With 2024 around the corner everyone is hoping for a better year.
Yet Thailand's economic outlook is murky. The World Bank recently slashed the country's GDP growth estimate for this year down to 2.5% from 3.4% in an earlier forecast, citing weak exports and the ongoing fiscal consolidation.
GDP in 2024 is now anticipated to expand by 3.2%, down from 3.5% projected in October.
The bank expects tourism, a key economic driver, to return to the 2019 level by mid-2025, as the Chinese market returns slowly.
Asian Development Bank (ADB) lowered its forecast for Thai GDP growth this year to 2.5% from 3.5%, citing an export contraction, reduced government spending, and lower investment in both the public and private sectors.
ADB also trimmed its forecast for Thai growth next year, falling to 3.3% from 3.7% because of a global economic slowdown.
What can we expect from the Thai economy in 2024? The Business section asked leaders in several sectors about their thoughts.
TOURISM TARGET
The tourism industry needs to continue on the recovery track in 2024 to achieve the revenue target of 2.56-3.04 trillion baht set by the Tourism Authority of Thailand (TAT).
Prime Minister Srettha Thavisin welcomes Chinese tourists upon arrival at Suvarnabhumi airport, following the passage of visa exemptions in September. The Chinese market is key to exceeding arrival forecasts in 2024, according to the Association of Thai Travel Agents.
TAT governor Thapanee Kiatphaibool said foreign arrivals would surge to 35 million in the best-case scenario, which remains below the record of nearly 40 million set in 2019, hampered by a sluggish global economy and limited seat capacity.
Tourism revenue could register 2.56 trillion baht, she said.
The TAT plans to encourage airlines to increase flights, attracting more tourists from potential markets, including 8 million Chinese, up from an estimate of only 3.5 million in 2023.
Given India's rising middle class, the market could be a growth engine in 2024, particularly from second-tier cities. The agency aims to secure at least 2 million Indian visitors next year, said Ms Thapanee.
The TAT is opening two new offices in Riyadh and Chicago next year, which should allow the long-haul market to generate more tourism revenue, especially from high-spending tourists from the Middle East, she said.
Other new targets include visitors from the Commonwealth of Independent States region, such as Kazakhstan and Uzbekistan, after Thailand granted visa exemptions for Kazakh visitors and extended the length of stay for Russian tourists.
Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said China remains the most significant market as it could potentially allow the country to exceed the forecast of 35 million arrivals next year.
The government should urgently resolve safety issues and fake news about Thailand, invest to promote new destinations, boost international tourism confidence, and extend visa-free schemes for relevant markets, he said.
HIGHER GROWTH
Thailand's economic growth is projected to increase to 3.2% in 2024, up from 2.7% this year, supported by a recovery in tourism and goods exports, said Pornchai Thiraveja, director-general of the Fiscal Policy Office (FPO).
The Asian Development Bank (ADB) has lowered its forecast for the Thai GDP this year from 3.5% growth to 2.5%
A strong rebound is predicted for tourist arrivals from Malaysia, South Korea, India, Russia, Laos, Vietnam and Singapore, with the recovery expected to reach 90% of the 2019 level next year, he said.
Thailand remains a popular tourist destination for the Chinese, and a stronger recovery from the mainland is expected next year.
The export sector also signalled a recovery, with the FPO projecting shipment values to expand by 4.4% in 2024 after contracting 1.8% this year.
The government's economic stimulus measures, particularly the 10,000-baht digital wallet plan and visa exemptions for some visitors, will play an important role in driving the economy next year by helping to shore up domestic consumption and employment in tourism-related businesses, said the office.
Growth of S-curve industries, particularly electric vehicles and the creative economy, as well as soft power, should also help power the economy next year, said the FPO.
However, there are several external challenges next year, including the risk of a global economic recession, the slowing Chinese economy, ongoing conflicts in Ukraine and Israel that may have consequences for long-term inflation rates, and worsening US-China relations.
