Thailand: Tensions thwart growth in 2022

Geopolitical tensions have pressured Thailand’s economic expansion this year, according to Danucha Pichayanan, secretary-general of the Office of the National Economic and Social Development Council (NESDC).

According to the office, the economy in 2022 is projected to expand in the range of 2.7-3.2%, compared with a range of 2.5-3.5% growth it predicted in May, mainly supported by the improvement in domestic demand, the recovery of the tourism sector and the continual expansion of exports.

Mr Danucha added that in this revised forecast, the figure at the upper range was downgraded to 3.2% from 3.5% mainly as a result of geopolitical conflicts which have disrupted the global supply chains and affected Thai production accordingly.

Among the geopolitical conflicts taking place at present are those between Russia and Ukraine, and China and Taiwan.

However, in a forecast on the 2022 average economic growth the NESDC predicted in May and August is around the same 3%, he said.

Mr Danuchai said the conflict between China and Taiwan is affecting the global semiconductor supply as Taiwan is one of the world’s leaders in semiconductors.

He said Thailand should woo major players in key industrial sectors to Thailand, so that the country could avoid future supply chain disruption. The government should revise incentives to draw these businesses to Thailand.

According to the NESDC, private consumption is expected to grow by 4.4% in 2022, improving from 0.3% in 2021 and an upward revision from 3.9% in the previous prediction.

The growth is mainly due to a higher than expected expansion of consumption in the first half of 2022 and government stimulus measures in the latter half.

Government consumption is expected to decline by 0.2%, compared with a 3.2% growth in 2021 with no revision from the previous prediction.

Total investment is expected to increase by 2.8% in 2022, declining from 3.4% in 2021, and downwardly revised from a 3.5% growth in the previous projection.

Private investment is estimated to expand by 3.1% in 2022, slightly decreasing from 3.3% in 2021, and a downward revision from 3.5% in the last prediction, due to the downward revision in global economic outlook.

Public investment is expected to grow by 2.0%, compared with a 3.8% growth in 2021 and a downward revision from 3.4% in the previous estimate.

Export value of goods in US dollar terms is anticipated to increase by 7.9%, compared with a 19.2% expansion in 2021 and upwardly revised from 7.3% in the previous estimate.

Together with the upward revision of export of services due to higher than expected inbound tourism, the export of goods and services is estimated to increase by 9.0%, compared with an 8.3% expansion from the previous estimate, and a 10.4% growth in 2021.

Headline inflation is estimated to be in the range of 6.3-6.8% and the current account is projected to record a GDP deficit of 1.6%.

The office on Monday also announced that the economy in the second quarter of 2022 expanded by 2.5% year-on-year, accelerating from a 2.3% growth in the previous quarter. In the first half of 2022, the economy grew by 2.4%.

Private consumption expenditure in the second quarter expanded by 6.9%, accelerating from a 3.5% expansion in the previous quarter, mainly supported by an easing of Covid-19 control measures which enabled economic activities and spending to return to normal levels, together with support from the consumption stimulus measures.

Government consumption expenditure registered a growth of 2.4%, decelerating from a 7.2% growth in the previous quarter.

In the first half of 2022, private consumption expenditure expanded by 5.2% and government consumption expenditure increased by 4.7%.

Total investment decreased by 1.0%, compared with a 0.8% growth in the previous quarter, mainly due to contraction in public investment which declined by 9.0% further from a 4.7% decrease in previous quarter.

Private investment expanded by 2.3%, decelerating from a 2.9% expansion in the previous quarter.

In the first half of 2022, total investment fell by 0.1%, as public investment contracted by 6.8% while private investment expanded by 2.6%.

For foreign trade, export value was recorded at US$74.5 billion, increasing by 9.7%, continuing from 14.4% in the previous quarter.

Import value was recorded at $69.4 billion, with 22.4% growth, accelerating from 16.3% in the preceding quarter.

In the first half, export value stood at copy47.8 billion, up 12%, while import value was recorded at copy33.4 billion, a 19.4% growth.