Weak Economy Amid Structural Problems: Thailand
Thailand’s economy grapples with significant challenges, according to Finance Minister Pichai Chunhavajira. Addressing a business seminar on Wednesday, Pichai emphasized the urgent need to support the property sector. He cited weak demand and rising bad loans. The government aims to boost economic growth to 3% this year, up from current projections of around 2.5%. However, this remains modest compared to historical growth rates of nearly 6%.
The Southeast Asian nation’s economy expanded by a mere 1.9% last year, trailing behind regional peers. Over the past decade, average growth has been just 1.73%, a reflection of deep-seated structural issues. Tourism stands out as a beacon of hope for the Thai economy. Thailand expects 35 million foreign tourist arrivals this year. Arrivals are inching closer to the pre-pandemic record of nearly 40 million in 2019.
However, the real estate sector remains under significant strain. Pichai expressed optimism that the central bank might relax loan-to-value (LTV) rules to alleviate pressures on the property market. Current LTV measures range from 90% to 100% for first residential properties. Commercial banks will be encouraged to address the rise in household bad loans. Concurrently, state-owned banks will also play a role in debt restructuring.
Government looks at improving economy of Thailand
The government plans to increase the Vayupak mutual funds by 100 billion baht, reaching 150 billion baht ($4.13 billion), with investments in stocks slated for October. This initiative aims to buoy the Thai stock market, which has declined by 6.6% this year, making it Asia’s worst-performing market.
Consumer confidence in the Thai economy has waned, hitting its lowest level since last September. It was driven by economic slowdown fears and political uncertainty. The University of the Thai Chamber of Commerce reported a drop in the consumer index to 58.9 in June from 60.5 in May. Political instability, particularly the ongoing court case that could lead to Prime Minister Srettha Thavisin’s dismissal, has further eroded confidence.
The Constitutional Court has scheduled the next hearing for July 24, with a verdict expected before September. Pichai remains hopeful that swift government action on budget disbursement and economic stimulus measures could help restore consumer confidence and stabilize the economy later this year.
