High Inflation Drags At Growth

This story is part of Forbes’ coverage of Thailand’s Richest 2022. See the full list here.

Rising inflation—as Thailand’s tourism industry shrugs off the impact of Covid-19—is expected to hamstring economic growth in 2022. Consumer prices have accelerated faster than expected since the beginning of the year, hitting a 14-year high in May, and will get in the way of a hoped-for rebound in household spending. That plus Russia’s war in Ukraine and a slowdown in China (a main export destination) led the government to sound a cautious note and lower its growth forecast for the year. GDP is now set to expand 3.4% in 2022, 4.3% in 2023 and 3.6% in 2024.

The central bank signaled it will scale down “a very accommodative monetary policy” to contain inflation. The concern is that a hike in interest rates will deepen the drag on domestic consumption.

At the start of June, Thailand announced a $1.6 billion bond issue to address the budget deficit, which is expected to have ballooned to 6.7% of GDP in the second year of the pandemic, before falling back to 4.6% this year. Prime Minister Prayut Chan-o-cha’s government is placing its hopes on a $93 billion budget bill for 2023 to help boost Southeast Asia’s second-largest economy. But critics say it could be a debt trap that benefits a few, arguing for investments that strengthen the economy long term.