## 1thaea2026001-source-pdf - 2.1 percent in 2025 and expected to decline further to 1.6 percent in 2026 as external

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### Major Macroeconomic Findings
- Real GDP growth:
  - 2.5 percent in 2024; 2.1 percent in 2025; 1.6 percent in 2026.
- Inflation:
  - Headline CPI (period average): -0.1 percent in 2025; 0.4 percent in 2026.
  - Headline CPI (end of period): -0.3 percent in 2025; 0.8 percent in 2026.
  - Core CPI (period average): 0.8 percent in 2025; 0.9 percent in 2026.
  - Core CPI (end of period): 0.6 percent in 2025; 1.1 percent in 2026.
- Domestic demand and financial conditions:
  - Consumption growth: 2.0 percent in 2025; 1.7 percent in 2026.
  - Gross fixed investment: 2.7 percent in 2025; 0.9 percent in 2026.
  - Credit to the private sector (by other depository corporations): -0.4 percent in 2025; 0.3 percent in 2026.
  - Financial conditions remain tight and credit growth is constrained.
- External position and reserves:
  - Current account balance: US$13.5 billion in 2025 (2.3 percent of GDP); US$9.1 billion in 2026 (1.6 percent of GDP).
  - Gross official reserves: US$281.9 billion in 2025; US$281.9 billion in 2026.
  - Exports of goods, f.o.b.: US$324.9 billion in 2025; US$317.6 billion in 2026.
  - Imports of goods, f.o.b.: US$303.7 billion in 2025; US$303.6 billion in 2026.
- Fiscal and public debt:
  - General government balance: -2.2 percent of GDP in 2025; -2.3 percent of GDP in 2026.
  - Public sector balance: -2.5 percent of GDP in 2025; -2.5 percent of GDP in 2026.
  - Public sector debt (end of period): 64.8 percent of GDP in 2025; 66.8 percent of GDP in 2026.
- Labor and social indicators:
  - Unemployment rate (2024): 1 percent.
  - Poverty headcount ratio at national poverty line (2022): 5.4 percent.
  - Per capita GDP (2024): US$7,347.
- Output gap:
  - -0.8 percent of potential output in 2025; -0.5 percent in 2026.
- Other salient points:
  - External stability described as robust with ample international reserves and moderate external debt.
  - Ongoing headwinds: trade policy uncertainty (including U.S. tariffs reduced from 36 percent to 19 percent), constrained credit growth, slower rebound in foreign tourist arrivals, domestic political uncertainty, border conflict with Cambodia, and floods disrupting activity.

### Inflation dynamics and labor income
- Headline inflation:
  - Averaged -0.1 percent in 2025; -0.3 percent in December 2025.
  - Negative for nine consecutive months in 2025.
- Drivers of downward pressure:
  - Lower global energy prices; decline in fresh food prices due to favorable weather; administrative measures across products and services; subdued labor income.
- Core inflation:
  - Core inflation averaged 0.8 percent in 2025.
  - Core‑core inflation hovered near or below zero since March 2025.
- Wage and goods price trends:
  - Goods inflation contracted further.
  - Wage growth declining since March 2025.

### External sector, trade developments, and REER
- Trade and flows:
  - Trade balance widened through September 2025, then narrowed in October–November 2025 as imports surged and exports moderated.
  - Financial flows: non-residents rotated out of Thai equities into local bonds on expectations of BOT rate cuts and a softer dollar.
- Tariffs and trade policy:
  - October 26 Joint Statement reaffirmed general U.S. tariff of 19 percent; staff estimate effective tariffs at 20 percent.
  - Package commitments to increase imports of U.S. LNG and aircraft; negotiations and exemptions ongoing.
- Exchange rate and competitiveness:
  - Staff estimate real exchange rate appreciation of about 3 percent as of November 2025, eroding price competitiveness.
  - REER: 3.1 percent above its 2024 average as of November 2025.
- External sector headline metrics:
  - 2024 CA surplus: 2.2 percent of GDP; 2025 CA: 2.3 percent of GDP; medium‑term CA projected around 2.8 percent of GDP.
  - NIIP: 13.3 percent of GDP in 2025.
  - Gross assets: 123.3 percent of GDP in 2025; gross liabilities: 110.0 percent of GDP in 2025.
  - Gross reserve assets: 48.9 percent of GDP in 2025.
  - Reserves correspond to 2.4 times short-term debt; 11 months of imports; 242.4 percent of the IMF’s standard ARA metric.

### Fiscal developments, public debt, and medium-term projections
- Recent fiscal execution:
  - FY24 general government fiscal deficit: 1.3 percent of GDP.
  - FY25 general government deficit estimated at 2.2 percent of GDP.
  - FY26 GFS general government overall deficit projected at 2.3 percent of GDP (fiscal impulse of 0.2 percent of GDP).
  - Capital spending execution: 65 percent vs. 80 percent target.
  - Reallocation: THB 157 billion (0.8 percent of GDP) from Digital Wallet transfers to investment projects.
- FY26 budget and support:
  - FY26 budget targets a deficit of THB 860 billion (4.5 percent of GDP), corresponding to a GFS central government deficit of around 3.1 percent of GDP.
  - FY26 support measures include: State Welfare Card top-up THB 22 billion (0.1 percent of GDP); “Khon La Khrueng Plus” THB 44 billion (0.2 percent of GDP); liquidity support for SMEs THB 267 billion soft loans; THB 50 billion credit guarantees; expedited tax refunds THB 60 billion.
- VAT and revenue measures:
  - Planned VAT increases: 7 percent to 8.5 percent in FY28 and to 10 percent by FY30 (if implemented).
  - Recommended revenue measures and yields:
    - Raising VAT starting in FY27: ~1.8 percent of GDP annual revenue over the medium term.
    - Rationalizing PIT allowances: 0.5 percent of GDP.
    - Strengthening tax compliance: 0.3 percent of GDP.
- Public debt projections (percent of GDP):
  - Public debt (Actual/Projection): 64.8; 66.8; 67.8; 68.5; 69.1; 69.5; 69.6; 69.5; 69.4; 69.2; 68.9.
  - Gross financing needs: 17.8; 10.2; 11.7; 13.5; 13.5; 13.7; 11.9; 14.1; 12.8; 13.3; 13.6 (percent of GDP across horizon).
- Debt structure:
  - Public debt predominantly domestic currency: 99.2 percent held by domestic investors.
  - Authorities’ average maturity around nine years; approximately 90 percent classified as long-term.
  - Staff advice: lengthen maturities and diversify instruments; continue prudent debt management.

### Monetary policy and FX stance
- Policy rate and stance:
  - Policy rate: 1.25 percent (lowest since January 2023) after five reductions since October 2024.
  - Baseline assumption: policy rate remains unchanged at 1.25 percent throughout the projection period.
  - Staff view: scope for further monetary easing; real interest rate remains elevated despite cuts.
- Monetary transmission and debt:
  - Pass-through to retail lending and deposit rates has been sluggish.
  - Recommend enhancing monetary transmission and facilitating orderly household and SME debt restructuring.
- Exchange rate policy:
  - Preserve exchange rate flexibility; limit FX intervention to restoring orderly market conditions under non-fundamental shocks.
  - Effective December 2025: non-resident non-financial corporates can hold Thai baht deposits in NRBAs and NRBSs without end-of-day limits.
  - Authorities relaxed FX outflow regulations and continued FX ecosystem liberalization, including phasing out remaining CFMs on nonresident baht accounts.

### Financial sector, credit, and household balance sheets
- Credit and non-performing indicators:
  - Private credit growth: 0.4 percent (y/y) as of November 2025 after contracting in H1 2025.
  - Outstanding corporate debt securities: 4.1 percent (y/y) as of November 2025.
  - Household debt to GDP: 86.8 percent as of end-September 2025 (down from 88.4 percent at end-2024).
  - NPL coverage ratio for commercial banks: 179.8 percent at end-September 2025 (177.2 percent at end-2024).
  - Commercial banks hold 37 percent of household loans; SFIs 28 percent; saving cooperatives 15 percent; credit card, leasing, and personal loan companies 12 percent.
- Financial policy measures and supervisory actions:
  - Inclusion of hire purchase and leasing companies under BOT oversight (effective 2 December 2025).
  - Responsible lending guidelines implemented February 2025.
  - Measures to restructure low-value unsecured NPLs and provide SME liquidity: planned low-interest loans THB 217 billion (1.1 percent of GDP) and THB 50 billion (0.3 percent of GDP) credit guarantees.
  - Plan to amend Bankruptcy Act to allow a "fresh start" for households and SMEs with prolonged debt issues.
  - Ongoing efforts to strengthen AML/CFT framework; Anti-Money Laundering Act amendment awaiting parliamentary approval.

