Thailand’s economy has been slow to recover from the impact of COVID-19 compared to other ASEAN countries, with its real GDP and GDP per capita still below pre-pandemic levels. The country’s heavy reliance on tourism and large informal economy made it especially susceptible to the effects of the pandemic.
Thailand’s Slow Economic Recovery
Efforts to revive the economy include immediate measures such as a one-time digital cash payment program and debt relief, as well as long-term strategies that encompass new free trade deals, initiatives for environmentally friendly industries, and infrastructure developments. However, the new government in the country is facing difficulties in tackling issues such as an increasingly older population, unequal access to education, and tensions in global trade.
Government Policies and Concerns
To address the economic challenges, the Thai government introduced short-term policies such as digital cash payments, debt relief, and cost-cutting measures. However, these initiatives have faced criticism due to their fiscal implications and the growing public debt-to-GDP ratio.
Impact of Free Trade Agreements
For decades, international trade has driven Thailand’s small, open economy, accelerating structural transformation and the shift of the population out of agriculture. The government is using free trade agreements (FTAs) to boost the economy, having signed 14 FTAs with 18 countries and being a member of many regional FTAs. Thai Prime Minister Srettha Thavisin is expected to visit Sri Lanka in February 2024 to sign an FTA.
Thailand is using free trade agreements to boost its economy, with the Prime Minister expected to sign an FTA with Sri Lanka. However, while these agreements are important, the benefits may be limited, especially given the country’s reliance on global value chains.
Supply-Side Constraints and Economic Growth
High productivity and resolving supply-side constraints are crucial for Thailand’s economic growth. Industrial policies are being implemented to address these issues, but it remains to be seen if they will achieve the desired outcomes amid concerns about political instability and other challenges the country faces.
Unlike other ASEAN countries, Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures. The Thai economy was hit hard by COVID-19 and has experienced a relatively slow economic recovery. Thailand’s large informal economy and dependence on tourism made the economy particularly vulnerable to the pandemic.
Mild economic growth in 2023 was primarily driven by activities in the travel sector, but the manufacturing sector continued to contract. Merchandise exports, a backbone of the Thai economy, continued to decline.
Short-term economic policies
The new government’s short-term economic policies include a one-off digital cash payment to about 50 million residents across the country, debt relief aimed at tackling illegal loan sharks and efforts to cut energy and electric train costs. Its medium- to long-term economic measures include new free trade agreements, green industry projects and a land bridge project connecting the Gulf of Thailand with the Andaman Sea.
Even though the digital wallet scheme has faced criticism from Thai economists, including two former Bank of Thailand governors, the government has decided to continue. The economic stakes are high due to the scheme’s 500 billion baht (US$14 billion) budget and the number of recipients.
This debt-financed spending has significant fiscal implications. After a decade-long stable debt-to-GDP ratio of about 42 per cent from 2009–2018, Thailand’s public debt-to-GDP ratio rose sharply from 41.6 per cent in 2019 to 62.44 per cent in 2023. Gone are the days of low borrowing costs, so a credible fiscal plan is needed to ensure that this digital wallet scheme will not preclude other economic and social policies.
Wannaphong Durongkaveroj Ramkhamhaeng University.
Wannaphong Durongkaveroj is Assistant Professor of Economics at Ramkhamhaeng University.
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