Thailand’s 2037 high-income goal at risk as productivity growth slows to 1.7%

Thailand is considering a national productivity council and reforms under its draft 14th development plan as slowing productivity growth threatens its ambition to become a high-income country by 2037.

The Organisation for Economic Co-operation and Development (OECD) puts Thailand’s annual productivity growth at 1.7% since 2020, down from 4.8% in the early 2000s. Previous policies to revive productivity have yet to address the problem comprehensively.

Danucha Pichayanan, secretary-general of the National Economic and Social Development Council (NESDC), told Bangkok Biznews that discussions with the OECD included establishing a dedicated agency or national committee to strengthen productivity and competitiveness.

 

Thailand’s work with the OECD supports ambitions to achieve economic growth of 3% or more and raise the pace towards 5% a year. Stronger productivity is central to that effort as expanding the workforce becomes increasingly difficult.

Thailand’s integration into global value chains helped drive rapid development from the 1960s and its transition to upper-middle-income status in 2011. Weak productivity growth, however, has constrained economic expansion over the past decade.

OECD Secretary-General Mathias Cormann highlighted the stalled income convergence at Future-Ready Economy 2026, held alongside the International Monetary Fund–World Bank annual meetings in Thailand in October. Thailand’s GDP per person rose from 30% of the OECD average in 2000 to 40% in 2013, but remained at 40% in 2024.

Thai agriculture and industry face different productivity challenges

Agriculture employs nearly 30% of Thailand’s workforce while contributing only 8–9% of GDP, according to Danucha. Agricultural GDP grows by about 2–3%, with adverse weather and disasters pushing growth below its average in some years.

Danucha identified technology and precision agriculture as ways to increase farm output and improve product quality. More effective management of agricultural assistance budgets would also help ensure public spending delivers greater benefits.

For manufacturing, Danucha emphasised continuous upskilling and reskilling as automated and semi-automated machinery becomes more widespread. Workers will increasingly need skills suited to production involving both people and artificial intelligence (AI).

The government’s Thailand Skill Bridge programme aims to prepare workers for emerging target industries. Bangkok Biznews identifies the Ministry of Industry, Board of Investment and Ministry of Higher Education, Science, Research and Innovation as partners in the initiative.

Franziska Ohnsorge, the World Bank’s chief economist for Asia, also stressed productivity’s importance at Bangkok Biznews’ “Thailand Economic Outlook 2027: New Horizon Beyond The Trap” forum on October 8, 2026. Stronger productivity would be essential to sustain growth as Thailand’s working-age population stagnates or shrinks, Ohnsorge told the forum.

OECD proposes a council to coordinate productivity policy

A national coordinating body could make productivity reforms faster, more consistent and more effective, according to Danucha. The Thailand Productivity Institute, under the Ministry of Industry, currently plays the main role in this area.

The OECD’s 2025 report, Strengthening Productivity Analysis for Policymaking in Thailand, recommends establishing a productivity council supported by a secretariat drawing staff from member institutions and academia. Its responsibilities would include applying an analytical framework, developing a work programme and publishing regular reports on productivity performance.

The OECD proposal includes NESDC. Bangkok Biznews also identifies six institutional groupings that would contribute to the collaboration:

- The Ministry of Agriculture and Cooperatives, through the Office of Agricultural Economics.

- The Ministry of Industry, through the Office of Industrial Economics and Thailand Productivity Institute.

- The Ministry of Higher Education, Science, Research and Innovation, through the National Research Council of Thailand and the Office of the National Higher Education, Science, Research and Innovation Policy Council.

- The Ministry of Digital Economy and Society, through the National Statistical Office.

- The Ministry of Labour, through the Division of Labour Economics in the Office of the Permanent Secretary.

- The Bank of Thailand and the Puey Ungphakorn Institute for Economic Research.
 

Draft 14th development plan sets five reform pillars

The draft 14th National Economic and Social Development Plan places productivity and competitiveness at the centre of its objective of faster, inclusive and sustainable economic growth. Its approach combines repairing and strengthening Thailand’s economic foundations with preparing for future opportunities.

Four principles underpin the draft plan:

1. Make productivity improvement the central driver of every economic sector.

2. Ensure growth benefits reach workers and small and medium-sized enterprises (SMEs).

3. Strengthen adaptability to technological and geopolitical change.

4. Build security and resilience by managing fiscal, energy and environmental risks.

The draft plan’s five development pillars aim to raise total factor productivity (TFP) and address structural distortions in the economy:

1. Economic transformation. Raise productivity across agriculture, manufacturing and services while developing new growth industries, including advanced technology, next-generation vehicles and components, electric vehicles, and health and medical services. Supporting measures include research and innovation, logistics and digital infrastructure, stronger SMEs and the movement of production resources towards more productive activities.

2. Public-sector reform. Adjust government roles, structures and management to create an appropriately sized, agile and efficient administration. A regulatory review would remove unnecessary laws and simplify complex procedures to support fair competition and good governance.

3. Human capital development. Improve skills, particularly among workers with low and intermediate skill levels, and develop digital infrastructure for workforce development. More flexible education would respond to labour-market needs, while welfare systems would support productivity and lifelong learning.

4. Sustainable resource and environmental management. Promote clean energy production and consumption and the bio-circular-green economy, alongside measures addressing climate change and fine particulate pollution, or PM2.5.

5. Research, technology and innovation investment and transfer. Develop priority technologies and strengthen collaboration between education, research and industry to commercialise research. Intellectual property protection and the application of emerging technologies, including AI, would support this work.

Within the draft plan’s economic pillar, NESDC identifies three priorities for increasing TFP:

- Shift towards higher-value activities, including advanced technology, next-generation vehicles, healthcare and the creative economy.

- Allocate resources more efficiently, matching workforce skills to market demand and encouraging business dynamism. Legal and regulatory changes would help SMEs enter markets, grow, adapt and obtain appropriate financing throughout the business cycle.

- Strengthen economic stability through financial and fiscal mechanisms.

Costa Rica forum identifies four productivity priorities

NESDC’s participation in the OECD’s 2026 Global Forum on Productivity in Costa Rica reinforced the need for a combination of policies, according to Danucha. The forum’s theme was “From Gaps to Growth: Unlocking Productivity Across the Economy”.

Danucha highlighted four mechanisms discussed at the forum:

1. Reduce structural distortions. Address unequal competition, regulatory barriers and informal employment to improve the allocation of resources.

2. Use more detailed data. Develop information on individual businesses and workers to support more precise productivity analysis and policymaking.

3. Spread the benefits of foreign direct investment. Attract investment while creating conditions that help domestic businesses gain technology and knowledge from multinational companies.

4. Prepare workers and infrastructure for AI. Improve workforce skills and prevent unequal adoption of AI between businesses. Digital and transport infrastructure investments should deliver value for money within fiscal constraints.

Cormann identified stronger competition as a starting point for productivity reform. Regulatory settings in Thailand, Indonesia and Malaysia are more restrictive than the OECD average, with Thailand facing particularly high barriers to market entry.

Cormann called for more effective regulation, simpler administrative procedures, fewer obstacles for new businesses and fair competition between state and private enterprises. Better allocation of capital would also be essential as Thailand increasingly depends on each worker producing more to sustain economic growth.

Source: Bangkokbiznews