### Structural transformation, productivity, and climate agenda
- Structural transformation:
  - Labor movement from low‑productivity to high‑productivity sectors has slowed; high employment share in agriculture and low‑value‑added services.
  - Estimated aggregate potential export gains from closing policy gaps: about 1.7 percent of GDP (GovTech 1.2 percent; human capital 0.3 percent; logistics 0.2 percent).
- Export sophistication and competitiveness:
  - Policy priorities: liberalize trade and investment restrictions, reduce equity restrictions, streamline approvals, expand public R&D, invest in IT and digital infrastructure, transition automotive industry to electric/hybrid, develop ICT industries, integrate SMEs into supply chains.
- Social resilience and pensions:
  - Total pension spending estimated at around 2.5 percent of GDP in 2024; civil service pensions 1.8 percent of GDP; SSF 0.2 percent of GDP.
  - About 40 percent of workforce outside SSF coverage relying on basic OAA.
- Climate agenda:
  - December 2025 Cabinet approved Climate Change Bill enabling ETS, CBAM, carbon taxes, MRV system, registry, and state Climate Fund.
  - NDC updated: 47 percent reduction in emissions from 2019 levels by 2035; net‑zero target advanced to 2050.
  - Guidance: broad sectoral coverage, limited exemptions, phased ETS, use carbon pricing revenues for targeted transfers and green investment, phase out untargeted energy subsidies.

### Risks, outlook drivers, and scenarios
- Risks:
  - Risks to outlook elevated and tilted to the downside.
  - Downside drivers: prolonged trade policy uncertainty; global financial market volatility; escalating geopolitical tensions or extended border conflict; domestic political volatility; weaker output growth increasing deflation risk.
- Adverse global scenario (QIPF / WEO Box reference):
  - U.S. output decline: 1.6 percent.
  - U.S. inflation: 0.7 percent increase in 2026 relative to baseline.
  - Thailand-specific under adverse scenario:
    - Exports decline by about 3.4 percent in 2028.
    - Output reduced in 2026 by approximately 2.0 percent relative to baseline.
    - Inflation reduces by 0.3 percentage points relative to baseline.
    - Public debt-to-GDP ratio rises by 2.0 percentage points by 2027 if no discretionary fiscal stimulus.
    - Monetary policy simulated: additional 100 bps policy rate cut in baseline adverse scenario.
- Alternative policy simulations:
  - More aggressive monetary easing: 160 bps policy rate cut illustrated (vs. 100 bps) to mitigate deflationary pressures and support recovery via baht depreciation.
  - Combined fiscal-monetary response:
    - Fiscal stimulus 1.5 percent of GDP (0.5 percent transfers; 1.0 percent additional expenditures).
    - Outcome: mitigates output decline, supports inflation and exchange rate depreciation; raises public debt-to-GDP ratio by below but close to 2 percent additional increase.
- Systemic risk monitoring:
  - Systemic risks contained but require continued close monitoring amid tight financial conditions and elevated credit risks.
  - Prob. of missed crisis, 2026-2031 if stress not predicted: 18.2 pct; Prob. of false alarms: 27.3 pct.

### Key statistics (selected, preserved verbatim)
- Real GDP growth (y/y percent change), 2024–2026: 2.5 (2024); 2.1 (2025); 1.6 (2026).
- Inflation (Headline CPI period average): 0.4 percent (2026); Headline CPI (period average) -0.1 (2025).
- General government balance (percent of GDP): -1.3 (2024); -2.2 (2025); -2.3 (2026).
- Public sector debt (end of period): 63.2 (2024); 64.8 (2025); 66.8 (2026).
- Gross official reserves (billions of U.S. dollars): 237.0 (2024); 281.9 (2025); 281.9 (2026).
- Current account balance (billions of U.S. dollars): 11.6 (2024); 13.5 (2025); 9.1 (2026).
- Exports of goods, f.o.b. (billions of U.S. dollars): 297.3 (2024); 324.9 (2025); 317.6 (2026).
- Nominal GDP (billions of U.S. dollars): 526.5 (2024); 576.7 (2025); 577.3 (2026).
- Population (2024): 71.67 million.
- Net FDI (2024): US$ 6.95 billion.
- Exchange Rate (2024): 35.29 Baht/USD.

### Public financial management, fiscal rules, and recommendations
- Fiscal rules (thresholds/ratios preserved):
  - Public debt: Not to exceed 70 percent of GDP.
  - Government debt service: Not to exceed 50 percent of the annual revenue.
  - Foreign currency public debt: Not to exceed 10 percent of the total public debt.
  - Foreign currency public debt service: Not to exceed 5 percent of the exports of goods and services.
  - Deficit borrowing: Not to exceed 20 percent of the expenditure budget and 80 percent of the budget for principal repayments.
  - Capital expenditure: Not less than 20 percent of the annual budget and not less than the fiscal year budget deficit.
  - Central Contingency Fund: Not to exceed 2-3 percent of the total budget.
  - Principal Repayments: Not less than 4 percent of the total budget.
  - New multi-year commitment: Not to exceed 10 percent of total budget.
  - Stock of fiscal liability from quasi-fiscal activities: Not to exceed 32 percent of total budget.
- Staff recommendations:
  - Introduce clearly defined deficit rule aligned with debt ceiling.
  - Remove or enhance flexibility for capital expenditure floor.
  - Streamline overlapping rules and strengthen enforcement mechanisms (e.g., establish a fiscal council).
  - Limit carryover period for unspent budget to strengthen fiscal discipline.
  - Improve reconciliation and disclosure between budget and GFS data; clarify SOE and extra‑budgetary operations.

### Data adequacy and dissemination
- Overall staff assessment: "Data provision has some shortcomings but is broadly adequate for surveillance." Overall data adequacy rating: B.
- Key gaps:
  - Discrepancies between GFS and national budget figures; arrears, PPPs, and contingent liabilities not distinctly identified.
  - Limited data for Specialized Financial Institutions, saving cooperatives, and other non-bank financial institutions.
  - Need for more granular credit data by type of financial institution and better SOE operations data.
- Corrective actions and capacity development:
  - Government Finance Statistics and Public Sector Debt Statistics TA mission completed October 2025.
  - Recommendations: enhance mapping of budget to GFS classifications; clarify adjustment sources; improve reporting of arrears/PPPs; expand financial sector data coverage.
- Thailand subscribes to the SDDS since August 1996 and publishes data on its National Summary Data Page.

### Policy recommendations and staff advice (high-level)
- Overarching prescription:
  - Carefully calibrated policy mix: targeted fiscal support anchored on a credible medium‑term consolidation strategy; additional data‑dependent monetary loosening; financial policies to facilitate orderly household deleveraging and restore the credit channel.
- Fiscal policy:
  - Targeted and parsimonious fiscal support; revenue-driven consolidation over the medium term; raise revenues to rebuild buffers and finance growth‑enhancing spending and strengthened social protection; strengthen fiscal rules and PFM.
- Monetary policy:
  - Accommodative stance welcomed; scope for additional data-dependent easing; preserve central bank independence; maintain exchange rate flexibility; limit FX intervention to restoring orderly market conditions under non‑fundamental shocks.
- Financial sector policy:
  - Facilitate orderly household debt reduction; provide SME liquidity support; strengthen regulation and supervision (including savings cooperatives); mitigate moral hazard; continue strengthening AML/CFT.
- Structural priorities:
  - Deepen trade and financial integration; improve labor productivity via structural transformation; reduce informality; advance export sophistication; strengthen social safety nets; enhance business environment and governance; advance climate agenda.
- Coordination and sequencing:
  - Maintain close monetary‑fiscal coordination; use revenue gains to finance education, training, infrastructure, climate initiatives, and better‑targeted social protection; ensure strong governance in debt‑relief and support programs to avoid moral hazard.

