Thai Economy Shows Growth Despite Concerns Over $14 Billion Stimulus Package

Along with other regional currencies, the Thai baht increased on Monday, rising 0.5% vs the dollar at 10:49 a.m. local time, offsetting some of the losses it had suffered this month due to political unrest.

Thanks to exports and tourism, Thailand’s economy grew quickly in five quarters. However, the country’s future remains uncertain due to a $14 billion stimulus plan and a change in leadership.

According to the National Economic and Social Development Council (NESDC), the gross domestic product increased by 2.3% in the three months ending in June compared to last year. This contrasts with a revised 1.6% pace for the first quarter and a 2.2% consensus prediction in a survey.

In comparison to a consensus projection of 1% growth and a revised 1.2% increase for the January-March period, the economy grew by 0.8% quarterly.

A cash giveaway plan to encourage spending is in doubt following a change in leadership, so even with the faster-than-expected year-over-year expansion, there is no certainty that the pace of recovery may sustain itself. With yearly growth of less than 5%, Thailand still lags behind its neighbours, and the political establishment may resurrect calls for the central bank to reduce borrowing costs.

The task now facing the newly appointed prime minister, Paetongtarn Shinawatra, daughter of the ousted leader Thaksin Shinawatra, is to figure out how to keep stimulating the second-biggest economy in Southeast Asia and increase its growth from the sub-2% average during the previous ten years. NESDC chairman Danucha Pichayanan stated during the briefing in Bangkok that the fiscal year 2025 budget will begin on October 1^st as planned and won’t be delayed by the change in administration.

“The fate of the digital wallet is unlikely to affect the budget schedule,” Danucha stated, estimating 2.5% GDP growth this year. If necessary, he said, “The government can use the budget to finance other stimulus projects.”

Along with other regional currencies, the baht increased on Monday, rising 0.5% vs the dollar at 10:49 a.m. local time, offsetting some of the losses it had suffered this month due to political unrest. There was a 1% increase in the primary stock index.

After Srettha Thavisin was removed by the court last week, Paetongtarn took over as leader. He told reporters on Sunday that more research is necessary to make sure the cash giveaway plan complies with the legislation governing budgetary restraint.

Under Srettha, adult Thais were to get 10,000 baht apiece starting in November.

The new prime minister stated separately on Monday that the ruling coalition, led by Pheu Thai, is scheduled to meet shortly and is anticipated to conclude talks on cabinet formation this week. Although Krungthep Turakij stated on Friday that Finance Minister Pichai Chunhavajira is unlikely to join the new government, Paetongtarn is expected to inherit a large portion of Srettha’s cabinet.

It is generally anticipated that the Bank of Thailand (BOT) would remain silent on Wednesday and maintain the policy rate at its highest level since 2013. The bank had been under pressure from Srettha to lower interest rates and boost the economy.

Even though inflation was well below the 1%-3% target, the BOT has maintained the one-day repurchase rate at 2.5% since the fourth quarter.

Citing potential pricing risks from the cash giveaway plan, Thai central bankers have resisted calls for rate cuts. Looser monetary policy, as per the BOT, would make efforts to reduce household debt – which currently stands at over 90% of GDP – more difficult.

According to Danucha, “The government needs to maintain a favourable political and economic environment. The Bank of Thailand will have to assess whether there’s a need to adopt looser monetary policy or not.”