Thailand’s growth slowed to an estimated 2.5 percent in 2019 from 4.1 percent in 2018, due to external and domestic factors.

The economy is projected to pick up moderately to 2.7 percent in 2020 as private consumption recovers and investment picks up due to the implementation of large public infrastructure projects.

As Thailand seeks to transition to high-income status by 2037, boosting productivity and reviving private investment will be critical, according to the World Bank’s Thailand Economic Monitor report, released today.

Global economic growth is forecast to edge up to 2.5 percent in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist.

Risks include a re-escalation of trade tensions and trade policy uncertainty

These risks include a re-escalation of trade tensions and trade policy uncertainty, a sharper-than-expected downturn in major economies, and financial turmoil in emerging market and developing economies.

“A continued deceleration of economic activity in large economies, China, the Euro Area, and the United States, could have adverse repercussions across the East Asia region, through weaker demand for exports and the disruptions of global value chains.” 

Birgit Hansl, World Bank Country Manager for Thailand. “

Financial investment, commodity, and confidence channels could further weaken the global economy and adversely impact Thailand’s exports.”

Declining exports and growing weaknesses in domestic demand

In 2019, declining exports and growing weaknesses in domestic demand were the key drivers of the slowdown in growth in Thailand.

Agricultural commodity exports declined by 7 percent in the first three quarters of 2019, led by sharp decreases in export volumes for major products such as rice and rubber. Manufacturing exports declined by 6 percent in the same period, with electronics exports hardest hit.

Thailand’s strong currency, which has appreciated by 8.9 percent since last year, making the baht the strongest it has been in six years, has also impacted international tourism and merchandise exports.

Accommodative monetary policies and a fiscal stimulus package

The government has responded swiftly to the growth slowdown, through accommodative monetary policies and a fiscal stimulus package to boost economic growth.

Going forward, the report recommends the governments consider policies to enhance the effectiveness of the stimulus by focusing on implementing major public investment projects, improving the efficiency of public investment management, and providing social protection coverage for vulnerable families.

The recent growth slowdown has highlighted Thailand’s long-run structural constraints, with slowing investments and low productivity growth. In the last decade, Thailand’s productivity growth has fallen to 1.3 percent over 2010-2016 from 3.6 percent over 1999-2007.

Private investment has halved from 30 percent of GDP in 1997 to 15 percent in 2018, as foreign direct investments slowed, and progress stalled on projects under the Eastern Economic Corridor.

The report projects that if current trends continue, with no significant pickup in investment and productivity growth, Thailand’s average annual growth rate will remain below 3 percent.

To achieve its vision of being a high-income country by 2037, Thailand will need to sustain long-run growth rates of above 5 percent, which would require a productivity growth rate of 3 percent and increase investment to 40 percent of GDP.

“Boosting productivity will be a critical part of Thailand’s long-term structural reform,” said Kiatipong Ariyapruchya, World Bank Senior Economist for Thailand

“Increasing productivity, particularly of manufacturing firms, will depend on increasing competition and openness to foreign direct investments, and improving skills.”

Kiatipong Ariyapruchya, World Bank Senior Economist for Thailand

Sustaining higher productivity growth will require removing constraints that prevents new firms, especially foreign firms, and skilled professionals from entering the domestic market.

These constraints include lifting restrictive laws, particularly for the services sector, implementing the new Competition Act with clear guidelines related to state-owned enterprises and price controls, and developing policies to build the skills and human capital needed for an innovative knowledge-based economy.

About the author

The World Bank's mission is to end extreme poverty and promote shared prosperity

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Sign Up for Our Newsletter

Get notified of our weekly selection of news

You May Also Like

Thailand’s Ministry of Finance expects 3.5 to 4.5% economic growth in 2022

For next year, the Ministry of Finance is projecting an economic growth of 3.5-4.5% from effective pandemic control measures, incentives, domestic spending, the export sector, private investment support, global economic recovery, and government expenditures.

How War in Ukraine Is Reverberating Across World’s Regions

The biggest effects on current accounts will be in the petroleum importers of ASEAN economies, India, and frontier economies including some Pacific Islands. This could be amplified by declining tourism for nations reliant on Russian visits.

New Year Spending Hits 12-Year-Low Due to Omicron Fears

The UTCC’s Center for Economic and Business Forecasting (UTCC-CEBF) released its economic projections for the 2022 New Year holiday season, anticipating spending to be the lowest in 12 years.