Thailand Monthly Thailand Economic MonitorEconomic Monthly Monitor 21 January 2025 November economic activity data suggests gradual growth, driven by strong external demand, particularly for goods exports and tourism, as well as a slight recovery in private consumption supported by fiscal stimulus. While tourism remained a key growth driver, with a notable increase in arrivals, manufacturing continued to contract, particularly in the automotive sector. Amid stronger private consumption, inflation picked up but stayed below the central bank's target. On the policy front, the Bank of Thailand maintained its policy rate and the government introduced measures to alleviate household debt pressures. The Thai baht appreciated due to the rising current account surplus, despite ongoing portfolio outflows. In November, the economy gradually expanded, supported Figure 1: Economic Indicators Improved in November, Except for the Manufacturing Production by external demand and a slight improvement in private (Percent, year-on-year) consumption. On the external front, goods exports remained 50 Manufacturing Production Index Service Production Index solid, and tourism continued to improve, suggesting stronger 40 Private Consumption Index GDP growth in Q4. Private consumption also saw a slight 30 Goods Exports improvement, with the private consumption index turning 20 positive for the first time in three months, driven by fiscal stimulus 10 through the THB 10,000 cash transfer to low-income households 0 and easing concerns over the recent floods. However, -10 manufacturing production contracted by 3.6 percent, the deepest -20 decline in 8 months (Fig. 1), mainly due to a sharp contraction in Jan-21 Jan-22 Jan-23 Jan-24 automotive production and other transport equipment. The Source: Haver Analytics; CEIC; World Bank staff calculations. automotive sector has been impacted by tighter credit approval, Figure 2: Exports to the US, EU, and ASEAN Saw the delayed consumer decisions amid ongoing price competition in Strongest Expansions EVs, and inventory rundown. (Percent, year-on-year) -16.0 0.0 16.0 Goods export growth remained solid in November, driven by higher manufacturing and agricultural exports. Goods Total exports expanded by 9.6 percent year-on-year in November, United States slightly lower than the 14.2 percent growth previously. EU27 Manufacturing exports saw strong growth over the past two ASEAN 2024 (Jan-Nov) months, driven by electronics exports, and particularly the China rebound in demand for hard disk drives, while vehicle and parts Hong Kong 2023 exports continued to decline. Agricultural exports also grew, with Japan food exports expanding. Overall, in the first 11 months of 2024, goods exports rebounded by 5.1 percent, up from a 0.8 percent Source: Haver Analytics; CEIC; World Bank staff calculations. contraction in 2023, driven by stronger demand from the US, EU, and ASEAN markets (Fig. 2). However, the recent contraction in Figure 3: Global Manufacturing PMI Contracted Manufacturing PMI: Global the global Manufacturing Purchasing Manager Index raises 60 Services PMI: Global 50 concerns about slowing export demand in the coming months Thai Exports: Manufacturing, YoY (RHS) (Fig 3). 55 25 Tourism continued to be a key driver for growth. In 50 0 December, tourist arrivals increased by 4.3 percent year-on- year, though slowing from 19.5 percent previously, reaching 86 percent of pre-pandemic levels (Fig. 4). Arrivals from China grew 45 -25 by 17.9 percent year-on-year but remained 41 percent of pre- pandemic levels. Overall, in 2024, arrivals totaled 35.3 million, a Source: CEIC; World Bank staff calculations. THAILAND MONTHLY ECONOMIC MONITOR | 1 25.5 percent increase from the previous year. Tourist spending Figure 4: Tourism Recovery Continued to Support surpassed 1.66 trillion baht (8.9 percent of GDP) in 2024. Growth (Tourist arrivals, percent of the 2019 level) Including both domestic and international tourists, the tourism 120 Total China sector's revenue contributed 2.6 trillion baht to the economy, a 100 ROW 25 percent increase from the previous year. 80 Amid stronger private consumption, inflation increased 60 slightly but stayed below the central bank’s target, 40 remaining among the lowest in ASEAN. In November, 20 headline inflation rose from 0.8 percent to 1.0 percent year-on- year, marking the fourth consecutive month of increase, but 0 remained the lowest among ASEAN peers (Fig. 5). The rise was driven by core inflation and energy prices (Fig. 6). Although oil Source: CEIC; World Bank staff calculations. prices