Thailand’s Economy Remains Resilient amid Global Headwinds
BANGKOK – Thailand’s economy is projected to recover to its pre-pandemic level in 2022, but the pace of growth will be slower-than-expected in 2023 owing to global headwinds. The economy is projected to expand by 3.4 percent in 2022 and 3.6 percent in 2023. Growth in 2023 has been revised down by 0.7 percentage point compared to June projections reflecting faster-than-expected decline in global demand. Tourism sector recovery and private consumption will remain the major drivers of growth.
The Thailand Economic Monitor for December 2022: Fiscal Policy for a Resilient and Equitable Future, released today, finds that the Thai economy has shown resilience to recent global shocks. Economic growth accelerated to 4.5 percent in the third quarter of this year fueled by resurgent private consumption and strong tourism inflows following economic reopening in May and the authorities’ measures to mitigate cost-of-living pressures. Tourism arrivals reached 45 percent of the pre-pandemic level in September, surpassing those in Indonesia and the Philippines.
Most recently, Thailand experienced a significant slowdown in exports growth like other ASEAN peers, reflecting the impact of the global economic slowdown. Exports of goods are expected to contract by 2.1 percent in 2023, a sharp decline from the estimated expansion of 8.1 percent in 2022. This downward revision reflects weakening demand from the major trading partners, including China, the European Union, and the US.
“As Thailand looks towards resuming its path towards high-income country status post-pandemic, raising adequate fiscal space will be necessary to meet the additional spending need and provide a fiscal buffer for future shocks,” said Fabrizio Zarcone, World Bank Country Manager for Thailand.
According to the report, Thailand’s fiscal response to COVID-19 significantly mitigated the impact of the crisis on household welfare. Poverty is, however, projected to rise to 6.6 percent in 2022 from 6.3 percent in 2021 as the COVID-19 relief measures start to be phased out amid elevated inflation. Additional shocks, including a renewed spike in energy prices, may further erode fiscal space unless more targeted and cost-effective social assistance measures are introduced.
“The current crisis serves as an impetus to undertake much-needed structural reforms required to improve the quality and allocation of spending as well as to raise structurally low revenue,” said Kiatipong Ariyapruchya, Senior Economist for Thailand at the World Bank. “Meeting the spending need, while also improving distributional impacts of fiscal policies and undergoing fiscal consolidation, requires more efficient and targeted spending and further effort on revenue mobilization.
The report recommends improving jobs and earnings opportunities among low-income groups, while creating fiscal space to achieve adequate spending on social assistance for the most vulnerable groups including elderly, disabled and extreme poor people. Financing the necessary public investments in physical and digital infrastructure and human capital to promote growth and human development in the longer term will also be critical for achieving sustainable poverty reduction.