World Bank highlights Thailand's recovery prospects and challenges

Zarcone opened his address by expressing gratitude for the invitation to the online event before going on to commend Thailand's ambition to accelerate growth and enhance the quality of life for its citizens, saying that these goals were attainable.

He also highlighted the Thai government’s focus on building a resilient economy capable of withstanding future global and domestic shocks but pointed out significant challenges, such as inequality and an ageing population, which will require attention for sustainable development.

Ambitious Economic Goals 

Zarcone shed light on three key areas of opportunity for Thailand's economy:

1 Inclusive human capital development and care for the ageing population: With fiscal space and solid macro fundamentals, Thailand is well-positioned to invest in human capital and infrastructure. The country's previous fiscal responses to the Covid-19 pandemic demonstrated its ability to provide social assistance and prevent significant poverty. Zarcone emphasized the potential for a permanent and targeted social protection system to support households and the greying population.

2 Growing the services sector and engaging with global value chains: Participating in global value chains (GVCs) presents an opportunity for Thailand to move towards productive and innovative industries. Export-oriented firms investing in research and development and exposed to competition have demonstrated notable productivity gains. The services sector, driving global economic transformation, offers avenues for scale, innovation, and spillover effects that can be leveraged for Thailand's growth.

3 Strengthening climate resilience: Zarcone praised Thailand's commitment to achieving carbon neutrality by 2050 and the country’s ongoing efforts to build a climate-resilient economy. The implementation of renewable energy solutions and adoption of the innovative Bio-Circular Green (BCG) economic model underlines However, he called for more ambitious measures, including well-designed fiscal policies to address climate change and encourage private sector investments in green initiatives.

Challenges on the horizon

While Thailand's vision for growth is commendable, the World Bank representative pointed out three significant challenges:

(a) Domestic structural weaknesses: A declining working-age population, slowing private investment, and weakened productivity growth present obstacles to Thailand's long-term growth prospects. Addressing these structural challenges will be essential for reclaiming higher growth trajectories and achieving high-income status by the desired timeframe.

(b) Global headwinds: Global economic uncertainties, such as high inflation, tight financial conditions, and record debt levels, may impact Thailand's recovery momentum through the goods trade and financial channels. Slower-than-expected growth in the East Asia and Pacific region, particularly in China, could further affect the Thai economy.

(c) Political stalemate: Internal political challenges pose hindrances to Thailand's recovery and future focus. The World Bank representative cautioned that impatience among the Thai private sector and international markets might increase if the political stalemate persists.

Zarcone concluded his address by reiterating the World Bank's commitment to supporting Thailand's development agenda and fostering a new and resilient economy, noting that the organisation's ongoing analytical work with various ministries and the private sector aims to inform strategic directions for inclusive growth across the country.

“The challenges may be significant, but the opportunities are equally vast”, he said. “The collaboration between Thailand and the World Bank holds promise for the nation's future as a beacon of growth, innovation, and human development in the region.”