Thailand trims 2024 growth forecast despite strong Q1, as weak exports weigh

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK (Reuters) - Thailand trimmed its economic growth forecast for 2024 on Monday despite a better-than-expected expansion in the January-March quarter, saying exports were projected to increase at a slower pace than previously thought due to external risks.

Southeast Asia's second-largest economy grew 1.5% in the first quarter from a year earlier, data from the National Economic and Social Development Council (NESDC) showed, beating analysts' expectations for a 0.8% expansion in a Reuters poll.

In the final quarter of 2023, gross domestic product (GDP) expanded an annual 1.7%.

On a quarterly basis, GDP grew a seasonally adjusted 1.1% after a revised 0.4% contraction in the final quarter of 2023, avoiding a technical recession. Economists had forecast a 0.6% expansion from the previous three months.

Growth was driven by exports and private consumption and investment, but public investment and government expenditure contracted, the state planning agency NESDC said in a statement.

"Thailand's economy rebounded in Q1 and we expect steady, if unspectacular, growth this year driven by a further rebound in tourism and strong government spending," Capital Economics said in a note.

The NESDC now expects GDP growth of between 2.0% and 3.0% for 2024, slightly lower than its previous forecast of 2.2% to 3.2%. Last year's growth was 1.9%.

The downgrade is due to high external risks, especially trade protectionism that is intensifying, geopolitical conflicts and volatility in the global economy, NESDC Secretary-General Danucha Pichayanan told a press conference.

Thailand's economy has lagged regional peers as it confronts high household debt and borrowing costs as well as weak exports amid an uneven recovery in top trading partner China.

The strong first-quarter GDP numbers could weaken the government's case for an interest rate cut, although new Finance Minister Pichai Chunhavajira has said he is more worried about people's access to finance than the level of interest rates.

For months, Prime Minister Srettha Thavisin has pushed for a rate cut, saying it would help the economy. The central bank has not bowed to the pressure, holding its key rate at a more than decade-high of 2.50%. The next rate review is on June 12.

The agency predicted exports in 2024 would rise 2.0%, lower than the 2.9% increase seen earlier.

Headline inflation was seen at 0.1% to 1.1%, lower than a previous forecast, and compared with the Bank of Thailand's target range of 1% to 3%.

The NESDC forecast 36.5 million foreign tourist arrivals this year, up from the 35 million projected earlier.

Thailand received 13.16 million foreign tourists from Jan. 1 to May 12, up 39% year-on-year, with Chinese visitors topping the list at about 2.6 million. In pre-pandemic 2019, there were record numbers of nearly 40 million foreign tourists.

Last month, the finance ministry lowered its 2024 growth forecast to 2.4% from 2.8%, but said it might reach 3.3% if the government's flagship 500 billion baht ($13.8 billion) household stimulus scheme is deployed in the fourth quarter as planned.

(This story has been refiled to remove an extraneous word in paragraph 9)

(Reporting by Orathai Sriring, Kitiphong Thaichareon, Satawasin Staporncharnchai, Chayut Setboonsarng; Editing by John Mair and Subhranshu Sahu)