Thai Q4 GDP quarterly contraction firms case for rate cut

© Reuters. People shop at a supermarket inside a department store in central Bangkok, Thailand, December 28, 2016. Picture taken December 28, 2016. REUTERS/Athit Perawongmetha/file photo

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK (Reuters) -Thailand’s economy unexpectedly contracted in the fourth quarter of 2023 from the third, adding to pressure for an interest rate cut as risks grow for the tourism-driven economy from high household debt and China’s slowdown.

Gross domestic product (GDP) fell 0.6% in the October to December quarter on a seasonally adjusted basis, the planning agency said on Monday, down from a revised 0.6% rise in the third quarter. The first quarterly contraction in a year compares with a 0.1% rise forecast in a Reuters poll.

From a year earlier, the economy grew 1.7%, slightly faster than a revised 1.4% growth in the third quarter but slower than a forecast 2.5% expansion.

Slowing economic momentum raises the chances of a rate cut at the central bank’s next policy review on April 10, after it left this month the key rate steady at 2.50%, the highest in more than a decade, in a split vote. Two dissenters favoured a rate reduction.

State planning agency chief Danucha Pichayanan told a press conference that monetary policy should support the economy and a quick rate cut would help.

Prime Minister Srettha Thavisin and his government have repeatedly urged the central bank to cut interest rates, saying they are hurting consumers and businesses and that the economy is in crisis.

The Bank of Thailand (BOT) has said rate cuts will do little to revive Southeast Asia’s second-biggest economy if structural issues persist.

The economy expanded 1.9% in 2023, slower than expected, and less than a revised 2.5% in 2022.

For 2024, the state planning agency expects growth to come in between 2.2% and 3.2%, lower than the 2.7%-3.7% it projected in November.

Exports in 2024 were expected to grow 2.9%, lower than a previous estimate, while headline inflation was seen at 0.9%-1.9%, compared with the central bank’s target range of 1% to 3%.

The economy should not contract in the first quarter of 2024 if exports recover, the agency said.