Thailand is reeling as a once-in-a-generation heatwave pushes temperatures to record highs.
Even taking into account the homicidal nature of some taxi drivers, venturing into Bangkok’s scorched streets in early May is usually a pleasant experience. Not so this year: the ‘heat index’, which includes humidity to offer a picture of ‘real’ temperatures, regularly tops 52C (a little above 125 degrees Fahrenheit).
Yet there is nothing blistering at all about the nation’s listless economy. Thai authorities are assailed by bad economic news wherever they look.
It is the only one of Asia’s five so-called ‘Tiger Cub’ economies – a list that includes Indonesia, Malaysia, the Philippines and Vietnam – to see GDP per capita decline so far this decade.
On May 8, an influential business group downgraded 2024 growth projections to 2.2% to 2.7%, against an earlier target of 2.8% to 3.3%. It also tipped exports to grow by as little as 0.5%, against previous projections of up to 3%.
Thavisin hopes to boost growth by dishing out nearly $14 billion to around 46 million low-income families
This clouded outlook is diverting foreign direct investment to other regional actors that bear the promise of higher growth rates, lower production costs, better demographics, and governments attuned to the needs of business owners.
Vietnam and particularly Indonesia, the latter positioning itself as a business-friendly global fulcrum of electric vehicle production, head that list.
Tourism, another vital generator of income for the state and for myriad companies large and small, is yet to fully recover from the ravages of Covid.
In 2023, 28 million people visited the country – a big jump from 2022 numbers but a far cry from 2019’s record high of 39.8 million. At the hotel Euromoney stayed at in central Bangkok last week, the occupancy rate of less than 30% was unusually low for the time of year, management say.
“China is the cause of the suffering,” says one prominent Thai banker. “In the past, it was the main source of inbound tourism – but last year, most of them still could not travel. We should see normality resume, but probably not until the final quarter”, when temperatures fall and visitors from colder northern climes seek out winter sun.
Driving growth
What can the authorities do to avert long-term decline and kickstart the economy? Well, plenty, up to a point.
Since being elected prime minister in August 2023, following nine years of military rule, Srettha Thavisin has visited 15 countries and regions, including China, Saudi Arabia and Japan, and, on two occasions each, the US and Germany.
His itinerary has been logical and well planned. Many of those countries are leaders in automobile production, and Thailand’s recovery, if it comes, will depend much on its ability to attract investment from the makers of the next generation of EVs, led by Chinese firms. A host of mainland carmakers are ploughing capital into new domestic component and EV plants, including BYD, Changan, Chery and SAIC.
Thavisin also hopes to boost growth by dishing out nearly $14 billion to around 46 million low-income families, disbursed via digital wallets.
The nation-wide handout, part of a pre-election pledge but dogged by delays and funding disputes, is tipped to take place at the very end of the year, with officials hopeful of boosting output by as much as 1.8 percentage points in 2025.
Such signs are promising, but so much needs to go right.
Southeast Asia’s second-largest economy has been drifting for years under both civilian and military rule, and now risks being overtaken by some of its once-impoverished but now arguably better-run neighbours.
The economy “likely went into a technical recession” in the first quarter, due to a sharp fall in private consumption and slumping exports of cars and electronics goods, Nomura said in an April 30 research note.
The investment bank said the news reinforces its belief that the central bank will cut interest rates by 25 basis points in June and then again in August.
Sexy story
Nor do the onshore capital markets offer much promise of hope. The Stock Exchange of Thailand was Asia’s worst-performing bourse in 2023, with Thai stocks recording net foreign selling of Bt192 billion ($5.2 billion) in the calendar year.
Bangkok-based investment bankers are by and large worried and underworked.
“We filed five big IPOs for clients last year, but couldn’t follow through and execute as the local markets are so bad,” lamented one.
“For Thailand to come become sexy again, investors need a story,” says Teerada Tuppun, head of global markets and institutional client group for Thailand at Deutsche Bank.
Trouble is, after years of slow growth, a Covid-induced lack of tourism and a pervasive sense of economic drift, the only narrative at play right now in Bangkok is the searing, cloying heat.
Thailand needs the skies to cool and the economy to heat up – and fast.