*International Monetary Fund — Staff Report for the 2025 Article IV Consultation for Thailand (as provided in the source content).*

### 2.1 percent in 2025 and expected to decline further to 1.6 percent in 2026 as external

### 1thaea2026001-source-pdf - 2.1 percent in 2025 and expected to decline further to 1.6 percent in 2026 as external

### Major Macroeconomic Findings
- Real GDP growth:
  - Estimated to have slowed from 2.5 percent in 2024 to 2.1 percent in 2025.
  - Projected to moderate further to 1.6 percent in 2026.
- Inflation:
  - Inflation remained subdued, with headline CPI (period average) at -0.1 percent in 2025 and projected at 0.4 percent in 2026.
  - Headline CPI (end of period): -0.3 percent in 2025 and 0.8 percent in 2026.
  - Core CPI (period average): 0.8 percent in 2025 and 0.9 percent in 2026.
  - Core CPI (end of period): 0.6 percent in 2025 and 1.1 percent in 2026.
- Domestic demand and financial conditions:
  - Consumption growth: 2.0 percent in 2025 and 1.7 percent in 2026.
  - Gross fixed investment: 2.7 percent in 2025 and 0.9 percent in 2026.
  - Credit to the private sector (by other depository corporations): -0.4 percent in 2025 and 0.3 percent in 2026.
  - Financial conditions remain tight and credit growth is constrained.
- External position and reserves:
  - Current account balance: US$13.5 billion in 2025 and US$9.1 billion in 2026 (2.3 percent of GDP in 2025 and 1.6 percent of GDP in 2026).
  - Gross official reserves: US$281.9 billion in 2025 and US$281.9 billion in 2026.
  - Exports of goods, f.o.b.: US$324.9 billion in 2025 and US$317.6 billion in 2026.
  - Imports of goods, f.o.b.: US$303.7 billion in 2025 and US$303.6 billion in 2026.
- Fiscal and public debt:
  - General government balance: -2.2 percent of GDP in 2025 and -2.3 percent of GDP in 2026.
  - Public sector balance: -2.5 percent of GDP in 2025 and -2.5 percent of GDP in 2026.
  - Public sector debt (end of period): 64.8 percent of GDP in 2025 and 66.8 percent of GDP in 2026.
- Labor and social indicators:
  - Unemployment rate (2024): 1 percent.
  - Poverty headcount ratio at national poverty line (2022): 5.4 percent.
  - Per capita GDP (2024): US$7,347.
- Other salient points:
  - Thailand’s external stability described as robust, supported by ample international reserves and moderate levels of external debt.
  - Ongoing headwinds: trade policy uncertainty (including U.S. tariffs reduced from 36 percent to 19 percent), constrained credit growth, slower rebound in foreign tourist arrivals, domestic political uncertainty, border conflict with Cambodia, and floods disrupting activity.

### Policy Recommendations and Staff Advice
- Overarching prescription:
  - A carefully calibrated policy mix combining targeted fiscal support anchored on a credible medium-term consolidation strategy, additional monetary loosening, and financial policies to facilitate orderly household debt deleveraging and to address the impaired credit channel.
- Fiscal policy:
  - Fiscal support should remain targeted and parsimonious given narrowing fiscal space.
  - Implement a revenue-driven fiscal consolidation over the medium-term to reduce public debt and allow fiscal space for growth-enhancing spending.
  - Raise revenues to rebuild buffers and create space for growth-enhancing spending and strengthened social protection.
  - Strengthen fiscal rules framework and public financial and debt management.
- Monetary policy:
  - Accommodative monetary stance welcomed to support domestic demand and mitigate downside risks to inflation.
  - Scope for additional data-dependent monetary easing, supported by efforts to strengthen policy transmission and address elevated household debt.
  - Preserve central bank independence and maintain exchange rate flexibility as a key shock absorber; limit foreign exchange intervention to restoring orderly market conditions under non-fundamental shocks.
- Financial sector policy:
  - Facilitate orderly household debt reduction and restore credit channel functioning.
  - Provide liquidity support for small and medium-sized enterprises (SMEs) and expand financial services to SMEs and underserved groups.
  - Strengthen regulation and supervision, including of savings cooperatives; maintain strong governance and mitigate moral hazard.
  - Continue strengthening the AML/CFT framework.
- Structural policy priorities:
  - Accelerate reforms to boost productivity and competitiveness and support external rebalancing.
  - Priorities: deepen trade and financial integration; improve labor productivity by reinvigorating structural transformation; reduce informality; advance export sophistication; strengthen social safety nets; enhance the business environment and governance; advance Thailand’s climate agenda.

### Risks, Outlook Drivers, and Scenarios
- Risks to the outlook:
  - Elevated and tilted to the downside.
  - Prolonged trade policy uncertainty, global financial market volatility, and domestic political developments could further weigh on growth and inflation.
- Upside possibilities:
  - A swift resolution of trade tensions or easing domestic uncertainty could support a recovery in growth.
- Staff scenario notes:
  - The deterioration in the external environment underscores the need for decisive actions to accelerate structural reforms.
  - Output gap: -0.8 percent of potential output in 2025 and -0.5 percent in 2026.
- Systemic risk monitoring:
  - Systemic risks in the financial sector described as contained but warrant continued close monitoring amid tight financial conditions and elevated credit risks.

### Key Statistics (selected, preserved verbatim)
- Real GDP growth (y/y percent change), 2024–2026: 2.5 (2024); 2.1 (2025); 1.6 (2026).
- Inflation (Headline CPI period average): 0.4 percent (2026); Headline CPI (period average) -0.1 (2025).
- General government balance (percent of GDP): -1.3 (2024); -2.2 (2025); -2.3 (2026).
- Public sector debt (end of period): 63.2 (2024); 64.8 (2025); 66.8 (2026).
- Gross official reserves (billions of U.S. dollars): 237.0 (2024); 281.9 (2025); 281.9 (2026).
- Current account balance (billions of U.S. dollars): 11.6 (2024); 13.5 (2025); 9.1 (2026).
- Exports of goods, f.o.b. (billions of U.S. dollars): 297.3 (2024); 324.9 (2025); 317.6 (2026).
- Nominal GDP (billions of U.S. dollars): 526.5 (2024); 576.7 (2025); 577.3 (2026).
- Population (2024): 71.67 million.
- Net FDI (2024): US$ 6.95 billion.
- Exchange Rate (2024): 35.29 Baht/USD.

*International Monetary Fund — Staff Report for the 2025 Article IV Consultation for Thailand (as provided in the source content).*

### 5.       Headline inflation declined below the BOT’s target range, remaining negative for nine

### 5.       Headline inflation declined below the BOT’s target range, remaining negative for nine

### Inflation dynamics and labor income
- Headline inflation averaged -0.1 percent in 2025 (-0.3 percent in December).
- Headline inflation remained negative for nine consecutive months in 2025.
- Drivers of downward pressure on headline inflation:
  - Lower global energy prices.
  - Decline in fresh food prices due to favorable weather.
  - Administrative measures affecting a wide range of products and services.
  - Subdued labor income reflecting subdued demand.
- Core inflation averaged 0.8 percent in 2025.
- Core-core inflation (core excluding prepared food) has hovered near or below zero since March 2025.
- Goods inflation contracted further.
- Wage growth has been declining since March 2025.

### External sector and trade developments
- External position strengthened through September 2025 then narrowed subsequently.
- Trade balance widened through September 2025 (supported by export frontloading), but narrowed in October and November 2025 as imports surged and exports moderated.
- An October 26 Joint Statement on a framework for a reciprocal trade agreement reaffirmed the general U.S. tariff of 19 percent; staff estimate effective tariffs at 20 percent given higher duties on a number of products.
- Package commitments aim to increase imports of U.S. liquefied natural gas and aircraft to narrow Thailand’s bilateral trade surplus; negotiations and product exemptions remain ongoing.
- Financial flows were mixed: non-residents rotated out of Thai equities into local bonds on expectations of BOT rate cuts and a softer dollar.
- Thai baht relatively stable before strengthening mid-year as trade tensions eased and foreign investor sentiment improved.
- Staff estimate real exchange rate appreciation of about 3 percent as of November 2025, eroding price competitiveness.

