Borrow to grow: World Bank urges Thailand to invest its way out of crisis

Thailand must invest its way out of crisis rather than rely on short-term fiscal fixes, a senior World Bank economist has warned, arguing that targeted borrowing to build new industries is the only viable path to restoring long-term growth.

Dr Kiatipong Ariyapruchya, senior economist at the World Bank in Thailand, said the country faces a convergence of structural risks — from an energy crisis and shrinking fiscal space to an ageing population — but these challenges could be turned into an opportunity if Thailand shifts its policy focus towards future-oriented investment.

Borrowing is not the problem — how it is used is

Thailand’s public debt is approaching the 70% of GDP ceiling, while household debt remains elevated and the tax base relatively weak. These constraints have intensified debate over fiscal limits.

However, Dr Kiatipong said the real issue is not the size of public debt, but the purpose of borrowing.

While many countries use fiscal policy in the short term to support vulnerable groups through cash handouts or soft loans, Thailand should go further by directing borrowing into high-impact investments that can expand economic capacity.

“If borrowing can drive stronger GDP growth, the debt-to-GDP ratio will naturally decline over time,” he said.

Energy crisis exposes structural vulnerability

Thailand’s reliance on imported energy remains a key risk. The country is classified in the “red group” due to being the largest net oil importer in Asean in proportional terms.

This leaves the economy highly exposed to global price volatility, directly affecting production costs and household expenses, and narrowing policy flexibility compared with regional peers that have domestic energy resources.

At the same time, Thailand retains a degree of resilience through low inflation, which remains close to zero and within the Bank of Thailand’s target range, even as global energy prices rise.

Ageing society and inequality weigh on growth

Another major constraint is Thailand’s transition into a fully aged society, which is dragging down labour productivity and increasing healthcare burdens.

This challenge is compounded by a heavy concentration of economic activity in Bangkok, limiting growth in secondary cities and reinforcing regional inequality.

“The economy is effectively running on one engine,” Dr Kiatipong said, warning that uneven development is slowing overall income growth and reducing efficiency.

He called for greater decentralisation, allowing provincial cities to raise funds and invest in infrastructure — such as light rail systems — to strengthen regional growth and broaden the economic base.

Five new engines to drive long-term growth

To break free from the middle-income trap, the World Bank has identified five industries of the future that could serve as new growth engines.

Advanced manufacturing and green industry

Thailand already has a strong base in this sector, particularly in electronics and electric vehicles. The country could capture up to 60% of the EV supply chain in the region. It is also among the world’s top exporters of low-emission air conditioners, supporting both industrial growth and energy transition.

Digital services

Seen as the backbone of the economy, digital infrastructure such as PromptPay has positioned Thailand as a regional leader. The next step is developing sovereign AI and attracting data centres to build a domestic AI ecosystem.

Agriculture and food

The focus is on upgrading traditional strengths with green innovation, increasing value in a sector that still employs a large share of the population.

Sustainable tourism and health

Thailand aims to strengthen its position as a wellness and medical tourism hub, targeting higher-value visitors while aligning with sustainability standards.

Creative economy

Leveraging cultural assets and creativity, this sector can add value across industries, particularly tourism, while digital technology and AI can help Thai content reach global markets.

Growth must accelerate to avoid prolonged stagnation

Thailand has remained in the upper-middle-income group for decades and risks being stuck there longer. Earlier projections suggested the country could escape the trap by 2037, but global disruptions, including Covid-19, have slowed progress.

If growth remains at around 2.5% annually, Thailand may not break free until 2050, a delay of more than a decade.

“The only way forward is to accelerate potential growth to 3–4% a year,” Dr Kiatipong said, stressing the need for coordinated investment, regulatory reform and infrastructure development.

Turning crisis into opportunity

The World Bank’s recommendations come ahead of the 2026 Annual Meetings of the International Monetary Fund and the World Bank Group, to be held in Bangkok from October 12–18.

Dr Kiatipong said aligning policy across the five sectors — supported by regulatory reform, service-sector liberalisation and improved infrastructure connectivity — would be key to transforming Thailand’s current challenges into long-term economic stability and prosperity.