Thai Finance Minister Unveils Bold Plan to Revamp Economy Amid Global Headwinds

 

Thailand's Finance Minister Pichai Chunhavajira has unveiled ambitious economic strategies aimed at transforming the country's economic structure, fostering new growth engines, and enhancing competitiveness.

 

These plans come with just two years remaining in the Pheu Thai government's term under Prime Minister Paetongtarn Shinawatra.

 

Speaking during an exclusive interview with Krungthep Turakij newspaper, Pichai highlighted the significant challenges facing the Thai economy from external factors, particularly reciprocal tariffs imposed by the United States.

 

He warned that these tariffs risk keeping Thailand's economic growth below 2% in 2025 for a second consecutive year, prompting the government to adjust its stimulus plans for the latter half of 2025.

 

This adjustment will run in parallel with a major economic restructuring effort designed to address decades of hindering growth.

 

Pichai outlined the pivotal role of fiscal policy, which he sees as the "hero" in driving Thailand back to sustainable growth and reducing social inequality.

 

"The core of solving the country's problems and building long-term sustainability is to drive significant economic growth," he stated. "A strong economy will bring financial prosperity to both the private and public sectors. If the economy expands well, people will have more wealth, which will translate into increased tax revenue for the government and a reduction in the public debt-to-GDP ratio."

 

He noted that public debt has risen from 40% of GDP in 2014 to 60% – or 12 trillion baht – today. However, Pichai argued that if GDP could grow by 5-6%, this seemingly large debt would diminish in proportion.

 

 

Pichai Chunhavajira

 

He emphasised that the perception of high or low debt hinges on repayment capacity; if the government generates more revenue than expenditure, or if the economy thrives, public debt becomes less of a concern. Nevertheless, he conceded that Thailand's current economic growth potential is lower compared to its regional neighbours.

 

Despite an uptick in economic growth to 2.5% last year, the government aims to maintain this momentum, targeting 3.0-3.5% growth in 2025, coupled with monetary policy measures to keep inflation at a central rate of 1.5%. This, he believes, will create more fiscal space for economic stimulus.

 

However, Pichai acknowledged volatility from external factors, including geopolitical conflicts and trade wars, which have impacted global exports. The US's reciprocal tariff measures are fundamentally altering global trade rules, shifting towards multilateral negotiations.

 

Consequently, Thailand must revise its stimulus plans to align with the evolving situation, providing targeted assistance to affected exporters, supply chain manufacturers, and labourers who require fiscal and monetary policy support.

 

"If we didn't change, the original plan was for this year's GDP to grow by 3% and maintain momentum by directly injecting funds into the system through consumption, which has already seen over a hundred billion baht for vulnerable groups," Pichai explained. "But today, the challenge has changed, and the method of stimulating the economy must change accordingly."

 

 

Three-Year Budget to Back Economic Restructuring

Pichai stated that fiscal measures are a crucial tool for economic propulsion. Despite reduced fiscal space compared to the past, the government retains spending capacity.

 

 

He highlighted the allocation of 157 billion baht in the 2025 budget, which will be strategically deployed for job creation, structural problem-solving, and enhancing competitiveness – a shift from previous approaches focused solely on direct consumption stimulus.

 

"Even though there's a remaining budget, it's still insufficient," he admitted, indicating that the 2026 budget, currently awaiting parliamentary submission, will be reviewed for potential adjustments, and the 2027 budget will be set to ensure consistency and continuity.

 

He also suggested that a budget deficit could accelerate economic growth. Thailand currently projects a deficit of 4% of GDP, while the World Bank's suitable level is 3.25%. The government's goal is to reduce the deficit not by cutting spending, but by boosting economic expansion.

 

 

Five Key Pillars for Economic Restructuring

To achieve sustainable growth, Thailand must undertake substantial structural adjustments to enhance competitiveness. Successfully tackling these issues would also address fiscal challenges.

 

Pichai outlined five key areas:

Transforming the Production Structure: Current Thai industry largely relies on older-generation products, such as internal combustion vehicles, and underutilises modern technology. The focus must shift to supporting and attracting investment in "future industries" like Electric Vehicles (EVs), digital technology, biotechnology, and green energy. This is particularly crucial during global production base relocations, necessitating legal reforms, such as amending "Right over leasehold asset" land ownership laws to allow foreign investors long-term land leases.

 

Overhauling the Agricultural Sector: Despite employing 30 million people and occupying one-third of the country's land, this sector contributes only 8% to the economy. It also faces high costs and low output, hindering export competitiveness. The aim is to reduce production costs and boost productivity. Key initiatives include reallocating planting areas for high-value crops, investing in integrated water management for consumption, agriculture, and industry, and developing lower-cost logistics.

 

Elevating the Tourism Sector: While tourist numbers are high, visitor behaviour has shifted towards lower spending and shorter stays. Structural remedies are needed, including improving airport infrastructure, transport connectivity, creating new events and destinations, and upgrading accommodation, food services, convenience, cleanliness, and safety to align with changing tourist preferences.

 

Developing Critical Infrastructure: Integrated water management is an urgent and continuous priority to support consumption, agriculture, and modern industries, anticipating future water shortages. Similarly, logistics systems require immediate upgrades, including accelerated construction of dual-track and high-speed railways to reduce costs and enhance transport efficiency.

 

Human Capital Development: Developing the skills of the workforce to meet the demands of modern industries is paramount to boosting national competitiveness.

 

Beyond these, the Ministry of Finance continues its debt restructuring efforts for the public, preparing measures to assist debtors with small outstanding amounts, which could resolve credit bureau issues for millions.

 

 

Fiscal Policy to Tackle Inequality

Pichai stressed that social and economic inequality is a growing problem that fiscal policy can address.

 

The government will act as an intermediary, collecting revenue from high-income earners through the tax system and redistributing it to low-income individuals, potentially through direct assistance or by reducing essential expenses such as free education or affordable public transport.

 

Furthermore, environmental issues, particularly climate change, are critical, with an emphasis on carbon emission reduction.

 

Future plans include setting carbon footprint standards for large industries and developing carbon credit systems, which will not only incentivise pollution reduction but also create new jobs.

 

Pichai concluded by emphasising that beyond economic, fiscal, and social measures, "national unity is the key" to collectively resolving problems and guiding the country in the right direction. He also underscored the importance of seamless cooperation between fiscal and monetary policies to support sustainable national growth.