### Fiscal developments and public debt
- FY24 general government fiscal deficit was 1.3 percent of GDP (reflecting delayed budget approval and under-execution).
- FY25 general government deficit is estimated at 2.2 percent of GDP.
- Public debt reached 64.8 percent of GDP by end-FY25.
- Capital spending fell short of authorities’ target: 65 percent execution of the budget vs. 80 percent target.
- Reallocation of THB 157 billion (0.8 percent of GDP) originally earmarked for Digital Wallet cash transfers toward additional public investment projects.
- FY26 budget targets a deficit of THB 860 billion (4.5 percent of GDP), corresponding to a GFS central government deficit of around 3.1 percent of GDP.
- GFS general government overall deficit projected at 2.3 percent of GDP for FY26, implying a fiscal impulse of 0.2 percent of GDP.
- FY26 support measures cited:
  - State Welfare Card top-up: THB 22 billion (0.1 percent of GDP).
  - “Khon La Khrueng Plus” program: THB 44 billion (0.2 percent of GDP).
  - Liquidity support for SMEs: THB 267 billion soft loans from state-owned financial institutions.
  - THB 50 billion credit guarantees.
  - Expedited tax refunds: THB 60 billion.
- Social Security Fund (SSF) holds around 12 percent of total public debt in government and SOE bonds (implying lower net public debt on a net basis).
- MTFF envisages a budget deficit of THB 788 billion in FY27 (4 percent of GDP).
- Planned VAT increases: from current 7 percent to 8.5 percent in FY28 and to 10 percent by FY30 (if implemented following elections, and assuming continued economic recovery).
- Recommended revenue measures and estimated yields:
  - Raising the VAT rate starting in FY27: estimated annual revenue of about 1.8 percent of GDP over the medium term.
  - Rationalizing personal income tax (PIT) allowances: could yield an additional revenue of 0.5 percent of GDP.
  - Strengthening tax compliance (reference to World Bank 2023): could yield additional 0.3 percent of GDP (noted in footnote).
- Recommended expenditure priorities: education and training, digital and physical infrastructure, climate mitigation and adaptation, strengthen social protection (Old Age Allowance, better targeting of State Welfare Card).

### Credit, financial conditions, and household balance sheets
- Private credit posted limited growth of 0.4 percent (y/y) as of November 2025 after contracting in the first half of 2025.
- Outstanding corporate debt securities grew 4.1 percent (y/y) as of November 2025, after contracting 2.3 percent (y/y) at end-June 2025.
- Household debt relative to GDP declined to 86.8 percent as of end-September 2025, down from 88.4 percent at end-2024.
- Decline in household debt driven primarily by a 2.3 percent (y/y) reduction in outstanding household loans by commercial banks.
- Commercial banks hold 37 percent of household loans; SFIs 28 percent; saving cooperatives 15 percent; credit card, leasing, and personal loan companies 12 percent.
- Credit risks for household and SME loans remain elevated; notable deterioration in housing loan quality has prompted banks to tighten lending standards.
- Weak investor confidence and flight-to-quality behavior led to higher borrowing costs and increased rollover risks for corporates with lower credit ratings or in slow-recovering sectors.

### Outlook and projections
- GDP growth projected at 2.1 percent in 2025 and 1.6 percent in 2026.
- Negative output gap expected to widen in 2025, then gradually narrow and close by 2028.
- Inflation projections:
  - Headline inflation expected to recover gradually in 2026, averaging around 0.4 percent.
  - Core inflation expected to average around 0.9 percent in 2026.
- Current account: preliminarily estimated moderately stronger than warranted in 2025; surplus projected to modestly increase in 2025 before narrowing in 2026.
- Key near-term pressures on exports and external surplus:
  - Impact of higher U.S. tariffs (more pronounced in last quarter of 2025).
  - Tourist arrivals plateaued below pre-pandemic levels.
  - Real exchange rate appreciation (about 3 percent as of November 2025).
- Household and SME loan quality indicators: high NPL rates for SME, housing and credit card loans; high special mention rates for car and SME loans.

### Risks and uncertainty
- Risks tilted to the downside for both growth and inflation.
- Downside risks include:
  - Prolonged trade policy uncertainty and stronger negative trade diversion effects from differential U.S. tariffs.
  - Greater global financial market volatility (stretched risk asset valuations, elevated debt levels, risks associated with AI-related investments).
  - Escalating geopolitical tensions or an extended border conflict that could dampen investor sentiment and tourism flows.
  - Domestic political volatility undermining confidence.
  - Weaker output growth leading to lower inflation expectations and higher likelihood of deflationary pressures.
- Upside scenarios include:
  - Swift resolution of global trade tensions.
  - Stronger-than-expected growth in trading partners.
  - Extended robust demand for electronics.
  - Prompt easing of domestic political uncertainty.

### Authorities’ views and consensus
- Authorities broadly agreed with staff’s assessment of the economic outlook and noted deflation risks remain contained.
- Authorities' near-term growth projections broadly in line with staff; medium-term outlook slightly more optimistic.
- Authorities emphasized recent price declines mainly driven by supply-side factors and noted medium- and long-term inflation expectations remain well anchored, expecting inflation to return to the bottom of the target range in 2027.
- Authorities concurred with staff on external sector assessment while reiterating concerns about the EBA methodology and emphasizing structural factors’ influence on the medium-term current account.

### Policy mix and recommendations
- Policy stance: limited policy space requires a carefully calibrated mix building on recent reform momentum.
- Fiscal: maintain targeted and parsimonious support anchored on a credible medium-term consolidation strategy; implement MTFF commitments.
- Monetary: additional monetary easing could help support demand and mitigate downside risks to inflation, while facilitating orderly household debt deleveraging to restore effective monetary transmission.
- Structural reforms: critical to reverse slowing growth—boost productivity and competitiveness, strengthen social safety nets, expand private investment opportunities, liberalize services, limit tax incentives and subsidies, and improve investment climate.
- Fiscal composition recommendations:
  - Prioritize growth-enhancing and well-targeted spending.
  - Reallocate resources (e.g., Digital Wallet reallocation and State Welfare Card top-up) to improve impact.
  - Use revenue gains to finance education and training, infrastructure, climate initiatives, and better-targeted social protection.
- Note on fiscal multipliers and projection caveat: fiscal multipliers for recommended revenue and expenditure measures assumed as 0.3 and 0.7 respectively; projections do not assume changes in inflation or impact of other policy recommendations.

*Source: IMF staff estimates.*

### 21.      Elevated public debt highlights the importance of prudent  debt management. Strong

### 21.      Elevated public debt highlights the importance of prudent  debt management. Strong

### Public debt and debt management
- Elevated public debt and sizable gross financing needs projected at around 12 percent of GDP over the medium term.
- Strong demand for government bonds—partly reflecting subdued private sector credit—has helped mitigate refinancing risks.
- Staff recommendations:
  - Continue prudent debt management practices, including lengthening maturities and diversifying instruments, in line with the medium-term debt strategy.
- Authorities’ stance:
  - Current debt ceiling will not be raised.
  - Thailand’s public debt has an average maturity of around nine years, with approximately 90 percent classified as long-term.
  - The majority of public debt is held domestically, supported by ample liquidity and strong investor demand.
  - Authorities committed to lengthening portfolio duration in line with the medium-term debt management strategy.

### Fiscal rules and recommendations
- Assessment:
  - Thailand has a comprehensive set of fiscal rules, but an extensive number of rules with different purposes makes the framework overly complex, reducing policy flexibility and creating PFM challenges (for example, overbudgeting capital expenditure to meet the minimum requirement).
  - The deficit rule is defined as a share of total expenditures, which obscures its link to the debt ceiling expressed as a share of GDP.
- Staff recommendations:
  - Introduce a clearly defined deficit rule aligned with the debt ceiling.
  - Remove or enhance flexibility for the capital expenditure floor.
  - Streamline overlapping rules (e.g., on debt service).
  - Strengthen enforcement mechanisms or oversight of rule enforcement, such as through the establishment of a fiscal council.
- Text Table 4. Thailand: Fiscal Rules (thresholds/ratios preserved)
  - Public debt: Not to exceed 70 percent of GDP
  - Government debt service: Not to exceed 50   percent of the annual revenue
  - Foreign currency public debt: Not to exceed 10 percent of the total public debt
  - Foreign currency public debt service: Not to exceed 5 percent of the exports of goods and services
  - Deficit borrowing: Not to exceed 20 percent of the expenditure budget and 80 percent of the budget for principal repayments
  - Capital expenditure: Not less than 20 percent of the annual budget and not less than the fiscal year budget deficit
  - Central Contingency Fund: Not to exceed 2-3 percent of the total budget
  - Principal Repayments: Not less than 4 percent of the total budget
  - New multi-year commitment: Not to exceed 10 percent of total budget
  - Stock of fiscal liability from quasi-fiscal activities: Not to exceed 32 percent of total budget

### Public financial management (PFM)
- Identified weaknesses:
  - Budget framework allows carryovers of unspent budget for up to 12 months into the next fiscal year, weakening control between the annual budget and its intended impact.
  - Disclosure of budget implementation data can be strengthened by providing a detailed breakdown in line with the approved budget.
  - The GFS presentation of the annual budget can be improved to have a closer linkage with GFS-based fiscal outturn data.
  - Enhancing use of the Functions of Government classification within the budget framework would support expenditure tracking and policy analysis.
- Staff recommendation:
  - Limit the carryover period to reduce carryovers and strengthen fiscal discipline.

