While the Finance Ministry had estimated a 3% growth rate, the Bank of Thailand (BOT) had expected the figure to increase to just about 2.9% this year.
Thailand’s Central Bank Chief said that the country’s economic growth would be below 2.9% this year after a weaker-than-expected fourth quarter. This was despite the highly praised government cash handout to accelerate the slowed-down growth rate.
While the Finance Ministry had estimated a 3% growth rate, the Bank of Thailand (BOT) had expected the figure to increase to just about 2.9% this year. The final quarter witnessed a drop in the expected level of consumption, and therefore, the economy is projected to have reached a 2.5% growth rate in 2024.
According to Governor Sethaput Suthiwartnarueput who spoke to Reuters, the cash handout did not entirely translate into consumption expenditure as it was used for different purposes such as repaying debts.
The BOT has maintained a neutral monetary policy and expects inflation to rise by 1.1% this year. The Bank is also concerned not to make any drastic changes to the policies due to the volatile nature of the Thai Baht. After docking the interest rate in October 2024, the Central Bank let the figure stagnate at 2.25% in December, and it is not expected to change until the next review towards the end of February.
Thailand‘s government is working to push the price rise up to 2%, a goal it has been working towards since October. With the rise in prices, economic activities will increase and help the Thai economy catch up with its regional counterparts. Sethaput added that even if inflation is not at 2%, the Central Bank is still working to keep it at low levels, affirming that despite the 0.4% overall rise in prices last year, the economy is not in a deflationary period.
Pornchai Thiraveja, Director General of the Ministry’s Fiscal Policy Office, said in a press conference that in 2025, the economy is estimated to grow up to 3%. He is also confident that exports, which are the backbone of Southeast Asia, will grow 4.4% as a result of increased global demand and the economic recovery of the country’s key trading partners.
The reduced growth estimate was not only due to lowered consumption but also because of a sharp decline of 2.7% in private investments, particularly in the automotive sector. Thiraveja said that machinery investments and the sales of internal combustion engine vehicles dropped, and business operators had to delay their investments as they faced difficulties in obtaining credit.
The industrial sector contributes a whopping 26% to Thailand’s GDP, with the automobile sector alone comprising 11% of total industrial production. In November 2024, there was a 21% year-on-year decline in automotive production, which pushed the shift towards electric vehicles (EVs).
To improve spending, Bangkok unveiled a government program of transferring $890 million to help senior citizens cope with the rising cost of living. As part of this stimulus programme, senior citizens were given 10,000 baht ($297) each, which was projected as an attempt to boost the country’s $500 billion economy.
Prime Minister Paetongtarn Shinawatra’s government has set its eyes on the 3% growth rate target for 2025 and is unleashing a hoard of measures such as debt moratoriums, higher state spending and cash stimulus to expand economic growth. Deputy Finance Minister Julapun Amornvivat said that if the 160 billion baht allotted this year is insufficient, the government would certainly consider setting aside more money for the program, as they are committed to sustaining this economic growth through booming and recessionary periods.
The government is hopeful that with the global supply chains changing to avoid the upcoming Trump tariffs, more companies will move their factories from China to Southeast Asia. Thailand is the region’s second-largest economy and hopes to see some gains from this international reshuffling.
