Thailand in need of labour reforms, wider access to green solutions: World Bank

The comment was made in the World Bank's “East Asia and Pacific April 2023 Economic Update”, which was released to the public on Friday.

According to the most recent report, Thailand's economy shared the positive trends of East Asia and the Pacific region. However, Thailand may experience a slowdown due to uncertainties, volatility, and ongoing geopolitical tensions.

Fabrizio Zarcone, World Bank's country manager for Thailand, pointed out that strong private consumption and further tourism recovery, particularly following the lifting of restrictions by China, will support economic growth, raise household incomes, and lead to a drop in the poverty headcount rate to 10.6% this year.

The labour market will continue to improve, aided by employment in the services sector, as manufacturing employment growth is expected to slow, the update said.

Tourist arrivals are expected to increase to 27 million in 2023, representing 68% of pre-pandemic levels. Arrivals are expected to pick up after that, surpassing pre-pandemic levels by 2024.

Overall, World Bank expected the Thai economy to grow by 3.6 per cent in 2023, up from 2.6 per cent in 2022.

However, Thailand's economic recovery has lagged behind that of its Asean peers, with falling goods exports clouding the outlook. Downside risks include a slowing external environment, domestic price pressures, and high household debt, Zarcone said.

Furthermore, persistent increase in commodity prices will continue to disproportionately affect poor and vulnerable groups, putting downward pressure on household consumption.

Meanwhile, political uncertainty continues amid the looming general election and the formation of a government.

He noted that Thailand's economy is growing, but there are still some factors impeding the country's progress. Therefore, the country is required to make structural reforms in order to leap forward.

His viewpoint is consistent with that of World Bank East Asia and Pacific vice president Manuela V Ferro, who said that in order to regain momentum, Thailand and most major East Asian and Pacific economies must boost innovation, productivity, and lay the groundwork for a greener recovery.

Kiatipong Ariyapruchya, World Bank senior economist for Thailand, suggests that the country improve its service sector with better payment and welfare in order to increase people's purchasing power while also assisting the government in properly collecting taxes.

Both professional and unskilled workers were upskilled and reskilled as part of the reform.

Meanwhile, he urged Thai manufacturers to improve their production efficiency so that less energy is consumed while productivity increases.

He supports the government's decision to continue expanding the State Welfare Card programme (from 13.5 million to at least 14.6 million beneficiaries), but only for the most vulnerable groups, in order to avoid a budget deficit and excessive public debt.

Zarcone added that Thailand should take more concrete steps to address its sustainable development and climate change issues. Meanwhile, he proposed more supportive measures to encourage people to use renewable energy during the energy transition.

According to Aaditya Mattoo, World Bank chief economist for the East Asia Pacific Region, growth in developing East Asia and the Pacific is expected to accelerate to 5.1% in 2023 from 3.5% in 2022, as China's reopening helps the economy recover to a 5.1% rate from 3% last year.

Growth in the region outside of China is expected to slow to 4.9% in 2022, from 5.8% in 2022, as inflation and high household debt in some countries weigh on consumption.

He noted that most East Asian Pacific countries have experienced higher and more stable growth than economies in other regions over the last two decades.

However, as productivity growth and the pace of structural reforms have slowed, the process of catching up with advanced economies' per capita income levels has stalled in recent years.

He said the significant "reform gap”, particularly in services, has the potential to magnify the impact of the digital revolution and boost productivity across industries, ranging from retail and finance to education and health.

He warned the region to prepare for three major challenges — rising tensions between major trading partners, an ageing society, and increased exposure to climate risks — as policymakers work to sustain and accelerate economic growth in the aftermath of Covid-19.

He proposed that increasing trade, addressing population dynamics, and improving climate resilience could boost growth.