### Monetary policy: bringing back inflation to the target range
- Current stance and outlook:
  - Policy rate is 1.25 percent, the lowest level since January 2023, following five reductions since October 2024.
  - Despite rate cuts, inflation is well below the BOT’s target range.
  - Baseline framework projection assumption: the policy rate remains unchanged at 1.25 percent throughout the projection period.
- Staff assessment and recommendations:
  - There is scope for further monetary easing as the real interest rate remains elevated despite policy rate cuts.
  - A further reduction in the policy rate would help alleviate financial burdens on vulnerable households and support recovery in domestic demand, with limited risk of additional leverage given tightened lending standards.
  - For accommodation to be effective, continue efforts to enhance monetary transmission (pass-through to retail lending and deposit rates has been sluggish).
  - Continue collaboration (BOT and MOF) to accelerate household and SME debt restructuring, expand financial inclusion, and improve credit risk assessments to improve policy effectiveness through the bank lending channel and reinforce economic resilience.
- Inflation target and communication:
  - Maintain current inflation target range of 1–3 percent.
  - Staff recommend maintaining the existing range while clearly explaining reasons for deviations, the expected timeframe for inflation to return to target, and the strategy for preserving price stability.
  - Lowering the lower bound to include zero or widening the band would risk signaling tolerance for deflation and weaken credibility.
- Exchange rate and FX policy:
  - Preserve exchange rate flexibility; continue to let the exchange rate serve as the first line of defense against external shocks.
  - FX intervention (FXI), consistent with IPF principles, can smooth destabilizing premia during large non-fundamental shocks.
  - Effective December 2025, access to Thai baht liquidity for non-resident non-financial corporates with trade and investment in Thailand will be streamlined by allowing them to hold Thai baht deposits in Non-Resident Baht Accounts (NRBAs) and Non-Resident Baht Accounts for Securities (NRBSs) without end-of-day limits.
  - Authorities have relaxed FX outflow regulations for residents by permitting additional purposes without prior BOT approval and by raising the annual limit for transfers of grants abroad.
  - Continued FX ecosystem liberalization— including phase-out of remaining Capital Flow Management measures (CFMs) on nonresident baht accounts—and initiatives to promote local currency payment settlement will reduce reliance on FXI and enhance market depth.
- Authorities’ view on monetary policy:
  - BOT assesses the current monetary policy stance as appropriately accommodative and will keep decisions outlook-driven.
  - Headline inflation is expected to return to the target range in 2027.

### Financial policy: managing systemic risks while addressing the debt overhang
- Systemic risk and supervision:
  - Systemic risk remains contained despite tight credit conditions; ample capital and provisions at most financial institutions serve as buffers.
  - Need to monitor institutions with significant exposure to sectors and borrowers with declining credit quality.
  - Resumed publication of the Financial Stability Report and new Financial Stability Review strengthen transparency.
  - Inclusion of hire purchase and leasing companies under BOT oversight strengthens supervisory and regulatory regime.
  - Further efforts needed to close regulatory leakages and ensure comprehensive oversight, notably for savings cooperatives which hold a significant and rising share of household debt.
  - NPL coverage ratio for commercial banks stood at 179.8 percent at end-September 2025 (177.2 percent at the end-2024).
- Household and SME support measures:
  - Authorities’ programs:
    - Restructure low-value unsecured non-performing loans by reallocating unused funds from the "Khun Soo, Rao Chuay" ("You Fight, We Help") program, combined with a mechanism to consolidate borrowers’ debt to enable re-entry into the formal credit system.
    - Support SMEs’ liquidity by providing soft loans and loan guarantees. The planned support package includes THB 217 billion (1.1 percent of GDP) in low-interest loans and THB 50 billion (0.3 percent of GDP) in credit guarantees.
    - Plan to amend the Bankruptcy Act to allow a "fresh start" for households and SMEs with prolonged debt issues.
    - Plans to promote joint ventures between financial institutions and asset management companies to accelerate balance sheet cleansing and debt restructuring.
  - Staff caveats:
    - Effectiveness will depend on final implementation, strong governance, mitigation of moral hazard, and compatibility with underlying challenges.
- Financial inclusion and credit information:
  - Overhaul of the credit guarantee system planned to improve credit risk assessments and address information asymmetries.
  - "Your Data" project, establishment of virtual banks, digital payment initiatives, and measures to enhance credit risk assessments will support expanded access to finance for SMEs and underserved groups.
- AML/CFT:
  - Authorities have amended Emergency Decree on Measures for the Prevention and Suppression of Technology Crimes (No.2) B.E. 2568 (2025) and Emergency Decree on Digital Asset Business (No.2) B.E. 2568 (2025), which took effect in April 2025.
  - The amendment of the Anti-Money Laundering Act to address technical compliance gaps identified in the 2023 Asia-Pacific Group on Money Laundering report is currently awaiting parliamentary approval.
  - Continued efforts needed to strengthen regulatory framework, preventive measures, and inter-agency coordination to address evolving money laundering and terrorism‑financing risks.

### Structural policies: reinvigorating growth and enhancing resilience
- Urgent structural reforms are needed to strengthen resilience and reverse declining growth.
- Priorities identified:
  - Deepen trade and financial integration.
  - Facilitate structural transformation and improve investment efficiency to aid external rebalancing and advance export sophistication.
- Suggested measures to facilitate regional and global trade integration:
  - Enhance e-government to streamline trade procedures and reduce regulatory burdens.
  - Invest in human capital to improve labor productivity and attract higher-value FDI.
  - Upgrade logistics performance to strengthen Thailand’s role in regional supply chains (potential export gains noted in staff analysis).

*Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1thaea2026001-source-pdf.pdf*

### 1.7 percent of GDP (Annex V). Extending bilateral and multilateral cross-border payment linkages

### 1.7 percent of GDP (Annex V). Extending bilateral and multilateral cross-border payment linkages

### Structural transformation and productivity
- Finding: Thailand’s structural transformation—movement of labor from low‑productivity to high‑productivity sectors—has slowed, leaving a relatively large employment share in low value‑added sectors such as agriculture and low‑value‑added services, which undermines overall labor productivity.  
- Staff analysis: By promoting trade openness, strengthening education, enhancing financial inclusion and access to credit, reducing informality, and improving governance, Thailand could accelerate labor movement toward higher‑productivity sectors (SIP), raising living standards and consumption more durably.  
- Financial structure: Broadening financial access for firms and fostering a more diversified financial structure would improve capital allocation efficiency, further unlocking productivity gains needed for sustained growth and addressing external sector rebalancing in the medium term.  
- Note: “Investment efficiency declined in Thailand after the global financial crisis... reflected in the high and rising incremental capital–output ratio” (footnote 14).

### Export sophistication and competitiveness
- Finding: Rising external challenges underscore the need to move up the value chain.  
- Policy recommendations:
  - Further liberalize trade and investment restrictions in primary and services sectors to support stronger FDI inflows and integration into higher value‑added segments of global value chains.  
  - Key reforms include reducing equity restrictions and streamlining screening and approval procedures, as recommended by the OECD (2021).  
  - Expand public R&D and accelerate investments in IT and digital infrastructure to strengthen Thailand’s manufacturing base.  
  - Priority areas: transition the automotive industry toward electric and hybrid vehicles; develop ICT industries to reinforce linkages with manufacturing; integrate local suppliers, particularly SMEs, into reconfigured supply chains.

### Social resilience and pensions
- Finding: Thailand’s inequality remains high relative to its income level.  
- Policy recommendations:
  - Integrate fragmented social assistance schemes and improve data sharing to better target support to the most vulnerable while minimizing fiscal costs.  
  - Expand social insurance coverage and reduce informal employment to strengthen resilience to shocks.  
  - Accelerate pension reforms to mitigate long‑term fiscal pressures and ensure adequate support amid a rapidly aging population.
- Pension metrics and concerns (footnote 15):
  - Staff estimates suggest total pension spending is estimated at around 2.5 percent of GDP in 2024.  
  - Civil service pensions account for the bulk of spending (1.8 percent of GDP).  
  - The Social Security Fund (SSF) represents 0.2 percent of GDP but faces long‑term sustainability challenges.  
  - About 40 percent of the workforce falls outside SSF coverage and relies solely on the basic OAA, which provides limited support.

