Thailand’s GDP will expand by 4.4%, but it will be brief, says IMF
The International Monetary Fund (IMF) has forecast a 4.4% growth in Thailand’s gross domestic product (GDP) this year compared to last year, due mostly to short-term financial stimuli.
However, it expects the pace of growth to decelerate to 2% year on year by 2025.
In its “2023 Article IV Consultation with Thailand” report published on Monday, the IMF’s executive board concluded that the kingdom’s economic recovery was waning amid decelerating inflation. While Thailand experienced a 2.6% economic expansion in 2022, growth moderated to 1.9% in the first three quarters of 2023, the IMF said.
The IMF noted that despite robust private consumption buttressed by a rebound in tourism, the economy faced challenges from weak external demand and domestic investment.
The report said inflation decelerated in November 2023, owing to the base effect of energy and food prices, gradual monetary policy tightening, and the extension of energy price subsidies.
As of September 2023, the current account balance registered a small surplus aided by the recovery in tourist arrivals, a drop in shipping costs and a larger compression of imports relative to exports, the report noted.
The report expects Thailand’s economic recovery in 2023 to remain timid, before accelerating in 2024. Real GDP is projected to grow by 2.5% in 2023, supported by an acceleration of services exports and private consumption in the last quarter, while headline inflation is expected to average 1.3% in the year.
Growth is projected to accelerate briefly in 2024, the report said, on account of improvements in external demand and robust growth in private consumption bolstered by the government’s fiscal stimulus.
Driven by the demand boost, headline inflation is expected to accelerate mildly in 2024 to 1.7%, but remain within the Bank of Thailand’s target. The current account balance is expected to turn into a small surplus in 2023 and further rise in 2024, as the continued recovery in tourism receipts and decline in freight costs offset the weak performance of exports.
The IMF remarked that the Thai economy’s rebound is subject to external risks that include an abrupt global slowdown – including in China – hikes in commodity prices, tighter than expected global financial conditions, and deepening of geo-economic fragmentation.
However, the IMF warned that domestic risks will add to uncertainty as a lack of fiscal discipline could undermine macroeconomic stability. Also, it said, elevated private sector debt poses a threat to financial stability, and over reliance on tourism increases Thailand’s vulnerability to external shocks.
Instead, the fund’s directors said Thai authorities should implement structural reforms to promote investment and boost competitiveness and productivity. They underscored the need to remove excessive regulation, upskill the labour force, and reform the social protection system. Managing climate transition risks and building resilience to natural disasters will also be key, they said.
