Thailand’s economy grew 2.5 percent in the second quarter as returning foreign tourists failed to offset high inflation and concerns over regional tensions, the country’s main economic agency said Monday.
Southeast Asia’s second-largest economy was hit hard during the pandemic, though visitor numbers are slowly improving with the relaxation of travel rules since May.
But the Ukraine war and now tension over Taiwan could put any economic recovery at risk, Thailand’s National Economic and Social Development Council (NESDC) warned.
“We have to continue monitoring to see how long counteraction from China over Taiwan will last,” NESDC Secretary General Danucha Pichayanan said.
“The relaxing of our Covid controls, the recovery of tourism are factors that support the growth.”
The agency said that gross domestic product rose 2.5 percent in April-June compared to the same period a year ago — well below the anticipated growth of three percent.
The NESDC also revised the expected full-year growth rate from 2.5-3.5 percent to 2.7-3.2 percent.
Economist Charl Kengchon, from the Kasikorn Research Centre, characterised the results as a “mixed bag”, with the tourism boost failing to lift growth.
“I think that is because inflation hit a 14-year high in June, so it is a drag on spending both (in the) household sector and business,” he said.
Inflation in the month of June hit 7.7 percent and was at 6.5 percent for the quarter, according to the NESDC.
The impact of the Russia-Ukraine war and Taiwan tensions were also a worry, Charl said, affecting supply chains.
“We expect Thailand exports to cool in tandem with the global economic growth next year, so we have to rely so much on tourism,” he said.
Thailand welcomed roughly 40 million people annually pre-pandemic, and has set ambitious targets on arrivals for the coming year in the hope of coaxing life back into the damaged tourist sector.