### Climate agenda and carbon pricing
- Recent legal development: In December 2025 the Cabinet approved the Climate Change Bill, establishing legal basis for carbon pricing instruments—including an Emissions Trading System (ETS), a Carbon Border Adjustment Mechanism (CBAM), and carbon taxes—plus a national greenhouse gas Measurement, Reporting, and Verification (MRV) system and registry, and a state Climate Fund.  
- NDC update: Thailand updated its Nationally Determined Contributions (NDC), targeting a 47 percent reduction in emissions from 2019 levels by 2035 and advancing the net‑zero target to 2050 (NDC 3.0).  
- Implementation guidance:
  - Ensure broad sectoral coverage, limit exemptions, and implement the ETS in a phased manner supported by robust MRV.  
  - Use carbon pricing revenues to support well‑targeted transfers to mitigate distributional impacts and to finance green public investment.  
  - Gradually phase out untargeted and costly energy subsidies to strengthen incentives for transition to cleaner energy sources.

### Authorities’ views
- Agreement: The authorities broadly agreed with staff’s policy recommendations and noted alignment with the 13th National Development Plan (2023‑2027) and the upcoming 14th National Development Plan (2028–2032).  
- Highlighted actions:
  - Upgrading manufacturing toward future mobility, green energy, and smart electronics with stronger R&D.  
  - Advancing the digital economy via investment in data centers and cloud services.  
  - Enhancing human capital by attracting high‑potential foreign workers through the Smart Visa and Long‑Term Residence programs.  
  - Progress in governance and regulatory reform, including rapid digitalization of public services, an urgent legal reform committee, and Cabinet‑approved reforms to the Foreign Business Act.  
  - Emphasis on reforming fragmented social protection and simplifying business processes to incentivize formal employment.

### Staff appraisal and macro policy mix
- Outlook and risks:
  - Thailand’s economy has been resilient but faces increasing challenges: slowing exports, decline in foreign tourist arrivals, higher US tariffs, and constrained domestic demand due to elevated private debt.  
  - Inflation is projected to remain subdued and the decline in the price level could become broad‑based and sustained.  
  - Risks to the outlook are tilted downwards.
- Policy recommendations:
  - Use a carefully calibrated mix of simultaneous policy actions building on recent reform momentum.  
  - Fiscal: Targeted fiscal support anchored on a credible medium‑term consolidation strategy. Fiscal policy expected to provide a modest positive impulse in FY26; available resources should be directed to growth‑enhancing, well‑targeted, and efficiently implemented spending.  
  - Revenue: The revised MTFF envisages fiscal consolidation based on VAT rate increase beginning in FY28. Advancing the VAT hike to FY27, alongside other revenue mobilization efforts, would create additional fiscal space to support growth and address long‑term challenges while reducing public debt. Strengthen the fiscal framework by introducing a clearly defined deficit target, streamlining rules, and improving public financial management.  
  - Monetary: Recent monetary easing to support domestic demand is appropriate; there is scope to loosen further while remaining data dependent and preserving policy space. Given elevated household debt, continue measures to restore the impaired credit channel to ensure effective monetary policy transmission and strengthen credit intermediation.  
  - Coordination: Continued close coordination between monetary and fiscal measures is essential; maintain central bank independence and exchange rate flexibility. FX intervention can help restore orderly market conditions when large, non‑fundamental shocks occur. Over the medium term, further FX market liberalization and gradual removal of remaining capital flow management measures would deepen market resilience.  
  - Household deleveraging: Orderly household deleveraging should balance debt reduction with support for vulnerable households and SMEs; clear implementation plans and strong governance are essential to ensure effectiveness while safeguarding financial stability and mitigating moral hazard.
- External position and structural reform:
  - Preliminary assessment: The external position in 2025 is preliminarily estimated to be moderately stronger than warranted by fundamentals and desirable policy settings. Thailand’s external sector remains resilient, with low external debt and reserves well above adequacy metrics.  
  - Structural priorities: Deepen trade and financial integration, improve labor productivity through structural transformation, and advance export sophistication. Strengthen social resilience and advance the climate agenda.

### Recommendations and administrative
- It is recommended that the next Article IV consultation with Thailand take place on a standard 12‑month cycle.

*International Monetary Fund — Thailand country report content as provided.*

### Annex I. Implementation of the Main Policy Recommendations of

### Annex I. Implementation of the Main Policy Recommendations of the 2024 Article IV Consultation

### Fiscal Policy
- Fund recommendations:
  - Recalibrate the fiscal stance in FY25: a less expansive fiscal stance—aiming at a lower overall deficit (by around ½ percentage points of GDP) or targeting additional cash transfers to the most vulnerable and resources redirected toward productivity-enhancing investments in human and physical capital.
  - Adopt tighter fiscal stance in FY 2026: Strengthening revenue mobilization, phasing out energy subsidies, addressing gaps in social protection, and scaling up public investment.
  - Further strengthen fiscal rules to support debt sustainability.
  - Strengthen fiscal risk monitoring and improving the transparency of fiscal data.
- Policy actions by authorities:
  - The authorities reallocated THB 157 billion (0.8 percent of GDP) originally earmarked for Digital Wallet cash transfers, toward infrastructure projects ( water management and transportation), human capital development, and tourism promotion.
  - The authorities have shared the adjustment items to reconcile the budget framework and GFS data.

### Monetary and Exchange Rate Policies
- Fund recommendations:
  - Remain ready to adjust monetary policy stance in a data and outlook-dependent manner, with the flexible exchange rate continuing to act as a shock absorber.
  - Consider reviewing the inflation target at longer intervals than one year, for example as a part of a regular medium-term review of the entire monetary policy framework.
  - Provide FXI data, with appropriate safeguards to maintain confidentiality as well as time lags.
  - Maintain appropriate fiscal and FX buffers to effectively address future shocks.
  - Phase out the remaining capital flow management (CFMs) measures on nonresident baht accounts, including the 2021 tightening in the access limits for non-NQRC investors.
- Policy actions by authorities:
  - The BOT has shifted its monetary policy stance from neutral to accommodative, by lowering the policy rate by 125 bps since 2024Q4. This easing, in line with the outlook-dependent approach, is consistent with a downward revision of the GDP outlook, as well as ongoing tight financial conditions which could weigh on the recovery momentum. However, the MPC also gives importance to the timing and effectiveness of monetary policy given the limited policy space.
  - Foreign exchange intervention has been broadly two-sided, aimed at smoothing excessive exchange rate volatility.
  - While desirable, reviewing the inflation target at longer intervals than a year is not feasible, as it is mandated by law that BOT reviews the inflation target with the Ministry of Finance every year.
  - On 1 September 2025, the BOT announced further relaxation of CFMs by allowing non-residents non-financial corporates having trade and investment in Thailand to conduct transactions without having to submit underlying documents and to maintain Thai baht deposits in NRBAs/NRBSs without end-of-day outstanding limits. This expands the NRQC scheme to be generally applicable without case-by-case approval effective from 1 December 2025 onwards.

### Financial Policies
- Fund recommendations:
  - Accelerate efforts to regulate hire-purchase companies and enhance the regulatory framework for savings cooperatives and credit unions.
  - Enhance BOT’s crisis resolution framework in line with FSAP and June 2024 TA recommendations.
  - Strengthen personal debt workout programs for households with prolonged debt issues.
  - Implement measures to prevent excessive leverage buildup that covers all financial institutions.
  - Further enhancing financial literacy.
  - Continue strengthening the AML/CFT framework (including ownership requirements in the Anti-Money Laundering Act, and improvements in the application of AML/CFT preventive controls through risk-based supervision).
- Policy actions by authorities:
  - In June 2025, The Royal Gazette published the Royal Decree on the Regulation of Hire Purchase and Leasing of Automobiles and Motorcycles under the Financial Institutions Business Act B.E. 2551 (2008), B.E. 2568 (2025). This decree will take effect on 2 December 2025 and grants the BOT oversight authority on market conduct of companies engaged in the businesses of hire purchase and leasing of vehicles and motorcycles, with the objective of strengthening consumer protection measures.
  - Regulations aim at prescribing characteristics, objectives, and scope of operations for each type of cooperative as well as regulations on deposits and investment concentration have been in effect since Nov 2024.
  - The new responsible lending guidelines were implemented in February 2025, with key revisions on tightening advertising standards and further guidance on default management and affordability assessments.
  - In April 2025, Royal Decrees that (i) places greater responsibility on financial institutions to implement effective fraud preventive measures and reinforcing consumer protection, and (ii) address issues related to crypto-related mule accounts, have been passed.

