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Thailand’s National Economic and Social Development Council (NESDC) on Tuesday said the economy expanded at a rate of 2.2% in the first quarter of 2022, higher than the 1.8% expansion seen in the fourth quarter of the previous year. The GDP growth rate comes as a surprise as a Reuters poll of analysts had pegged the figure at an average of 2.1%.
The country posted robust growth in the first quarter on the back of rising exports and easing Covid-19 restrictions which are spurring business activities and the revival of the tourism sector. This is the third straight quarter in which the Thai economy has expanded, indicating that the country might be on the path to recovery from the pandemic.
While Thailand GDP for the quarter is positive, the NSEDC full-year growth forecast for 2022 to 2.5% to 3.5% from its previous estimate of 3.5% to 4.5%, citing inflationary pressures and slowing global growth owing to Russia’s invasion of Ukraine.
The Thai economic authority said the country’s consumption has increased, with expenditures rising across different sectors. However, the main boost to the economy came from foreign exports, which rose to $73.3 bn during the first quarter, up 14.6%. The country recorded a trade surplus of $9.2 bn.
Additionally, the agriculture sector returned to the black after contracting 0.6% in the previous quarter. NESDC said that the accommodation and food service activities sector expanded for the first time in three quarters by 34.1%, compared to a 4.9% contraction the previous quarter.
The tourism sector, the mainstay of Thailand GDP, expanded for the first time in 11 quarters, with average occupancy rates rising to 36.15%.
What’s next for the Thai economy?
Although the Thai economy posted robust growth figures in the first quarter, the government is wary of rising inflation, which it sees to be in the range of 4.2% to 5.2% for full-year 2022. Foreign exports are now expected to rise by 7.3% in 2022, an increase from the previous forecast of 4.9%.
Earlier this month, Thailand reported an April CPI inflation rate of 4.65%, lower than the expected 4.98% as per a Reuters poll. However, Commerce Ministry official Ronnarong Phoolpipat during a briefing had said headline inflation is likely to exceed 5% in the coming months.
“As oil prices rise, generally product prices will also increase. But it does not mean inflation will be much higher. We also have to look at many factors,” Phoolpipat said.
However, the Bank of Thailand does not seem worried and had kept interest rates at a record low of 0.5% in March. Last week, Goldman Sachs in a note said Thailand may increase key interest rates in September, contrary to most economists’ expectation of a rate hike in the first quarter of 2023.
“The big concern now is the conflict between Russia and Ukraine, which has a chain-reaction impact,” Danucha Pichayanan, NESDC secretary-general, said during a briefing. “The Covid outbreak situation in China is also another risk as it’s one of Thailand’s major export markets.”
NSEDC also expects a current account deficit of 1.5% of Thailand GDP, while it previously anticipated a surplus of 1.5%.
