Thailand’s economy is slowing, and that could be a problem

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Residents rest in front of a fan in Bangkok, April 25, 2023.

Andrew Malerba | Bloomberg | Getty Images

Thailand’s economy grew at its slowest pace in nearly a year in the third quarter, and analysts say the trend is here to stay.

Thailand’s gross domestic product grew 1.5% year-on-year for the quarter ended in September, official data showed on Monday. That’s well below the 2.4% forecast by economists polled by Reuters, and below the 1.8% expansion in the second quarter.

The reading marked the second straight quarter to slow the growth of Thailand’s economy.

“Public spending, investments and exports of goods have slowed, despite strong private consumption and tourism,” said Chua Han Teng, an economist at DBS Bank, warning that the room for public spending was narrowing among public policies.

After months of political deadlock and stock market volatility, Srettha Thavisin was elected Thailand’s prime minister in late September, amid expectations from economists that a long-term economic recovery could be challenging.

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“The consecutive quarters of weak production-side GDP point to a weaker Thai economy than market sentiment suggests, despite the strong growth in consumption,” analysts at Bank of America Global Research said in a note.

“Expect a more pronounced impact from tightening monetary policies going forward,” they said.

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The Bank of Thailand raised its key interest rate for the eighth consecutive time at its September policy meeting and said economic growth and inflationary pressures should pick up next year.

But analysts at Nomura expect a hold on the Thai central bank at its next meeting on November 29 and through 2024.

“However, we still see a risk of rate cuts as early as Q2 2024,” Nomura said.Importantly, the weak Q3 GDP result is likely to strengthen the government’s push for a large digital wallet bill, despite uncertainty regarding the financial plan. “

Long stoppages or possible cuts BOT policy level could also mean bad news for the Thai bahtwhich has lost 1.3% against the dollar so far this year and is on course for its fourth annual decline.

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