Thai economic recovery faltered as growth declined

Growth in 2023 was dampened by a contraction in goods exports as well as ongoing fiscal consolidation. The economy is projected to expand at a more moderate 3.1% in 2025.

Headline inflation is projected to slow to 1.1% in 2024 due to low energy prices. However, food prices are expected to increase.

Outlooks and risks

Thailand’s economic growth is projected to pick up to 3.2% in 2024 from 2.5% this year, supported by a recovery in tourism and goods exports and sustained private consumption, the report noted.

Goods exports are expected to rebound due to favourable global trade despite the slowing Chinese economy.

Tourism is not projected to return to pre-pandemic levels until mid-2025, set back by the Chinese slowdown.

Upside and downside risks to growth exist. If the Digital Wallet program promised in the recent elections is rolled out in May 2024, it will cost 500 billion baht, some 2.7% of GDP. Growth is then anticipated to surpass baseline projections and the fiscal deficit may increase to 4-5 percent of GDP, approaching the average level observed during the COVID-19 crisis in 2020-2022.

Carbon pricing is critical

Heightened geopolitical conflict and high oil prices, which could lead to another inflationary surge in Thailand due to its high dependency on energy imports, pose downside risks to the outlook. Moving to a lower-carbon growth path could help Thailand build energy security, reduce environmental degradation, and position Thailand as a regional leader in green and sustainable growth.

A special focus of the report finds that carbon pricing, whether through carbon taxes or an emissions trading scheme, is critical for achieving ambitious reductions in greenhouse gas emissions.

Thailand could make greater use of carbon pricing to stabilise emission levels, but additional measures, or very high carbon prices, would be required to reduce emissions. Supplemental steps such as building electric vehicle infrastructure or providing training in solar panel installation, could accelerate low-carbon technology adoption.

“Thailand has set a clear goal of achieving net-zero emissions by 2065 and a 30 percent reduction in emissions by 2030,” said Fabrizio Zarcone, World Bank country manager for Thailand.

“As Thailand revises its Climate Change Act, which is expected to be launched in 2024, carbon pricing must be considered as a critical policy instrument if Thailand is to meet its ambitious carbon neutrality target.”

Revenues generated from carbon pricing could be used to fund other climate policies or to support public expenditure. For example, carbon prices could ease the financial pressure on Thailand’s healthcare system, much of which is publicly funded.

Thailand has implemented a range of policies to reduce carbon emissions and has taken the first steps to implement comprehensive carbon pricing. Voluntary emissions trading has been in place since 2015. These policies may constrain future emissions growth, but more policy ambition is needed to meet current targets.