The Thai economy is set to bounce back from a surprising contraction in the fourth quarter of 2022 as foreign tourist arrivals are likely to surprise on the upside and counter headwinds to merchandise exports from a global slowdown, say leading economists.
Southeast Asia’s second-largest economy will expand by 4% this year even after the “sharp and surprise sequential contraction” in the fourth quarter, according to Nomura Holdings. Standard Chartered Banks sees gross domestic product (GDP) expansion of 4.5% this year, and DBS Bank forecasts a growth rate of 3.4%, up from a disappointing 2.6% last year.
While a 1.5% contraction in fourth quarter from the preceding three months surprised most analysts, China’s scrapping of its zero-Covid policy has already triggered a rush of tourists from the country’s biggest source of visitors before the pandemic. That may in turn perk up domestic consumption, providing a spark for economic expansion, especially in the second half.
“We see significant upside from returning Chinese tourists over the next two years,” Chua Han Teng, an economist at DBS, wrote in a recent research note. “It will be driven by some revenge travelling, improvements in flight capacity and efforts by Thai authorities to spur tourism activity.”
The following is a secection of other economists’ views on the outlook:
Siam Commercial Bank (Somprawin Manprasert): “The trend of the tourism-led recovery this year hasn’t changed. We see a turnaround in the economic situation during the last couple of weeks from rising tourist arrivals and a not-so-bad global economy and these will likely set the tone for good growth this year.
“We just revised up our tourist arrivals this year to 30 million and we still see an upside to our forecast.”
Nomura Holdings (Euben Paracuelles, Charnon Boonnuch): “We maintain our 2023 GDP growth forecasts of 4%, well above the National Economic and Social Development Council’s new mid-point forecast of 3.2% and picking up more materially from 2022. This reflects our more positive view on the tourism revival, in which we expect 30 million foreign tourist arrivals, above the 28 million expected by the NESDC.
“However, as we have stated, we think the tourism boost will materialise in second half after the supply-side constraints (manpower shortage and flight capacity) ease materially in second quarter. Our forecast pencils in a sequential GDP growth rebound in the first quarter, avoiding a technical recession.”
Kiatnakin Phatra Securities (Pipat Luengnaruemitchai): “Despite the negative surprise on GDP growth, we do not think it would be a cause for the Bank of Thailand to pause. The positive outlook on tourism recovery, particularly after China’s reopening, should support the recovery, despite the headwinds from exports contraction.
“More importantly, Thailand’s policy rate remains well below the inflation rate. As the Bank of Thailand becomes increasingly concerned about the risk of demand-pull inflation, it would need to continue its gradual and measured normalisation plan.”
Maybank Investment Banking Group (Ju Ye Lee): “I’m maintaining my 2023 GDP growth forecast at 4% despite the weak fourth quarter print, as China’s reopening will not only boost tourism (tourism receipts from China visitors amounted to 3.1% of GDP in 2019) but also help support goods exports, which was the key dampener to fourth-quarter growth.”
Pantheon Macroeconomics Ltd (Miguel Chanco): “The Thai economy’s finish to 2022 was a disaster across the board, and should put a quick end to the BoT’s tightening cycle.”
