Official data released on Monday showed Thailand's real gross domestic product (GDP) growth accelerated from 3% year-on-year in the third quarter of 2024 to 3.2% in the fourth quarter. This reading was below what most analysts including us were expecting (BMI: 3.4%, Reuters: 3.9%). While this was the strongest pace of expansion in 2024, full-year growth of 2.5% notably missed the 2.7% target set by the Bank of Thailand.
Forecast implications: The latest data warrant no change to our 2025 forecast. Thailand is on track to hit its growth potential of 3% on the back of extensive fiscal stimulus support. We estimate that the remaining two phases of the digital wallet plan will provide a boost to the economy from the first through third quarters of 2025.
Analysis: The external sector remained a bright spot in the fourth quarter of 2024, offsetting tepid growth in domestic output. Exports added nearly 7.5 percentage points to headline growth, coinciding with the strong economic performance of its major trading partners.
Both the US and China surpassed our growth estimates closing out 2024. But with growth in these economies likely to lose steam over the course of this year, we doubt that the momentum in Thailand's exports will persist going forward.
As such, domestic drivers will rise to the fore. The Pheu Thai Party's flagship digital wallet scheme is now divided into three phases. The initial phase distributed 10,000 baht last September to 14.5 million Thais identified as most in need. The second and third phases, planned for the first and second quarters respectively, will provide funds to the remaining 30.5 million Thais who applied by an earlier deadline.
The handouts will inject 450 billion baht (2.4% of GDP) into the economy. We estimate that it will boost headline growth by approximately 0.3 to 0.5 percentage points from the fourth quarter of 2024 to the third quarter of 2025.
If anything, the latest growth figures add urgency for the Bank of Thailand (BoT) to act. We have previously highlighted that the fourth-quarter growth data would be a deciding factor in the central bank's monetary policy decision on Feb 26. With growth falling short of its estimate, the likelihood of a 25-basis-points rate cut at the upcoming meeting has increased significantly.
We forecast that the Bank of Thailand will lower its policy rate by an additional 50 basis points by the end of 2025, which will support investment activity over the coming quarters.
This commentary is published by BMI, a Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from BMI and independent sources.