Thailand’s finance ministry has forecast economic growth of 3.6% this year and that appears a strong possibility, given that tourist arrivals are surging back toward pre-Covid levels.
The economy has shown resilience and is on a solid path to recovery, according to outgoing finance minister Arkhom Termpittayapaisith, who gave an address at a World Bank forum on Monday.
Arkhom said the economy expanded faster than expected in the first quarter of this year due to the tourism sector’s revival, notably one million Chinese tourists between January and mid-May, after Beijing dropped its tough travel restrictions late last year.
The recovery has been supported by good revenue collection, and a comprehensive and timely policy mix of fiscal and monetary policies, which should continue to be implemented proactively and prudently, respectively, Arkhom said.
Five million Chinese expected
The government expects the number of Chinese visitors to meet its target of 5 million this year, with spending of 446 billion baht ($13.18 billion), government spokesperson Anucha Burapachaisri said in a statement.
Last year, about 274,000 Chinese tourists visited the Southeast Asian country, compared with 11 million in pre-pandemic 2019, or about 28% of the total.
Overall foreign tourist arrivals were 9.47 million from January to mid-May, the government earlier said, compared with the 11.15 million visitors in the whole of 2022.
Southeast Asia’s second-largest economy grew faster than expected in the first quarter, driven by the continued pickup in the crucial tourism sector, a key source of jobs that was decimated by the Covid-19 pandemic.
Inflation of under 3% forecast
While predicting inflation would come in below 3% this year, within the central bank’s target range of 1% to 3%, Arkhom said he could not tell whether there would be a reduced need for raising interest rates.
“There is still uncertainty over energy prices and US issues,” he told reporters on the sidelines.
The central bank is expected to raise its key rate again by a quarter point to 2.0% on Wednesday before holding it steady through 2024, a Reuters poll showed.
The finance ministry said in a statement the economy was boosted in April by stronger tourism, higher farm production and falling inflation, while Thailand was well-positioned to withstand global volatility.
It predicted growth of 3.6% this year after a 2.6% expansion last year.
Arkhom said revenue collection also showed strong signs of recovery in the 2022 fiscal year and was expected to surpass the pre-pandemic level in the 2023 fiscal year.
“I’m confident that Thailand is firmly heading towards full recovery and soon return to its vibrant economy,” he added.
The World Bank said in a statement on Monday Thailand needs to address growing spending needs, while keeping public debt under control.
Thailand’s public debt rose due to the pandemic response, but overall fiscal risks remain manageable, the bank said.
New PM candidate may face legal challenge
The main threat to the Thai economy could be uncertainty over the new government, given the opposition of some military-appointed senators and rivals to the Kao Klai (Move Forward) Party’s victory.
Move Forward leader Pita Limjaroenrat will face a lawsuit over his qualifications and a request for his cabinet to be dissolved if he becomes prime minister, serial legal challenger Ruangkrai Leekitwattana warned on Monday, according to a report by the Bangkok Post.
Ruangkrai went to the Election Commission (EC) to testify in his complaint about Pita’s qualifications. His complaint is based on Pita’s holding of shares in a media company he inherited from his father.
The petition has the potential to eliminate Pita as a candidate to be prime minister because the military-drafted constitution bans such holdings.
The Move Forward leader says he declared his holding in the defunct media company to the anti-graft agency several years ago, but Ruangkrai wants the EC to ask the Constitutional Court to disqualify Pita retroactively.
Move Forward has signed an agreement with seven other parties to form a new government but a vote on the outcome is not due until the result is ratified by a formal vote in parliament in July.
There has also been squabbling with Kao Klai’s major coalition partner Pheu Thai over the selection of a new speaker.
Any court action to eliminate Pita or his cabinet has the potential to stir major protests, given the party’s popularity, particularly with younger Thai voters.
- Reuters with additional editing and reporting by Jim Pollard
NOTE: Two photos were added to this report on May 29, 2023.