Thailand’s Q1 GDP growth slows to 1.5% amid weak exports

SINGAPORE (ICIS)–Thailand’s economy grew by 1.5% year on year in the first quarter, slowing from the 1.7% expansion in the preceding quarter, as private consumption continued to remain robust.

On a quarter-on-quarter seasonally adjusted basis, the Thai economy – southeast Asia’s second largest – expanded by 1.1% in the first three months of 2024, the National Economic and Social Development Council (NESDC) said in a statement.

The quarterly growth prevented the economy from entering a technical recession, following a revised 0.4% contraction in the final quarter of 2023.

Thailand’s economy expanded by 1.9% year on year in 2023.

Private consumption rose by 6.9% year on year in the first quarter, continuing the 7.4% expansion in the previous quarter, and offsetting a 2.1% decline in government spending.

Exports by value fell by 1.0% year on year in the first quarter, weighed by lower volumes, while imports were up 3.2%.

Manufacturing declined by 3.0% year on year on in the first quarter, extending the 2.4% decline in the previous quarter.

The manufacturing sector in Thailand is dominated by older industries with declining global demand and lags in sectors where global demand is increasing, Nomura Global Markets Research said in a report released on 17 May.

This reflects Thailand’s failure to move up the supply chain and add value to its export products, a trend that has become increasingly evident in its post-pandemic export structure, it said.

Of the ten largest export products, Thailand has gained an increasing share in the global exports of air-conditioners, hard disk drives, and rubber tires.

However, the global export share of these products has been declining, with hard disk drives, the largest export product, experiencing a significant drop in global market share.

Meanwhile, Thailand’s global export share in integrated circuits has declined slightly, even as the segment has seen substantial growth in the global market.

“This implies the current global tech turnaround will result in the export underperformance of the country,” Nomura added.

2024 FORECAST LOWERED
The NESDC now expects the Thai economy to expand by 2-3% year on year in 2024, down from the previous range of 2.2-3.2%.

The Thai economy still faces downside risks and limitations, particularly from high household and corporate debt levels, the risk of floods affecting agricultural production, and the uncertain and volatile global financial market, it said.

As for trade, a downward revision in exports for 2024 was mainly attributed to a decline in export volume during the first quarter of the year and a lowered forecast for global trade volume growth.

Initially, export value was anticipated to grow by 2.9%, but this has been revised down to 2.0%, while export volume growth was adjusted from 2.4% to 1.5%.

“On the external front, while exports of goods may not benefit from the global tech turnaround, given structural constraints, the slow economic recovery in China should continue to limit the pace of the tourism recovery [in Thailand],” Nomura said.

Focus article by Nurluqman Suratman