### Structural Policies
- Fund recommendations:
  - Streamline business regulations and further liberalize FDI restrictions.
  - Expanding public R&D and investments in IT and digital infrastructure.
  - Increase public spending on education, with a strong focus on STEM-related areas.
  - Continue advancing the governance reform agenda and addressing weaknesses in contract enforcement and corruption.
- Policy actions by authorities:
  - Authorities emphasized ongoing regulatory reforms, including accelerating digitalization of public services and establishing a legal reform committee to remove operational obstacles.
  - In April 2025, the government approved an initiative to reform the Foreign Business Act, aiming to reduce structural barriers and modernize FDI legislation.
  - To address demographic challenges and skill gaps, Thailand launched the “Upskill and Reskill for Future Industry” initiative targeting training for more than 100,000 workers in collaboration with the Board of Investment, private sector, and academia.
  - Complementary measures include Smart Visa and Long-term Residence Visa programs to attract high-potential foreign talent and incentivize entrepreneurs to invest in human resource development.
  - In March 2025, the NACC, the Public Sector Anti-Corruption Commission (PACC), and the Office of the Auditor General (OAG) signed a Memorandum of Understanding (MOU) that focuses on advancing policy-based corruption risk assessments for large-scale government projects.
  - In June 2025, the amendment of Organic Act on Anti-Corruption strengthens whistleblower protections by shielding informants from lawsuits, disciplinary actions, and harassment, while also enabling the NACC to provide legal and financial support.

---

### Annex II. Implementations of 2019 Financial Sector Assessment Program (FSAP) Key Recommendations

### Overall Regulatory and Supervisory Framework
- FSAP recommendations:
  - Establish an overarching body to strengthen cooperation, coordination, and information sharing among regulators/supervisors, with a “comply or explain” mechanism where it makes recommendations to member agencies.
  - Improve further the accountability mechanism of the FIPC and the OIC, including by reinforcing the accountability of the FIPC to include hearings to an appropriate legislative body.
  - Strengthen further the independence of regulators including by removing representatives of other institutions from the FIPC and boards of regulatory agencies and by removing requirements for MOF approval to issue regulation to SFIs and take corrective actions.
- Policy actions and developments:
  - Coordination, cooperation, and information exchange are holistically being executed through both high-level and working-level platforms on a regular basis. High-level forums include the Financial Institutions Policy Committee (FIPC) Meeting and the joint MPC-FIPC Meeting. Working-level platforms include the 3-Regulators Steering Committee Meeting and other quarterly informal meetings.
  - Procedures: Initial proposals are submitted to the FIPC for preliminary review and endorsement; comprehensive public hearing/consultation is conducted; final draft, taking into account the hearing outcome, is resubmitted to the FIPC for final approval prior to promulgation.
  - After COVID-19, more emphasis placed on macro-financial linkages and integrated policy implementation. However, formulation of policies and supervisory guidelines for SFIs are subjected to the final approval by MOF.

### Risks to the Banking Sector Stability
- FSAP recommendations:
  - Enhance the data management system and improve capacity for liquidity risk analysis.
  - Extend the risk analysis to better cover a wider range of sources of risk with potential systemic spillovers, including concentration in loan portfolio.
  - Collect more granular data on SFIs to refine the stress tests on solvency and liquidity.
- Policy actions and developments:
  - The BOT is acquiring and analyzing retail and wholesale payment data—including bank counter services, PromptPay, mobile banking, and BAHTNET transactions—to support liquidity monitoring dashboards.
  - BOT uses data on net flows and the proportion of liquid assets held by Daily Fixed Income (DFI) funds as indicators for liquidity conditions.
  - Under the MOU, the BOT currently obtains financial position and investment data from savings cooperatives and is expected to receive the financial data of automotive hire-purchase and leasing businesses in 2027, after legislation granting BOT supervision power over these entities was passed earlier this year. Placement of such businesses under BOT’s direct supervision will take effect on 2 December 2025.
  - The BOT has established the Macro-Financial Stability Secretariat (MFiSS) and the Subcommittee on Economic and Financial Stability to oversee alignment between macroeconomic and financial conditions and implementation of integrated policies, including the MaPP and macro-financial linkages.
  - Enhancements to systemic risk assessment include integration of savings cooperatives, insurance and non-bank retail lending metrics into a financial stability dashboard; development of the Composite Indicator of Systemic Stress (CISS), which can forecast panic events at least 3 days in advance; and collaboration with SEC and OIC to conduct macro stress tests.
  - Regarding loan concentration, BOT is considering regulatory approaches on the Large Exposures (LEX) standard and reviewing the Single Lending Limit (SLL) framework; BOT is exploring leveraging supervisory data to enhance risk monitoring.

### Macroprudential and Financial Stability
- FSAP recommendations:
  - Clarify the financial stability mandate of the FIPC and the MPC.
  - Address potential leakages by extending BOT’s macroprudential authority, including extending DTIs to personal loans granted by SFIs, TCCs, and CUs.
  - Introduce a broad-based DSTI ratio.
  - Amend internal guidelines on preventive and corrective action to reflect flexibility granted under FIBA.
  - Implement new definitions of loan restructuring and rescheduling and current practices surrounding NPL identification to meet international standards.
- Policy actions and developments:
  - MPC and FIPC operate under distinct mandates; monetary policy deliberations by the MPC inherently take financial stability into account as one of three core objectives. FIPC is explicitly tasked with ensuring stability of financial institutions. Macroprudential policy decisions should involve both MPC and FIPC under the IPF framework.
  - Progress seen in Thrift and Credit Cooperatives and Credit Unions.
  - Debt Service Ratio (DSR) regulation: core principles incorporated into underwriting standards via the Responsible Lending Guidelines. Timing of official rollout under consideration. BOT initiated development of a data reporting system and plans to review standards and methodologies for DSR calculation in collaboration with stakeholders. A revised DSR calculation standard is expected to be published by mid 2026, with mandatory data reporting by financial institutions targeted for 2027.
  - Cooperative Promotion Department (CPD) guidelines require savings cooperatives to consider members’ debt obligations to other financial institutions and aim to ensure members retain at least 30 percent of their monthly income after debt repayments.
  - BOT amended the PPA/PCA internal guideline, enhancing BOT’s flexibility in taking PPA actions before a bank’s supervisory rating of 4 (weak bank) is reached.
  - IFRS 9 became effective in Thailand since January 2020. BOT revised relevant regulations and coordinated with the Federation of Accounting Profession in Thailand to support the adoption of IFRS9.

### Banking and SFIs Oversight
- FSAP recommendations:
  - Continue reforms to supervise the three largest retail deposit taking SFIs under the same standards as commercial banks.
- Policy actions and developments:
  - BOT enhances regulation to supervise SFIs using a phased approach:
    - Phase 1-2 (effective 2017-19): rules and guidelines on governance, capital requirements, liquidity reserve requirements, credit processes, single lending limits, accounting, branch services, outsourcing, KYC, IT risk management, mortgage loans, and market conduct.
    - Phase 3 (effective 2020-1): Regulation on Telebanking and Digital Banking Channel, Guidelines on Operational Risk Management, Guidelines on Internal Control, and Mobile Banking Security.
  - Next phase: BOT plans to revise relevant regulations to ensure alignment with commercial banks; draft regulations prepared and submitted for approval by the Minister of Finance (examples include approval of appointment of non-ex officio directors, managers, persons with power of management, and advisors; and KYC for deposit account openings at SFIs).

### Thrift and Credit Cooperatives and Credit Unions
- FSAP recommendations:
  - Define and initiate the implementation of a regulatory and supervisory regime for financial cooperatives proportionally equivalent to that applied to the banking system.
  - Address potential over-indebtedness including by defining maximum DTI ratios and requiring TCCs and CUs to report to the NCB.
- Policy actions and developments:
  - BOT together with other regulatory bodies supported the CPD in promulgating more stringent regulations on corporate governance, disclosure, and capital requirements. Regulations on characteristics, objectives, scope of operations, deposits and investments concentration prevention have been in effect since November 2024.
  - BOT worked with CPD to promote responsible lending practices among savings cooperatives to address household debt challenges.

### AML/CFT
- FSAP recommendations:
  - Enhance scope and capacity for risk-based AML/CFT supervision.
- Policy actions and developments:
  - The Anti-Money Laundering Act is being amended to expand the coverage of reporting entities and to incorporate beneficial ownership requirements to improve transparency of legal persons, trusts, cooperatives, and NPOs.
  - The Counter-Terrorism and Proliferation of Weapons of Mass Destruction Financing Act has been amended and came into force to provide the mechanism for delisting request and procedures relating to false positives.
  - A draft Operation of Non-Profit Organizations Act is being drafted to enhance transparency of NPOs.
  - The National Money Laundering and Counter Terrorism Financing Risk Assessment was updated.