On the domestic front, the economy may be dampened by swelling household debt, which accounts for 90.7% of the country's GDP, while severe drought could limit crop output, and energy and food prices could spike, said the office.
RISKY BUSINESS
Amid looming global uncertainties, the public and private sectors expect Thailand's export sector to expand by roughly 2% in 2024, up from an anticipated contraction of 1-1.5% this year.
The Commerce Ministry set an export growth target for 2024 of 1.99% to reach US$288 billion, or 10 trillion baht. The Thai National Shippers' Council (TNSC) forecast outbound shipments would grow by 1-2% in 2024, with a total value of $287-$289 billion.
The forecasts are attributed to continued growth in exports of food products, fruit, automobiles and auto parts, electrical appliances, and electronic goods.
In addition, the baht is expected to remain relatively weak, within a range of 34.9 to 35.1 per dollar, enhancing the competitiveness of Thai products, according to the council.
TNSC chairman Chaichan Chareonsuk said fuel prices are unlikely to pressure freight rates because of relatively low demand in the manufacturing sectors of major economies, such as China.
However, next year should prove a challenge for shippers as a result of a slowing global economy and an anticipated drought, he said. Other risk factors include escalating geopolitical conflicts, which affect demand for goods and overall trade, while worldwide interest rates remain relatively high, affecting economic dynamics, said Mr Chaichan.
Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce, said both the International Monetary Fund and the Organisation for Economic Co-operation and Development suggest a global economic slowdown in 2024, with expected growth of 2.9% and 2.7%, respectively, compared with 3% this year.
Factors such as high interest rates and rising unemployment rates in the US, as well as challenges in the Chinese economy stemming from the property crisis, weak consumer consumption and the private sector's reluctance to invest, are contributing to global economic uncertainties, said Mr Thanavath.
INTEREST RATE CUTS
The US Federal Reserve predicts interest rates will be considerably lower at this point next year than they are now, signalling three rate cuts are possible in 2024.
Economists expect the Bank of Thailand to maintain its policy rate unchanged at 2.5% throughout 2024.
Local research houses forecast major central banks, led by the European Central Bank, to start cutting policy rates next year, a move that will lead the Fed to cut its policy rate beginning in the second quarter of 2024.
At its December meeting, the Fed maintained the federal funds rate at 5.25%-5.5%, marking the third consecutive pause since July.
Local economists anticipate the People's Bank of China will likely continue to ease its monetary policy to stimulate the economy. The Bank of Japan is expected to scale back its monetary easing by lifting the yield curve control measure during the first half of next year and ending its negative interest rate policy in the latter half, according to research houses.
However, economists expect the Bank of Thailand to maintain its policy rate unchanged at 2.5% throughout 2024.
Piti Disyatat, the Bank of Thailand's assistant governor for its monetary policy group, said the bank's policy rate could be maintained for an extended period, in line with the country's continued recovery.
"If the Monetary Policy Committee [MPC] decides to cut the rate, it would be based on rising inflation exceeding the target range of 1-3%. However, the committee expects inflation to be in the target range for the medium term," he said.
At its last meeting in November this year, the MPC voted unanimously to maintain its policy rate at 2.5%. The rate is at its highest level in a decade, following a series of rate hikes since August last year.
END OF THE BEAR MARKET
As the Fed provided a clear indication it intends to cut interest rates three times next year, while fears of a US recession recede, equity investors hope the Thai bourse will rebound in 2024 after a poor showing in 2023.
The prospect of lower interest rates has brought down bond yields, encouraging investors to return to high-risk assets such as shares on the Stock Exchange of Thailand (SET).
Investors' expectations that the Fed will start trimming rates next March could trigger fund inflows to risk assets such as equities on the Thai exchange, said Soraphol Tulayasathien, senior executive vice-president of the SET, earlier this month.
Paiboon Nalinthrangkurn, chairman of the Association of Thai Securities Companies, also predicts an upturn for the Thai stock market in 2024 as global interest rates fall, thus lowering the risks of economic recession. China is also ramping up measures to revitalise its economy, said Mr Paiboon.
