IMF Executive Board Concludes 2013 Article IV Consultation with Thailand

Press Release No. 13/441
November 11, 2013

On September 20, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Thailand.1

In 2012, Thailand’s economy rebounded strongly from the devastating floods, with real GDP growing by 6.5 percent. Private consumption rose 6.7 percent, reflecting pent-up demand and government measures, including the rice pledging scheme, where the government committed to buying rice from farmers at a set price above the prevailing market price, and the first-car buyer scheme. On the back of reconstruction spending, private investment grew by 14.4 percent, while government spending and inventory accumulation also made a significant contribution to growth.

However, growth slowed significantly in early 2013. The expiration of the first-car buyer scheme appears to have had a larger-than-expected impact on private consumption, while exports were adversely affected by a slowdown in external demand. Real GDP was reported to have declined 1.7 percent (seasonally adjusted, not annualized) in the first quarter of 2013 from the previous quarter, and another 0.3 percent in the second quarter.

The external environment remains challenging and domestic tailwinds are weakening. Credit growth remains strong, but has decelerated in recent months. The stock market rally has fizzled since May, even as housing price growth continues. Business sentiment remains robust while consumer confidence has weakened. In this context, real GDP growth is projected to slow down to 3.0–3.5 percent in 2013. Next year, public investment projects are expected to become a key engine of growth, boosting growth to 5.2 percent. With growth driven by domestic demand, the current account surplus is expected to reach a small deficit of 0.2 percent of GDP in 2014.

Risks to the outlook are tilted to the downside, dominated by external factors. External risks deriving from an escalation of the euro area crisis or fiscal policy shocks in the United States have diminished, but are still skewed to the downside. Slower-than-expected growth in major emerging economies, particularly China, would also have a considerable impact because of trade linkages. The unwinding of monetary policy stimulus in the United States may trigger further capital flow reversal from emerging markets. Domestically, the impact of the unwinding of various government policies on private consumption may be larger than anticipated. Finally, political stability has strengthened, but remains a downside risk.

The government is seeking to diversify the drivers of economic growth. The authorities have pursued redistribution policies to boost domestic consumption, while attempting to maintain the dynamism of the export sector. They have also prepared an ambitious infrastructure program to lower logistics costs and further integration in the Mekong Region and with southern China, as well as to boost the economy’s resilience to floods.

Executive Board Assessment

Executive Director noted that skillful macroeconomic management, as well as the strong fundamentals of the Thai economy—including low inflation, healthy balance sheets of commercial banks and corporations, high international reserves, and a moderate level of public debt—have blunted the impact of recent severe shocks and are underpinning a recovery. Against this background, Directors concurred that the current stance of fiscal and monetary policies remains broadly appropriate. Looking ahead, Directors encouraged the authorities to persevere in their efforts to rebuild fiscal buffers, strengthen financial stability, and promote more inclusive growth.

Directors considered that a gradual return to fiscal consolidation will broaden the room for policy maneuver over the medium term and create space for priority spending. They noted, however, that the achievement of the authorities’ targets may require additional measures and would benefit from a stronger medium-term fiscal framework. Against this background, Directors supported expanding investment in infrastructure and education, and replacing generalized subsidies with targeted income support for vulnerable groups.

Directors considered that the currently accommodative monetary policy stance is appropriate. Nonetheless, they encouraged the authorities to stand ready to normalize the policy stance if inflationary pressures re-emerge. Directors also observed that capital flow volatility has presented challenges to macroeconomic management. They agreed that Thailand’s strong international reserve position, together with exchange rate flexibility and macroprudential and capital flow measures as appropriate, will help address such volatility going forward.

Directors welcomed the progress in developing the non-bank financial sector, which should boost financial inclusion and facilitate investment. They also agreed that policy actions to strengthen the regulatory and supervisory frameworks for non-bank and specialized financial institutions are essential to safeguard the soundness of the financial system.

Directors welcomed the authorities’ aim to promote more inclusive growth. Highlighting the need to enhance labor productivity, they endorsed plans to boost workers’ skills to address skills mismatches and labor shortages. They also supported plans to expand infrastructure to lower transportation costs, promote commerce, and boost long-term growth.

Thailand: Selected Economic Indicators, 2010–13
  2010 2011 2012 2013

Real GDP growth (percent)

7.8 0.1 6.5 3.1



Headline CPI (period average, percent)

3.3 3.8 3.0 2.2

Core CPI (period average, percent)

0.9 2.4 2.1 1.1

Saving and investment (percent of GDP)


Gross domestic investment (excl. stocks)

24.7 26.3 28.5 29.0

Of which: private

18.8 20.8 22.8 23.1

Gross national saving

29.1 28.3 29.8 29.8

Of which: private, including statistical discrepancy

23.8 24.0 27.0 27.4

Fiscal accounts (percent of GDP) 1/


Central government budgetary balance

-2.6 -1.7 -2.6 -3.4

Revenue and grants

18.2 18.9 19.5 18.1

Expenditure and net lending

20.8 20.6 22.1 21.6

General government balance 2/

-0.8 -0.7 -1.7 -2.7

Public sector balance 3/

-1.6 -1.5 -3.1 -3.6

Public sector debt

42.6 41.7 45.4 47.2

Monetary accounts (end-period, percent change)


Broad money growth

10.9 15.1 10.4 ...

Private sector credit growth

12.3 17.0 14.6 ...

Balance of payments (billions of U.S. dollars)


Current account balance

10.0 5.9 0.2 0.4

(Percent of GDP)

3.1 1.7 0.0 0.1

Exports, f.o.b.

191.6 219.1 225.9 237.5

Growth rate (in dollar terms)

27.1 14.3 3.1 5.1

Imports, f.o.b.

161.9 202.1 219.9 229.0

Growth rate (in dollar terms)

37.0 24.9 8.8 4.1

Gross official reserves (end-year)

191.7 206.3 205.7 211.7

(Months of following year's imports)

11.4 11.3 10.8 10.0

Exchange rate (baht/U.S. dollar)

31.7 30.5 31.1 ...

External debt (In percent of GDP)

31.5 30.3 36.4 41.4

Debt service ratio 4/

4.7 3.5 4.2 4.8

Sources: Data provided by the Thai authorities; CEIC Data Co. Ltd.; and IMF staff estimates.

1/ On a fiscal year basis. The fiscal year ends on September 30.

2/ Includes budgetary central government, extrabudgetary funds, and local governments.

3/ Includes general government and nonfinancial public enterprises.

4/ Percent of exports of goods and services.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here:


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