A team from the International Monetary Fund (IMF), led by Ms. Corinne Deléchat, disclosed a report on the recovery of Thailand’s economy at the conclusion of the 2024 Article IV Consultation with Thailand, held between November 11 and 26, 2024, as follows:
During 2023, the Thai economy recorded a modest expansion of 1.9%, with further growth of 2.3% seen in the first three quarters of 2024, primarily driven by private consumption and a revival in tourism-related activities. Despite the recovery of international tourist numbers to roughly 90% of pre-pandemic levels, tourism revenues are still somewhat lower.
In the first nine months of 2024, the country witnessed a mere 1.6% increase in public consumption and a contraction of 2.3% in public investment, mainly due to delayed budget approval and slower budget implementation processes.
The IMF anticipated the cyclical recovery to persist, projecting an economic growth of 2.7% for 2024, set to moderately accelerate to 2.9% in 2025. A robust increase in private consumption, propelled by government stimulus, along with a pickup in private investment largely driven by public capital spending and increasing foreign direct investment, are expected to buttress this growth.
However, the report also noted potential risks that could affect these projections. Escalating global trade conflicts or amplified trade uncertainties could disrupt Thailand’s export resurgence and inhibit foreign direct investment. Fluctuations in commodity prices could also impact growth and result in inflation surges, both globally and domestically.
Domestically, Thailand faces the risk of debt overhang in the private sector, potentially leading to increased defaults and non-performing loans, thereby impairing credit supply and negatively impacting growth.
The IMF advised Southeast Asia’s second-largest economy to shift its policy focus towards rebuilding policy space as economic growth narrows, with a less expansionary fiscal stance or, alternatively, reallocation of planned cash transfers towards productivity-enhancing investments or social protection reforms.
In addition, the IMF commended the Bank of Thailand’s decision to reduce the policy rate in October and suggested further reductions to support the country’s economic recovery, while also calling for a comprehensive approach to address household debt overhang, including enhancing financial literacy and implementing responsible lending guidelines.
To reverse its declining potential growth, Thailand must adopt comprehensive structural reforms, including promoting competition, digitizing exports, reskilling the workforce, liberalizing the service sector, and strengthening governance. By upgrading physical and ICT infrastructures, improving social protection, and addressing root causes of household debt accumulation, Thailand can achieve stronger and more inclusive growth.
The projection by the IMF is slightly lower than the target set by the Thai government for 3.0% growth in 2025 and 3.1% expected by Fitch Ratings.