declined compared to last year, energy prices were affected by the removal of the diesel price subsidy in April. Figure 5: Inflation Remained the Lowest Among However, the government continued to subsidize electricity and Emerging Market Peers (Percent Year-on-Year) cooking gas prices. From January to April, the power tariff was reduced to 4.15 baht per kilowatt-hour, down from 4.18 baht per 10.0 Indonesia Malaysia unit in 2024, with the aim of easing households' living costs. Philippines Thailand 8.0 Vietnam During its December 18 meeting, the Bank of Thailand (BOT) 6.0 maintained the policy rate at 2.25 percent, following 25bps 4.0 reduction in October. The BOT assessed that the economy is 2.0 expected to continue expanding as previously projected, despite increased external challenges while inflation is anticipated to 0.0 return to the BOT’s target range (1-3 percent) in 2025. However, -2.0 debt-servicing pressure, stemming from recent tightening of credit standards—which was the main reason for the previous -4.0 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 policy rate reduction—remains. To further alleviate this pressure, Source: CEIC; World Bank staff calculations. the government introduced a targeted debt relief program for vulnerable groups. Figure 6: Core and Energy Price Pressures Have Contributed to Higher Inflation (Percent Year-on-Year) The Thai government has launched the "You Fight, We 8.0 Energy Help" debt relief initiative to tackle high household debt and Core inflation 7.0 worsening debt quality. Key measures include a three-year 6.0 Raw Food interest payment suspension, phased principal reductions (50 5.0 Headline inflation percent in year one, up to 90 percent in year three), and 4.0 restructuring for small debts under THB 5,000. The program 3.0 2.0 targets home, car, and SME loans within specified limits and is 1.0 estimated to cost THB 39 billion for state-owned banks, funded 0.0 directly by the government. Additional funding sources include a -1.0 reduction in banks' contributions to the Financial Institutions -2.0 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Development Fund (FIDF) and THB 50 billion in government- Source: CEIC; World Bank staff calculations. provided low-interest loans for non-bank lenders to support debt restructuring. These measures aim to alleviate financial burdens, boost disposable income, and reduce non-performing loans. Applications are open until February 28, 2025. The program is expected to provide relief to 1.9 million debtors with a combined debt of THB 890 billion (4.8 percent of GDP), helping to contain the country’s high household debt-to-GDP ratio (89.0 percent as of Q3). THAILAND MONTHLY ECONOMIC MONITOR | 2 Prime Minister Paetongtarn Shinawatra highlighted her Figure 7: THB NEER Appreciated as Current Account administration's plans, emphasizing a balance between Balance Improved (Index January 2021=100) immediate economic relief and long-term structural 110 reforms. Key accomplishments include the THB 10,000 cash handout scheme worth THB 145 billion, household debt relief 105 measures, and a THB 110 billion economic recovery campaign. 100 Looking ahead to 2025, the government plans to roll out the second phase of THB10,000 stimulus targeting senior citizens 95 aged 60 and above (4 million people), empower communities through the Village and Community Development Program, 90 expand educational opportunities with scholarships and skill Jan-21 Jan-22 Jan-23 Jan-24 training, and provide affordable housing. Structural reforms will IDR MYR PHP THB focus on water management, air pollution reduction, drug trafficking, monopolies, and informal businesses, with a broader Source: CEIC; World Bank staff calculations. vision to position Thailand as a regional hub for AI innovation Figure 8: The Current Account Balance Was at Nine and sustainability. Month High in November (Index January 2021=100) Thai baht appreciated due to an improved current account BOP: USD: Trade Balance balance, despite continued portfolio outflows. In December, BOP: USD: Services, Primary Income & Secondary Income the Thai baht NEER appreciated by 1.7 percent, the highest BOP: USD: Current Account Balance 6000 among other Asian currencies (Fig. 7). This appreciation was driven by an improved current account surplus, which reached 4000 4.8 percent of GDP, the highest in nine months (Fig. 8). Despite 2000 continued portfolio investment outflows for the third consecutive month, totaling THB 4.6 billion, primarily from equity markets, the 0 government bond market saw net