©Reuters. People shop at a supermarket inside a department store in central Bangkok, Thailand, December 28, 2016. Picture taken December 28, 2016. REUTERS/Athit Perawongmetha/file photo
By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s economy unexpectedly contracted in the fourth quarter of 2023 from the third quarter, increasing pressure for an interest rate cut as risks to the tourism-led economy from high household debt grow and the slowdown in China.
Gross domestic product (GDP) fell 0.6% in the October-December quarter on a seasonally adjusted basis, the planning agency said on Monday, down from a revised 0.6% increase in the third quarter. The first quarterly contraction in a year compared to a 0.1% rise forecast in a Reuters poll.
Compared to a year earlier, the economy grew 1.7%, slightly faster than a revised 1.4% growth in the third quarter but slower than a forecast expansion of 2.5%.
Slowing economic momentum raises the chances of a rate cut at the central bank’s next policy review on April 10, after leaving the key rate stable at 2.50% this month, the highest in more than a decade, with a split vote. Two dissenters favored a rate reduction.
The head of the state planning agency, Danucha Pichayanan, said at a news conference that monetary policy should support the economy and that a rapid rate cut would help.
Prime Minister Srettha Thavisin and her government have repeatedly urged the central bank to cut interest rates, saying they are hurting consumers and businesses and that the economy is in crisis.
The Bank of Thailand (BOT) said rate cuts will do little to revive Southeast Asia’s second-largest economy if structural problems persist.
The economy grew 1.9% in 2023, slower than expected and less than the revised 2.5% in 2022.
For 2024, the state planning agency expects growth of 2.2% to 3.2%, lower than the 2.7% to 3.7% forecast in November.
Exports in 2024 were expected to grow 2.9%, lower than an earlier estimate, while headline inflation was between 0.9% and 1.9%, compared with the central bank’s target range of between between 1% and 3%.
If exports recover, the economy is not expected to contract in the first quarter of 2024, the agency said.