Thailand's economy needs structural changes for long-term growth, says report

EIC chief economist Somprawin Manprasert expressed his concerns as the SCB EIC forecast Thailand's growth for 2024 at 3.0%, up from 2.6% this year.

The EIC report said the growth was being fuelled by export expansion, which was supported by rising global trade growth. Furthermore, private investment will increase in tandem with the recovery of exports, the increasing trend of investment promotion applications, and government policies to encourage investment.

Meanwhile, an increase in foreign tourists visiting Thailand will also help the country's economic growth.

However, in the long run, Somprawin pointed out that the country needed growth engines, such as skilled labour, innovative sunrise industries, and strong domestic consumption.

"In the long-term, the SCB EIC is concerned that the Thai economy would grow at a slower rate than its potential to grow,” said Somprawin, adding this was due to long-term structural issues such as low investment, lower total factor productivity, and scars from the Covid pandemic.”

Thailand was among the countries with the slowest recovery from the Covid-19 crisis, he said.

Furthermore, the Thai economy remains fragile and weak as a result of uneven household and business recovery, particularly low-income households and small businesses with high debt but slow revenue recovery.

Besides, the country is facing rising uncertainties as a result of external factors such as climate change and geopolitical issues, as well as domestic factors such as government policies that must be closely monitored.

He added that highly uncertain government policies could lower the fiscal buffer available for additional spending to address economic uncertainties and promote investment to boost Thailand's long-term potential.

In order to effectively address Thailand's weaknesses, Somprawin proposed “four enhancing policies” as solutions to Thailand's structural issues.

The first step is to enhance household immunity through adequate social assistance and social insurance mechanisms. The second is to enhance Thai businesses' competitiveness by encouraging trade competition, easing regulatory guillotine, and becoming a member of the Organisation for Economic Cooperation and Development.

"Joining this international group would give the country access to know-how, good practices, and robust standards," he noted.

The third is to enhance national investment strategies in keeping with changing global trends.

He pointed out that since there was no one-size-fits-all solution, each industry would be required to craft its own cost-cutting policies to stimulate growth.

The fourth is to enhance the sustainability of Thailand's real sector by acting as a facilitator, which will be a critical factor in enabling businesses to adapt to global trends in an efficient and sustainable manner.

Somprawin praised the government's efforts to address the household debt issue. He, however, added that it was too soon to say anything and that resolving debt problems took time.

The SCB EIC estimated that the Thai economy would recover slowly and grow at a lower rate in 2024 due to weaker economic momentum following this year's high growth in private consumption and a slower-than-expected recovery in household income, particularly among the low-income group. In addition Chinese tourist arrivals were lower than expected. Also, due to a delay in the fiscal year 2024 Budget Act, public investment will grow at a slow pace.