%. The benchmark stock index dropped as much as 0.6%.
“We still expect the currency to outperform on further tourism recovery,” Chiu said.
NESDC’s Danucha acknowledged that, for now, “even if other factors, especially tourism, are doing well, exports is the big drag”. Outbound shipments faltered, contracting in each of the months between October and December.
Key numbers from NESDC’s statement:
- 2023 exports seen falling 1.6%, imports to drop 2.1%
- Inflation forecast to average 2.5%-3.5%
- Private consumption growth this year seen at 3.2%
The nation welcomed 11.2 million foreign tourists in 2022, the most since the Covid outbreak, boosted by China’s reopening toward the close of the year.
About 28% of Thailand’s 40 million annual visitors before the pandemic were from China. Tourism typically accounts for at least 12% of the economy and a fifth of jobs while private consumption, which also benefits from travellers spending, makes up 50% of GDP. Along with exports that’s equal to more than half the output, they form the lifeblood of the Thai economy.
“It’s quite a surprise,” said Shreya Sodhani, an economist at Barclays Bank plc. “While manufacturing and exports of good were expected to be weak, I think it is the weakness elsewhere that is surprising and the weak momentum will weigh on growth into 2023, despite the reopening of China.”
