Thailand’s economy expanded more than estimated in the first quarter as the nation benefited from a resurgent tourism, although the outlook hinges on its ability to demonstrate political stability.
Gross domestic product grew 2.7% on year in the three months to March, the National Economic and Social Development Council said Monday. That’s faster than the median 2.3% expansion estimated by economists in a Bloomberg survey. Output expanded 1.9% from the fourth quarter.
While the return of tourists post-pandemic supported first quarter performance, the outlook depends on how smooth the transition of power is, after Sunday’s vote showed pro-democracy parties dominated the election. With 99% of the vote counted, Move Forward party and Pheu Thai were together projected to rack up 287 of the 500 seats in the lower house.
Even so, it’s not yet clear whether the parties will be able to form a government even if early remarks from both their leaders indicate a potential coalition. In Thailand, there are 250 senators appointed by the military who also get to vote for prime minister, along with the elected members of the lower house. That could determine whether or not Thailand will be politically stable, which is key to winning and keeping investor faith in the economy.
“I hope that after this election and we get a clear picture of politics and we get a clear picture of the economics numbers, the market would be more attractive,” Stock Exchange of Thailand President Pakorn Peetathawatchai said in an interview to Bloomberg Television’s Haslinda Amin. “Once they see the recovery of all these industry, I’m quite certain that foreign funds will look at Thailand and see us as a more stable environment for investment.”
The baht advanced by the most in more than five weeks, climbing as much as 0.9% as election trends showed opposition parties were winning. The currency pared its gain to 0.5%, still keeping it among the top performers in emerging Asia this year.
What Bloomberg Economics Says...
The acceleration in Thailand’s GDP growth in the first quarter — alongside an outlook for continued recovery in the tourism sector — will probably spur the Bank of Thailand to continue reducing stimulus. The central bank has already indicated that more tightening is likely in the pipeline. The election over the weekend, which paves the way for more populist spending, is also likely to reinforce this stance.
—Tamara Mast Henderson, Asean economist
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Signs of an orderly formation of a new government appeared after the Pheu Thai party, which is linked to exiled former premier Thaksin Shinawatra, offered to support Move Forward’s leader Pita Limjaroenrat for prime minister. That follows earlier comments by Thailand’s army chief that there was “zero chance” of the Southeast Asian nation returning to a military rule in the event of post-election turmoil.
The NESDC maintained its forecast for tourist arrivals this year at 28 million.
Chinese travelers, who accounted for about 30% of visitors to Thailand before the pandemic, are returning again, with their numbers on course to hit 1 million a month starting October.
--With assistance from Tomoko Sato, Anuchit Nguyen, Cecilia Yap and Michelle Jamrisko.
(Updates with details throughout.)