inflows following the BOT -2000 monetary policy committee’s decision to keep the policy rate unchanged. -4000 -6000 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Source: CEIC; World Bank staff calculations. News Highlights: Issues to Watch: • Second cash handout to elderly is expected ‘by end of • Trade: How will the potential trade policy changes in the February’ (Bangkok Post, Link). US affect the Thai economy? • The cabinet approved debt support measures, including • Inflation: Will the partial removal of energy subsidies and interest suspensions and reduced principal payments cash transfers put pressure on inflation? (Bangkok Post, Link). • Fiscal: Will the government rollout the remaining THB • Thailand imposed top-up tax on January 1 (Bangkok Post, 10,000 cash handout? Link). Prepared by Warunthorn Puthong (Economist). For further questions, please email wputhong@worldbank.org THAILAND MONTHLY ECONOMIC MONITOR | 3 Selected Economic and Financial Indicators 2024 2024 2023 2024 Q1 Q2 Q3 Q4 Aug Sep Oct Nov Dec GDP and Inflation (%YoY) GDP growth (real) 1.9 - 1.6 2.2 3.0 Contribution to GDP growth: Private consumption 4.0 - 3.7 3.0 2.2 General Government consumption -0.7 - -0.3 0.0 1.0 Gross fixed capital formulation: Private 0.6 - 0.8 -1.2 -0.5 Gross fixed capital formulation: Public -0.3 - -1.8 -0.3 1.8 Net Exports of goods and services 3.0 - -1.6 2.5 1.0 Change in Inventory 0.0 - 0.2 -1.9 -2.5 Residual and errors -4.7 - 0.7 0.0 -0.1 GDP, nominal (USD Billion) 515 - 130 123 132 GDP, nominal (THB Billion) 17,922 - 4,621 4,514 4,598 Consumer Prices Index: Headline 1.3 0.4 -0.8 0.8 1.0 1.0 0.4 0.6 0.8 1.0 1.2 Consumer Prices Index: Core 1.3 0.6 0.4 0.4 0.4 0.8 0.6 0.8 0.8 0.8 0.8 Output Indicators Manufacturing Production Index (%YoY) -3.8 -1.7 -3.5 -0.1 -1.1 -1.8 -3.2 -0.6 -3.6 Capacity Utilisation (%) 59.6 58.6 60.4 57.7 58.3 58.6 57.6 58.0 57.6 Farm Production Index (%YoY) 2.3 -1.8 -3.4 -1.6 -1.0 0.0 -2.3 -2.6 1.3 Service Index (%YoY) 8.6 5.1 3.9 4.6 5.7 5.8 5.5 6.4 7.4 Labor Market Unemployed workers (Thousand Persons) 395.2 416.9 407.7 429.1 413.9 Unemployment rate (%) 1.0 1.0 1.0 1.1 1.0 Underemployment/1 (Thousand Persons) 202 181.9 191.5 162.4 191.9 Underemployment (%) 0.5 0.5 0.5 0.4 0.5 Balance of Payments (USD million) Current account 7,412 6,729 3,407 1,120 2,202 1,307 1,163 659 2,034 Current account (% of GDP) 1.4 1.3 2.6 0.9 1.7 3.1 2.7 1.6 4.8 Trade Balance 19,379 13,923 2,495 5,655 5,773 2,442 2,470 1,446 2,023 Exports of goods (%YoY) -1.4 13 -0.5 4.3 8.9 11.4 1.1 14.2 9.1 Imports of goods (%YoY) -3.4 15 2.6 0.8 11.3 8.5 9.5 17.1 2.3 Service, primary and secondary Income -11,967 -7,194 912 -4,535 -3,571 -1,135 -1,307 -787 11 Tourist Arrivals (Thousand Persons) 28,150 26,089 9,370 8,131 8,588 2,963 2,521 2,679 3,150 Financial account -11,864 -7,956 -5097.2 -2380.2 -479.1 Financial account (% of GDP) -2.3 -1.5 -3.9 -1.9 -0.4 Foreign direct Investment, net -7,159 94 1,301 -854 -353 Portfolio flows -13,728 -9,404 -4,494 -3,052 -1,858 Others Investments 9,093 2,167 -1,779 1,661 2,285 Central Government Budget (Fiscal Year, THB billion)/2 Revenue 3,224 2,670 698 953 1,019 289 481 247 229 Expenditure 3,745 2,829 737 1,023 1,069 258 542 479 307 Central Government balance -522 -159 -39 -70 -50 32 -62 -232 -78 Central Government balance (% of GDP) -2.9 -0.9 -0.8 -1.6 -1.1 Public debt (% of GDP) 62.4 63.3 63.7 63.4 63.3 64.0 63.3 64.0 64.4 Financial Markets Indicators Policy rate (%) 2.50 2.25 2.50 2.50 2.50 2.25 2.50 2.50 2.25 2.25 2.25 M2 (%YoY) 1.79 2.29 1.7 2.4 2.3 2.0 1.9 3.0 2.7 - Household Debt (% of GDP) 91.4 - 90.8 89.8 89.0 SET Index 1,416 1,400 1,378 1,301 1,449 1400 1,359 1,449 1,466 1,428 1,400 Thai government bond yield, 10 year (%) 2.67 2.25 2.50 2.66 2.47 2.25 2.55 2.47 2.41 2.29 2.25 Foreign exchange reserve and FX forward position (USD billion) 255 263 253 253 269 262.5 262 269 264 264 263 USD/THB, end of period 34.22 33.99 36.47 36.85 32.29 34.0 33.97 32.29 33.75 34.29 33.99 THB NEER, average 119.8 121.0 118.8 117.2 121.8 126.2 121.5 125.2 126.7 124.8 127.1 1/ Underemployment accounts for workers who are occupied less than 35 hours per week and are available for additional work (defined by BOT). 2/ Fiscal Year 2024 begins in October 2023 and ends in September 2024, Fiscal Balance according to GFS. Source: Office of the National Economic and Social Development Council, Bank of Thailand, Office of Industrial Economics, Ministry of Industry National Statistical Office of Thailand, Fiscal Policy Office, Public Debt Management Office, Haver Analytics. THAILAND MONTHLY ECONOMIC MONITOR | 4