Kiatnakin Phatra Warns of Downside Risks to GDP over Tightening Financial Conditions

Thailand reported a disappointing 2Q23 GDP growth yesterday, and Kiatnakin Phatra Securities (KKP) warned that there are significant downside risks to its GDP projection that could lead to economic growth not being able to achieve 3.3% target this year.

Thailand Q2 GDP disappoints consensus by almost half of expectation of +3.1% to +1.8% YoY. While total expenditure expanded by +5.1% YoY, the contribution from statistical discrepancies was as large as -3.3 percentage points along with -1.65 percentage points change in inventories.

The -1.65% change in inventories impact on GDP growth was mainly from agricultural products such as rice and manufactured goods such as computer parts and accessories, chilled and frozen chicken, and lastly refined petroleum products.

This was due to the global economic slowdown, plunging Thailand’s export into the negative zone at -5.7% for three quarters in the row. The downtrend was especially due to the manufacturing sector that was hit hard by -3.3%.

Still, private consumption showed 7.8% YoY growth compared to 5.8% in the last quarter. The return on tourism and domestic consumption pushed for +13.8% from services, +4.2% non-durable goods and +3.2% on durable goods.

KKPS noted that this showed growth divergence between services and industrial sectors and with the tighter financial conditions, including lending standards by banks, and higher policy rates in latter half of 2023, the 3.3% GDP target is highly possible to be missed.