Thailand on Alert: China’s Economic Slowdown Impact Looms

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Last updated on September 4th, 2023 at 01:08 pm

Recent developments include a warning from Thailand’s National Economic and Social Development Council (NESDC) to Thai companies, particularly exporters, to get ready for the effects of China’s economic slowdown. This warning comes as China deals with a real estate market plagued by significant debt and liquidity difficulties, which is slowing down growth more than was anticipated.

Danucha Pichayanan, the secretary-general of NESDC, emphasized the need for vigilance and acknowledged that, although it is presently uncertain how much Thailand will be impacted by China’s economic problems, the situation needs to be closely watched. He expressed these worries when Thailand’s economic outlook report for the second quarter was released.

There is currently little knowledge on whether or not this issue will ultimately cause an economic disaster, said Pichayanan. The world economy as well as the Thai economy will unavoidably suffer if China’s economy weakens. Additionally, this has to be supported.

The global economic downturn and unpredictability of geopolitics have already hurt Thailand’s export industry. Being a country that depends primarily on exports, Thailand’s commerce and tourism income stand to suffer greatly from a downturn in China paired with the global crisis.

According to the NESDC data, China’s GDP expanded by just 5.5% in the first half of the year, which was the slowest rate in the previous two years. Furthermore, China’s growth trajectory is far from stable due to several reasons that prevent expansion and recovery.

Pichayanan identified four main issues that limit China’s economic expansion:

  • Investment is declining, especially in the real estate market.
  • Domestic consumption decline: accompanied by a high youth unemployment rate.
  • Import and export quotas: Originating in Western countries.
  • High public debt: 51.5 percent of GDP.

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As the cost of fuel and food gradually declines, China is also on the verge of deflation. A fundamental risk posed by the falling product prices is that, if demand remains weak, the Chinese economy could enter a deflationary phase.

Pichayanan did give a glimmer of optimism when he said that the People’s Bank of China’s accommodative monetary policy would help the Chinese economy. This might inject cash into the Chinese economy and improve its prospects when combined with current fiscal stimulus measures.

In conclusion, Thailand’s economy is at a crossroads and is vulnerable to the knock-on effects of China’s economic slowdown due to its significant reliance on exports. For Thai firms to handle these difficult times and lessen potential economic shocks, smart procedures and monitoring are crucial.

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