Saturday, April 13, 2024



Thailand Flag

GDP: USD495.3bn (World ranking 30)
Population: 71.7mn (World ranking 20)
Form of state: Constitutional Monarchy
Head of government: Srettha Thavisin (PM)
Next elections: 2027, Legislative


  • Member of the Association of Southeast Asian Nations (ASEAN)
  • Robust domestic consumption
  • •Strong FDI inflows as a result of firms diversifying away from China


  • Weaknesses in governance and corruption
  • Deficiency in skilled labor force
  • Weak demographic profile
  • High level of household debt

Economic overview

Growth to edge up in the medium term, driven by a recovery in tourism and robust consumption

Thailand experienced comparatively moderate GDP growth in the decade prior to the Covid-19 crisis, with an average annual growth rate of +3.6%. However, the pandemic significantly impacted the economy, resulting in a contraction of -6.1% in 2020 followed by a slow recovery in 2021 (+1.5%) and 2022 (+2.6%). We estimate the economy to have slowed down to an annual growth rate of +2.4% in 2023 due to the drag from challenging external conditions – notably weak global demand and the slowdown in China broadly offsetting the positive contributions from private consumption growth. Looking ahead, we expect economic growth to accelerate to close to +3% in 2024 and 2025 on the back of a gradual recovery in external demand, an acceleration in inbound ourism, higher investments and continued robust private consumption. Further, Thailand stands to benefit significantly, especially in terms of higher FDI inflows as multinational firms look to diversify supply chains away from China – conditional on incentives to improve its competitiveness relative to its regional peers (notably Vietnam and Indonesia).

The Covid-19 crisis saw a shift in the broad fiscal policy stance of Thailand. The fiscal deficit deviated significantly from its trend in 2020 (-4.5% of GDP), 2021 (-7%) and 2022 (-4.6%) – compared with -0.8% of GDP in 2019 and -0.3% of GDP on average in the 2010s. We expect the fiscal deficit to moderate to an annual average of -2.7% of GDP during the period 2023- 2025, in the context of populist policies to stimulate domestic consumption and higher infrastructure investments, but also stronger growth and therefore higher government revenues.

On the monetary policy front, the Bank of Thailand switched to monetary tightening in August 2022 with a cumulative increase of 200bps by the end of 2023, on the back of a considerable depreciation of the Baht against the US dollar and rising inflation. Looking ahead, we expect the monetary policy stance to remain neutral in the near term with a gradual easing thereafter likely depending on the government’s expected fiscal expansionary path and a gradual easing of inflationary pressures. After rising to a record high of 6.1% in 2022, we expect headline inflation to ease to 1.4% in 2023 and 2024, followed by a slight increase to 1.5% in 2025, thereby remaining within the target range of the central bank (1-3%). However, demand-induced inflationary pressures cannot be completely ruled out – notably from strong private consumption growth, wage growth prospects and fiscal stimulus measures.

Resilient financing environment, with vulnerabilities in terms of public debt

Broadly, the short-term financing risk in Thailand is medium. Indeed, while the level of FDI relative to the current account deficit remains low, in the medium term, it should accelerate on the back of multinational firms’ efforts to diversify supply chains away from China. In addition, public debt will be worth monitoring, although it remains manageable as most of it is domestic and with long maturities.

Thailand’s financial system has showed resilience but vulnerabilities exist. The fiscal deficit rose significantly during the pandemic although it should moderate to an annual average of -2.7% of GDP during the period 2023-25. Public debt rose from 41% of GDP in 2019 (and an average of 36% in the 2010s) to close to 61% in 2022 in the wake of the pandemic. Going forward, we expect public debt to stabilize around 60% by 2025. On the positive side, this is not critical as most of the debt is domestic and with long maturities. In terms of the external balance, Thailand’s current account balance posted moderate deficits in 2021-2022 as the tourism sector suffered from the pandemic and rising global energy prices boosted the value of imports in 2022. We expect the current account deficit to have narrowed to -0.2% of GDP in 2023 and to return to a surplus of 1.9% in 2024 and to 2.6% in 2025, driven primarily by the recovery in the tourism sector, moderating energy prices and a recovery in trade on the back of a pickup in external demand. In addition, the promotion of free trade and deeper regional integration through the signing of free trade deals will be on Thailand’s external policies agenda in the medium term.

Challenges remain in the business environment and political outlook

Thailand’s business environment has deteriorated over the past few years, according to our assessment of 185 economies, in which the country now ranks just below average. The Heritage Foundation’s Index of Economic Freedom 2023 survey assigns Thailand rank 80 out of 184 economies, down from rank 42 in the 2021 survey, reflecting deteriorations regarding property rights, judicial effectiveness, government integrity, business freedom, labor freedom and trade freedom. Meanwhile, the World Bank Institute’s annual Worldwide Governance Indicators survey suggest weakness in regulatory quality and the control of corruption based on the 2022 survey, with a slight decline from the previous year. Our proprietary Environmental Sustainability Index puts Thailand at rank 154 out of 210 economies, reflecting weaknesses in terms of renewable electricity output, the recycling rate and overall climate[1]change vulnerability. However, the country scores better with regard to energy use and CO2 emissions per GDP as well as water stress.

The current coalition government led by Srettha Thavisin faces challenges despite its comfortable majority in the House of Representatives due to differing interests of the component parties within the coalition. Voters have been disillusioned over the alliance between the Pheu Thai Party (PTP), which promised greater democracy and the military aligned parties. Further, the leading opposition party – the Move Forward Party (MFP) faces a serious charge that its campaign to introduce reform of the monarchy is equivalent to trying to overthrow the current governing system of constitutional monarchy. In the short to medium term, risks to political stability in Thailand cannot be completely ruled out.

CEOWORLD magazine - Insights - Thailand