Thailand is reeling as a once-in-a-generation heatwave sends temperatures to record highs.
Even considering the murderous nature of some taxi drivers, stepping onto the scorched streets of Bangkok in early May is mostly a pleasant experience. Not so this year. The “heat index,” which includes humidity to indicate the “real” temperature, is always above 52 degrees (slightly above 125 degrees Fahrenheit).
But there’s nothing terrible about this country’s lethargic economy. Thai authorities are being bombarded with bad economic news everywhere they look.
Of Asia’s five so-called “tiger cubs” (a list that includes Indonesia, Malaysia, the Philippines and Vietnam), it is the only one whose per capita GDP has declined so far over the past decade.
On May 8, the influential business group revised down its 2024 growth forecast to 2.2% to 2.7% from the previous target of 2.8% to 3.3%. Exports are also expected to grow by only 0.5%, compared to the previous forecast of up to 3%.
Tabishin wants to spur growth by providing nearly $14 billion in benefits to about 46 million low-income households.
This uncertain outlook has diverted foreign direct investment to other regional actors that can expect higher growth rates, lower production costs, better demographics, and governments tailored to the needs of business owners. .
Vietnam, and especially Indonesia, is at the top of the list, positioning itself as a global hub for business-friendly electric vehicle production.
Tourism, another important source of income for the state and countless businesses large and small, has yet to fully recover from the devastation of the coronavirus.
In 2023, 28 million people visited the country. Although this is a significant increase from 2022 numbers, it is still far from the all-time high of 39.8 million in 2019. Management said the hotel in central Bangkok where Euromoney stayed last week had an occupancy rate of less than 30%, an unusually low rate for this time of year.
“China is the cause of the suffering,” says one prominent Thai banker. “It used to be the main source of inbound tourists, but last year most tourists were still unable to travel. We should get back to normal, but probably not until the last quarter.” As temperatures drop, visitors from colder northern climates seek out the winter sun.
What can authorities do to avoid long-term decline and stimulate the economy? Well, up to a point.
Since being elected prime minister in August 2023 after nine years of military rule, Sureta Tabisin has visited 15 countries and regions, including China, Saudi Arabia, and Japan, as well as the United States and Germany twice each.
His itinerary is logical and well planned. Many of these countries are leaders in car production, and Thailand’s recovery will largely depend on whether it can attract investment from next-generation EV makers, led by Chinese companies. Many mainland automakers, including BYD, Changan, Chery and SAIC, are pouring capital into new domestic parts and EV factories.
Tabishin also wants to spur growth by distributing nearly $14 billion through digital wallets to about 46 million low-income households.
The nationwide transfer, part of a pre-election promise but stalled by delays and funding issues, will be implemented at the end of the year, with authorities hoping to boost output by as much as 1.8 percentage points in 2025. This is the outlook.
While these signs are promising, many things need to go right.
Southeast Asia’s second-largest economy has been adrift for years under both civilian and military rule, and is at risk of being overtaken by some of its once-poor but now arguably better-run neighbors. There is.
Nomura said in an April 30 research note that the economy “likely entered a technical recession” in the first quarter due to a sharp decline in consumer spending and weak exports of automobiles and electronics products.
The investment bank said the report strengthens its view that the central bank will cut interest rates by 25 basis points in June, followed by another cut in August.
There is also not much hope in the domestic capital market. The Stock Exchange of Thailand was Asia’s worst-performing exchange in 2023, with Thai stocks recording overseas net sales of 192 billion baht ($5.2 billion) in the calendar year.
Bangkok-based investment bankers are generally anxious and underemployed.
“Last year, we filed five big IPOs for our clients, but couldn’t follow through because the local market was so bad,” one person lamented.
“For Thailand to become sexy again, investors need a story,” said Teerada Thupun, head of global markets and Thailand institutional investors group at Deutsche Bank.
The problem is, after years of low growth, a lack of tourists due to COVID-19 and a pervasive sense of economic doldrums, the only story going on in Bangkok right now is the searing, oppressive heat. Sada.
Thailand needs to cool its skies and rapidly warm its economy.