Economic growth slumps to four-year low in Q3

Deceleration delivers downside surprise: Thailand's GDP expanded 1.2% in annual terms in Q3, following 2.8% growth in the previous quarter. The deceleration surprised markets on the downside and marked the weakest reading since Q3 2021, when the economy was still in the grip of the Covid-19 pandemic. In seasonally adjusted quarter-on-quarter terms, the economy shrank 0.6% in Q3, following 0.5% growth in the previous quarter.

Domestic demand dampens GDP growth: Compared to the previous quarter's data, readings in Q3 weakened for government consumption (-3.9% on a year-on-year basis vs +2.2% in Q2), fixed investment (+1.1% vs +5.8% in Q2), exports of goods and services (+6.9% vs +11.2% in Q2) and imports of goods and services (+4.6% vs +10.9% in Q2). Finally, the variation in private consumption was the same as in the prior quarter (+2.6% in Q3 and Q2). Q3’s weak print was partly attributed to weak budget execution and a change in government, which dampened both spending and investment from the public sector. Moreover, a sharper drawdown in inventories compared to Q2 further weighed on GDP growth, as did a deterioration in services exports amid weakening tourism sentiment.

Panelist insight: Nomura’s Charnon Boonnuch and Euben Paracuelles commented on the outlook: “We continue to expect a technical recession in Q4, pencilling in sequential growth of -0.4% q-o-q sa, due to multiple growth headwinds from the prolonged border dispute with Cambodia, the impact of alcoholic ban and the mourning period. We also see a limited boost to growth from the co-payment scheme by the interim government, given weakening credit conditions. We believe the economy remains vulnerable to rising debt concerns, with non-performing loans rising further to 2.9% in Q3 from 2.8% in Q2. Importantly, financial conditions remain tight, […] which suggests that a slowdown in private sector spending is likely to materialize in coming quarters.”

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