World Bank warns Thailand of labour crisis, urges AI upskilling

Melinda Good, Division Director for Thailand and Myanmar at the World Bank, shared insights on Thailand's economic challenges, opportunities, and growth prospects during the “Thailand Economic Drives 2026” seminar by Post Today on Tuesday (February 24).

She highlighted that while global economic conditions over the past year resembled a "huge storm" threatening significant downturns, the world economy has proven more resilient than anticipated, growing by an average of 2.7%, which was half a percentage point higher than forecasts.

Key factors that have supported global economic resilience include:

• Front-loading of business orders ahead of tariff measures
• Stable financial markets and the ongoing flow of investment
• Significant investments in Artificial Intelligence (AI), which have also positively affected investment in Thailand.

However, Melinda cautioned that some of these positive factors are short-term, particularly the rising policy uncertainty globally, which she described as a "hidden tax" that limits firms' investment decisions and capital flow.

Given Thailand’s open economy and high reliance on exports, these global challenges are bound to affect the country.

Thailand must identify its strengths amid global shifts

To tackle these challenges, Melinda suggested that Thailand must identify its strong points and emerging global trends. She outlined several critical global trends:

• Jobs

Globally, 1.2 billion youth are set to enter the workforce in the next decade, but only 400 million jobs will be available. Meanwhile, Thailand, like much of ASEAN, is ageing, with forecasts indicating a future worker-to-retired-person ratio of 1:2.

Melinda stressed that the skills mismatch in Thailand, particularly the shortage of tech talent, remains a significant concern. She recommended fast-tracking the creation of a "skills bridge" to help workers develop the digital skills needed for the future. 

Developing such skills could contribute up to a 20% increase in Thailand's GDP.

• Technology

AI, robotics, and cloud computing are no longer distant concepts but are transforming investment and global supply chains. Thailand ranks second in ASEAN for AI adoption, just behind Singapore. 

However, Melinda pointed out that Thailand must focus on applying these technologies in manufacturing to create higher-value jobs. While initial GDP growth from AI-related investments may seem small, the long-term compounded growth would provide Thailand with a significant competitive edge.

• Climate

Environmental risks are a major concern for Thailand. Without urgent action, climate change could cause economic damage worth 7-14% of GDP by 2050. 

According to the World Bank, over 60% of Thailand’s population and businesses are located in flood-prone areas, putting the country at a higher risk than other ASEAN competitors. To combat this, Thailand may need to invest up to US$219 billion to mitigate these risks.

• Trade fragmentation

Melinda also discussed the rise of protectionism, with over 400 new protective trade measures introduced annually since 2020. In contrast, fewer liberalising policies have been implemented globally. 

However, she highlighted that ASEAN, including Thailand, is in a unique position to lower trade costs within the region, which could increase Thailand’s income by about 2%. This would strengthen Thailand’s ability to attract the right investments.

Thailand’s path forward: key industries for growth

Melinda observed that Thailand is still stuck in the middle-income trap, with growth rates lower than the target for transitioning to a high-income country. To achieve higher growth, Thailand must leverage its advantages in five key industries:

• Advanced green manufacturing

Thailand should capitalise on electric vehicles (EVs) and solar energy to strengthen local producers by connecting SMEs with the global clean energy supply chain and improving clean energy infrastructure.

• Digital services

Although Thailand has a strong digital technology adoption rate, such as in digital payments, regulatory reforms are needed to facilitate secure data sharing and improve digital government services. 

Strengthening digital infrastructure and fostering public-private partnerships will help expand the digital workforce and improve local businesses.

• Agribusiness

While agriculture remains a key employment sector, farmers’ incomes remain low. To address this, the focus should shift from quantity to quality, with greater emphasis on safety, traceability, and connecting smallholder farmers to high-value supply chains.

• Tourism

Despite strong tourist long stays, Thailand's tourist spending lags behind competitors like Malaysia, with an average of just US$103 per day, compared to Malaysia's US$107. 

To remain competitive, the focus should shift towards sustainable tourism and health tourism, enhancing credibility through international standards to attract high-value customers.

• Creative industries

Thailand has great potential in creative industries, such as film, architecture, and the arts. However, compared to countries like South Korea and the US, employment in these sectors is still low. 

Policies should focus on increasing export revenues from creative products and developing cross-border intellectual property laws.