GDP rebounded 1.8% q/q in Q4, driven by a turnaround in household spending and a rise in international visitors. Nonetheless, the recovery continued to lag its regional peers with GDP growing only 1.6% in 2021 after -6.2% in 2020, says Oxford Economics.

Oxford Economics expects economic momentum to improve further in 2022, with GDP rising by an above-consensus 5.1%. However, Oxford Economics expects the policy rate to remain at 0.5% until Q1 2023 as Thailand’s stunted recovery and a partial recovery in tourism still warrants an accommodative stance.

In line with our above-consensus forecast, Thai economy expanded 1.9% y/y in Q4 after contracting by an upwardly revised 0.2% in Q3 (Figure 1). On a seasonally adjusted basis, GDP grew 1.8% q/q amid an easing in most Covid restrictions and a rise in international tourist numbers.

Uneven recovery

However, the domestic recovery was uneven. Amid higher vaccination rates and improved mobility, private consumption rose 3.6% q/q (0.3% y/y) in Q4, but total investment fell 1.7% q/q (-0.2% y/y), with both public and private construction remaining very weak.

Net exports added 0.5ppt to y/y GDP growth in Q4 as import growth eased amid an unwinding of previous quarter’s surge in inventories. Meanwhile, total exports rose 17.7% y/y as manufacturing capacity increased, with a pickup in international visitors boosting service exports.

Interim Omicron drags aside, Oxford Economics expects domestic demand to be a key driver of GDP this year with the resumption of its “Test and Go” scheme to further boost growth. But the economy still faces several headwinds, including Covid-related disruptions to labour mobility, slower Chinese growth, and higher business and consumer prices.

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