World Bank lowers Thailand’s economic growth to 2.8%

The World Bank predicts that Thailand’s economic growth will be 2.8% this year, lower than previously expected, due to weak exports and a delayed budget.

• Thailand’s economic growth is expected to be 2.8% in 2024, lower than previously forecasted, due to weak exports and a delayed budget.
• Tourism and private consumption are projected to be key drivers of growth, with tourist arrivals expected to reach 90% of pre-pandemic levels.
• The government is planning a 500 billion baht handout to 50 million Thais through a “digital wallet” scheme, which could potentially add 1% to economic growth but also increase public debt.

Tourism and private consumption are expected to be key drivers of growth, with tourist arrivals projected to reach 90% of pre-pandemic levels this year. The Thai government aims to welcome a record 40 million foreign visitors in 2024, following the reception of 28 million visitors in 2023.

Additionally, Prime Minister Srettha Thavisin’s proposed $14 billion handout to 50 million Thais through the “digital wallet” scheme could potentially contribute an additional 1% to growth, although it may also increase public debt

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Last week, The World Bank has published its Systematic Country Diagnostic (SCD) Update for Thailand, outlining five reform priorities for the country to boost growth during a sustained economic downturn.

The priorities include building strong human capital, fostering a competitive and innovative economy, unlocking growth in secondary cities, ensuring sustainable and climate-resilient development, and strengthening fiscal institutions and public finance.

The report emphasizes the need for Thailand to improve education outcomes, enhance tech competitiveness, promote sustainable practices, and address challenges posed by climate change.

In addition to the factors mentioned earlier, there are other elements influencing Thailand’s economy:

1. Global Supply Chain Disruptions: The ongoing global supply chain challenges, including shortages of raw materials and shipping delays, impact Thailand’s manufacturing and export sectors. These disruptions can hinder production and affect trade flows.
2. Labor Shortages: The pandemic has led to labor shortages in certain industries, affecting productivity and output. Sectors like agriculture, construction, and hospitality have faced difficulties due to reduced workforce availability.
3. Tourism Dependency: While tourism is a significant contributor to Thailand’s economy, it also makes the country vulnerable to external shocks. Any fluctuations in international travel, travel restrictions, or health crises directly impact tourism revenue.
4. Political Uncertainty: Thailand has experienced political instability in recent years, with frequent changes in government and policy direction. Uncertainty can deter foreign investment and affect business confidence.
5. Debt Levels: High public debt and corporate debt pose risks to economic stability. Managing debt levels while stimulating growth remains a delicate balance for policymakers.
6. Climate Change and Natural Disasters: Thailand is susceptible to natural disasters such as floods, droughts, and tropical storms. These events disrupt economic activities, damage infrastructure, and affect livelihoods.
7. Digital Transformation: Accelerating digitalization and embracing technology can enhance productivity and competitiveness. However, ensuring equitable access to digital infrastructure remains a challenge.
8. Income Inequality: Addressing income disparities and promoting inclusive growth are essential for long-term economic stability. Focusing on education, healthcare, and social safety nets can help reduce inequality.

The SCD Update was developed in consultation with various stakeholders and aims to support Thailand’s transition towards greater economic prosperity and environmental integrity.