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Realizing Higher Growth Potential in Thailand Through Bold Structural Initiatives and Reforms
Thailand’s economy is on the upswing, driven by strong private demand, a rebound in tourism, and increased government spending. The growth forecast is 2.8% for 2024 and 3.4% for 2025.
Economic Developments and Outlook
Thailand’s economic momentum is driven by resilient private demand, tourism recovery, and increased government disbursements. The ASEAN+3 Macroeconomic Research Office (AMRO) forecasts growth strengthening to 2.8% in 2024 and 3.4% in 2025. Despite this, structural reforms are necessary to avoid underperformance. The first quarter of 2024 saw weak government spending and exports, but private consumption and tourism remained robust. Tourist arrivals are expected to grow from 28.3 million in 2023 to over 36 million in 2024, boosted by higher government disbursements following April’s budget approval.
Risks and Challenges
Thailand faces significant short-term risks, including potential setbacks in exports, private investment, government disbursement, and private consumption due to high indebtedness. Inflation might rise as energy subsidies are withdrawn. Over the medium to long term, public debt sustainability and a secular decline in growth potential pose substantial challenges. Global digital and green transitions could impact export competitiveness, especially for SMEs. Skill gaps and high labor informality limit technological progress utilization, further complicating economic transformation efforts.
Policy Recommendations
Securing macro-financial stability and revitalizing structural transformations are critical for Thailand’s long-term growth. Current monetary policies are appropriate, supporting economic recovery while managing high household debt. Fiscal policies should focus on consolidation for rebuilding fiscal space, with AMRO praising Thailand’s Medium-Term Fiscal Framework revisions. Comprehensive revenue reforms are essential to meet increasing infrastructure, aging population, and climate change expenditure demands. Key areas for reform include fostering innovation, enhancing human capital, and upgrading infrastructure, with a strong emphasis on executing development plans and investment projects effectively.
Source: Thailand: Realizing Higher Growth Potential Through Bold Structural Initiatives and Reforms
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