More push required for 4% growth in 2023

Money spinner: Tourists from mainland China visit Wat Arun temple in Bangkok ahead of the Chinese Lunar New Year as China reopens its border. Economists expect Chinese tourist arrivals to be about half of as much as 10 million that the government predicts will visit the “Land of Smiles” this year. — Reuters

BANGKOK: An upswing in tourism from China’s reopening will help boost Thailand’s economy, but isn’t sufficient to restore growth to pre-pandemic levels just yet, according to analysts.

Thailand’s gross domestic product (GDP) will probably expand 3.7% this year, according to the median estimate in a recent Bloomberg survey of economists.

While that will make it the fastest expansion in five years, it’s still way off from the 4.2% growth seen in 2017 and 2018.

That’s because economists expect Chinese tourist arrivals to be about half of as much as 10 million that the government predicts will visit the “Land of Smiles” this year.

Nine of the economists surveyed see Thailand’s tourism sector staging a full recovery to pre-Covid levels from 2024.

About 28% of Thailand’s 40 million annual visitors before the pandemic were from China. Tourism accounts for at least 12% of the Thai economy and a fifth of jobs, while private consumption makes up 50% of GDP.

Along with exports that are equal to more than half the output, they form the lifeblood of the Thai economy.

While inbound travellers are likely to surpass the government’s initial estimate of 25 million this year, shipments abroad are seen to languish as the global economy dims and the baht rebounds to near a 10-month high.

A general election by May is also seen as a boon and a bane.

“It’s not clear how rising travellers will boost GDP growth,” according to National Economic and Social Development Council secretary-general Danucha Pichayanan, who said the agency will review its growth projection when it reports fourth-quarter GDP on Feb 17.

“Weak global demand will hurt our exports significantly and will drag our GDP growth. We have both push and pull factors to consider.”

The Thai National Shippers Council expects exports to grow 1% to 3% in 2023. They worry that the currency’s 5% gain, which has made it the region’s best performer so far this year, will erode price competitiveness.

The baht has risen more than 15% since plunging to a 16-year low in October, buoyed as well by the prospects of China’s return to the tourism market.

Thailand is estimated to have welcomed at least 11.5 million foreign travellers last year, surpassing the initial 10 million estimate, luring guests with longer-term visas, looser requirements and come-ons like the legalisation of weed for medical use.

Inflation that hit a 14-year high in 2022 is expected to cool this year and will likely convince the central bank to pause shortly.

Still, tourism isn’t expected to inflate the economy fast enough amid weak global growth and prospects of slower government spending after the election, which Nomura Holdings Inc, in a Jan 13 note said is “an under-appreciated risk”.

A “fragmented outcome” of the vote could delay government spending, it said. Election-related spending of at least 40 billion baht (RM5.2bil) could boost GDP by as much as 0.3 percentage point, said the University of the Thai Chamber of Commerce. — Bloomberg