June 25, 2024
BANGKOK – A decline in purchasing power, ineffective government expenditure, geopolitical risks and household debts could affect the Thai economy during the rest of the year, several economists warned on Monday.
Amonthep Chawla, the chief economist at CIMB Thai Bank, said the economy was being pressured by a drop in the purchasing power of the lower- to middle-income sector as well as a slowdown in the recovery of the retail sector.
He added that only the upper- and upper-middle class were propping up the economy with their purchasing power, indicating a widening gap between people’s income.
“Small and medium enterprises are being affected by the economic slowdown, and large business operators could soon be affected if the situation persists,” he said.
Amonthep added that liquidity in Thailand could drop in the third quarter because the government is focusing its spending only in the fourth quarter.
He added that the US-China trade war could also affect Thai exports, adding that though the sector is in a good state at present, future trade barriers may affect trade and investment, he said.
He pointed out that Thailand was still not able to attract enough Chinese investment, which has resulted in slow economic expansion. The Chinese have been more interested in investing in Vietnam, Malaysia and Indonesia, rather than here, he added.
He also said that the sharp weakening of the Chinese yuan and the United States’ delay in lowering its policy rate may cause the Thai baht to fall further. “Another worrisome issue is the drop in confidence of foreign investors if this situation persists,” he said.
Amornthep expects the economy this year to expand by 2.3% year on year, but only after the government releases its 10,000-baht digital wallet handout in the fourth quarter.
Somprawin Manprasert, chief economist at Siam Commercial Bank’s Economic Intelligence Centre, meanwhile, warned of risks posed by international factors, such as the upcoming US elections that may impact several economies later this year.
These risks may also affect Thailand’s tourism industry, which is the main engine to stimulate the economy, he said, adding that rising household debt could pressure the Thai economy to fall further.
“We are worried about worsening vulnerability from rising household debt and the economy may fall further if there are any adverse international factors,” he said.