However, he said the Thai government needs to ensure GDP expands in a range of 3-4% in 2024 and future years.
"The government needs to maintain the highest fiscal discipline and make the most of the fiscal budget. It should not introduce any measure for the capital market that is not in line with international practices," said Mr Paiboon.
Asia Plus Securities (ASPS) forecasts the SET index returning to 1,500 points by the end of 2023, from November's close of 1,380 points, then rising to 1,717 points in 2024.
InnovestX Securities, the financial investment flagship of SCB X Group, also projects the SET index reaching 1,700 points by the second quarter of next year.
"Global risks have begun to ease, especially in developed economies, and there is a chance of risks gradually declining from the beginning of the first quarter next year, including a lower likelihood of recession in large economies such as the US and the EU," ASPS said in a research note.
EXPENSIVE BILLS
Electricity bills will remain expensive in 2024, mainly driven by high fuel costs, but the prices should not be as high as in 2022, according to regulators.
During the last four months of 2023, the rate for electricity was reduced to 3.99 baht a unit, thanks to lower gas prices and the government's policy to reduce the tariff.
The power tariff, which is used to calculate power bills, rose to a record high of 4.72 baht per kilowatt-hour (unit) in 2022 because of a surge in liquefied natural gas (LNG) as a result of the Ukraine-Russia war. During the last four months of 2023, the rate was reduced to 3.99 baht a unit, thanks to lower gas prices and a government policy to reduce the tariff.
The tariff is unlikely to decrease considerably next year, said an energy analyst who requested anonymity.
Power bills in Thailand are more expensive than in some regional peers, especially Vietnam, causing the business sector to call on the government to better control the tariff, aiming to maintain the country's competitiveness and draw more foreign investors.
One way to slow a surge in the tariff is using the state-run Electricity Generating Authority of Thailand (Egat) to subsidise electricity prices. Egat tallied a huge loss of 117 billion baht as of November 2023, following a series of electricity price subsidies.
Another option would be to increase the amount of gas produced domestically, as gas accounts for 60% of fuels used for power generation in Thailand.
The country imports more LNG following a drop in domestic supply, especially at the Erawan block in the Gulf of Thailand. Gas production capacity at Erawan was 200 million standard cubic feet per day (MMSCFD) in 2022.
PTT Exploration and Production Plc is planning to increase production at this gas field to 800 MMSCFD by April 2024.
EEC GROWTH
The Eastern Economic Corridor (EEC) is expected to keep growing in 2024 after authorities announced a plan to fuel its development, with a target of drawing 500 billion baht worth of investment projects.
The effort is part of a five-year development plan spanning from 2023 to 2027. Foreign investors who spend on targeted businesses are entitled to 10-year visas.
A man walks past a signboard promoting the Utapao International Airportn in the EEC. The government wants to make the EEC the country's high-tech industrial hub. (Photo: Somchai Poomlard)
The government wants to make the EEC, which covers parts of Chon Buri, Rayong and Chachoengsao, the country's high-tech industrial hub housing 12 targeted S-curve industries, including next-generation car production and smart electronics.
According to Commerce Minister Phumtham Wechayachai, who chaired the EEC committee's meeting in November, the plan outlines five development strategies.
The strategies comprise: promoting investment in targeted industries; enhancing the efficiency and utilisation of infrastructure and public utility systems; upgrading workforce skills to adapt to technological changes and innovation; developing modern, liveable and occupation-appropriate cities; and connecting the benefits available from investment to the sustainable development of communities.
The goal is to raise actual investment in the flagship industrial area to 500 billion baht during 2023-2027, up from about 75 billion baht a year at present. The plans aims to expand the GDP of the EEC provinces by 6.3%, improving the income and quality of life for the local population.
Mr Phumtham said the meeting approved the EEC visa as a special case, allowing investors with modern and environmentally friendly investments in targeted industries to bring in foreign workers.