### Crisis Management and Resolution
- FSAP recommendations:
  - Review and amend bank and SFI resolution law to align with Key Attributes.
  - Develop bank and SFI resolution toolkit and implement bank-specific resolution planning.
  - Strengthen ELA and deposit insurance arrangements in line with best practice.
- Policy actions and developments:
  - Banks: BOT Act was amended in July 2018 to set out the current resolution framework broadly aligned with Key Attributes. BOT developed a resolution toolkit in 2020, a playbook in 2021, and sample resolution plans applicable to D-SIBs. Bank-specific resolution planning for D-SIBs is ongoing.
  - SFIs: Financial Institutions Business Act provides statutory basis for Minister of Finance to assign BOT as regulator of SFIs and to take prescribed corrective or resolution actions with MoF approval.
  - Strengthening ELA: principles and guidelines for accepting loan portfolio collaterals were approved in 2020. Progress includes assessment and pricing of loan portfolio collaterals, review of financial haircuts, finalizing process to set-off loans in case of default, developing the loan review system and drafting loan documentations for Section 42 ELA.

*Source: Thai authorities and IMF 2019 FSAP.*

### Annex III. External Sector Assessment

### Annex III. External Sector Assessment

### Overall assessment
- Preliminary staff estimates for 2025 suggest that the external position is moderately stronger than the level implied by medium-term fundamentals and desirable policies, with CA and REER gaps modestly widening.
- The CA balance is expected to marginally increase to 2.3 percent of GDP in 2025 from 2.2 percent of GDP in 2024, primarily reflecting stronger services and primary income balances, partially offset by a decline in the trade balance.
- Over the medium term, the current account is projected to gradually rise to around 2.8 percent of GDP.
- Policy guidance: promote productive investment, liberalize the service sector, minimize tax incentives and subsidies that distort competition, preserve buffers, smooth adjustment, maintain prudent and parsimonious fiscal policy given elevated public debt, focus public expenditures on targeted social transfers and infrastructure investment for a green recovery, reform and expand social safety nets (notably fragmented pension plans), address widespread informality, and pursue revenue‑driven fiscal consolidation to rebuild fiscal buffers.

### Foreign asset and liability position and trajectory
- 2025 projections (percent GDP):
  - NIIP: 13.3
  - Gross Assets: 123.3
  - Debt Assets: 38.4
  - Gross Liab.: 110.0
  - Debt Liab.: 36.5
- Gross assets rise to 123.3 percent of GDP in 2025 (from 122.8 percent of GDP in 2024); gross liabilities decline to 110 percent of GDP (from 114.3 percent of GDP).
- Composition:
  - Gross reserve assets: 48.9 percent of GDP.
  - Direct investment (assets): 36.8 percent of GDP.
  - Gross liabilities: direct investment ~58 percent, portfolio investment ~21 percent.
- Flow projections:
  - Net portfolio investment assets expected to pick up by 1.7 percent of GDP.
  - Other investment projected to decline by 0.5 percent of GDP.
  - Net direct investment expected to remain stable.
- Assessment: NIIP projected to remain a small creditor position over the medium term given CA surpluses. External debt expected to decline to 36.5 percent of GDP in 2025 from 37.1 percent of GDP in 2024; short-term debt ≈ 16 percent of GDP. Risks to external debt stability and liquidity are limited.

### Current account
- 2025 projections (percent GDP):
  - CA: 2.3
  - Cycl. Adj. CA: 2.4
  - EBA Norm: 1.0
  - EBA Gap: 1.4
  - Staff Adj.: 0
  - Staff Gap: 1.4
- Background:
  - 2024 CA surplus: 2.2 percent of GDP.
  - 2025 CA increase to 2.3 percent of GDP mainly due to stronger services and primary income balances.
  - Trade balance expected to decline by 0.4 percent of GDP as imports grow faster than exports.
  - From a saving–investment perspective, a decline in private investment is anticipated to offset lackluster private and public savings.
  - Going forward, CA expected to increase to 2.8 percent of GDP as trade policy uncertainty abates and foreign tourist arrivals recover.
- EBA assessment:
  - EBA CA model: cyclically adjusted CA of 2.4 percent of GDP and a CA norm of 1.0 percent of GDP for 2025.
  - CA gap of 1.4 percent of GDP comprises:
    - Identified policy gap: 0.6 percent of GDP.
    - Unexplained residual: 0.8 percent of GDP.
  - Policy gap drivers:
    - Positive fiscal balance: 1.1 percentage points.
    - Change in reserves: 0.3 percentage points.
    - Negative credit policy gap: –0.9 percentage points.
    - Domestic policy gaps (0.6 percent of GDP): change in reserves largest contributor (0.5 percent of GDP); domestic health expenditure gap 0.2 percent of GDP indicates room to increase social safety net spending.
  - IMF staff assesses the CA gap range as 0.7 to 2.1 percent of GDP with a midpoint of 1.4 percent of GDP for 2025.

### Real exchange rate (REER)
- Background:
  - The baht has been on a gradual real appreciation trend since the mid-2000s.
  - As of November 2025, the REER was 3.1 percent above its 2024 average following the strengthening of the current account balance, including from exports expanding faster than imports.
- Assessment:
  - Using an elasticity of 0.5 and based on the IMF staff CA gap, staff assesses the 2025 REER to be undervalued in the range of 1.5 to 4.1 percent, with a midpoint of 2.8 percent.
  - The EBA index REER gap in 2025 is estimated at 8.6 percent.
  - The EBA level REER gap is estimated at –2.0 percent.

### Capital and financial accounts: flows and policy measures
- Background:
  - 2025 capital and financial account balance (excluding change in reserves) expected to increase to about 0 percent of GDP from -1.2 percent of GDP in 2024.
  - Increase reflects: reduction in portfolio outflows by 1.8 percent of GDP, decline in net FDI inflows by 0.4 percentage points, decrease in financial derivatives by 0.1 percentage points; other investment broadly stable.
- Policy and assessment:
  - Thailand maintains strong external buffers and fundamentals.
  - Authorities’ measures welcomed: further liberalization of the financial account, expansion of the scope of the Non-Resident Qualified Company program, measures to facilitate FX outflows (permitting additional purposes without prior approval, raising transfer limits), removal of documentation requirements for non-resident transactions.
  - Staff recommendations:
    - Reverse the 2021 reduction in the limit on Thai baht lending from domestic financial institutions to non-residents without underlying document submission.
    - Phase out CFM measures on nonresident baht accounts.
    - Pursue a comprehensive package of macroeconomic, financial, and structural policies to address volatile capital flows, complemented with gradual and prudent financial account liberalization.

### FX intervention and reserves level
- Background:
  - Exchange rate regime classified as floating (de jure and de facto).
  - Gross international reserves projected to increase to 48.9 percent of GDP in 2025 from 45.0 percent of GDP in 2024.
  - Reserves correspond to approximately:
    - 2.4 times short-term debt,
    - 11 months of imports,
    - 242.4 percent of the IMF’s standard ARA metric.
  - Exchange rate allowed to adjust with some two-sided FX interventions in periods of large volatility.
- Assessment:
  - Reserves are higher than the range of the IMF’s reserve adequacy metrics; there is no need to build up reserves for precautionary purposes.
  - Policy guidance: allow exchange rate to move flexibly as a shock absorber; use FX intervention to address disorderly market conditions and mitigate policy trade-offs when the FX market becomes dysfunctional and deviations in hedging and financing premiums become excessive due to large non-fundamental shocks.

### Key risks and policy responses (from Risk Assessment Matrix)
- External risks (likelihood and impacts summarized):
  - Geopolitical Tensions — High likelihood; could disrupt trade, travel, investment, tourism, supply chains. Policy response: diversify trade partnerships, strengthen supply chain resilience, liberalize markets to attract FDI, promote R&D and structural reforms, accelerate infrastructure development.
  - Escalating Trade Measures and Prolonged Uncertainty — High likelihood; could slow export recovery, reduce FDI, disrupt supply chains, weigh on consumption and investment.
  - Commodity Price Volatility — High likelihood; higher fuel prices could slow growth, raise inflation, worsen fiscal balance via prolonged fuel subsidies. Policy response: accommodate first-round cost-push effects given low inflation and slack; prepare monetary policy for second-round effects; fiscal support if price pressures moderate; avoid costly and regressive fuel subsidies and replace with targeted support.
  - Financial Market Volatility and Correction — High likelihood; could tighten financial conditions and weigh on consumption and investment. Policy response: deploy integrated policy instruments (monetary tightening, FX intervention, fiscal support) as appropriate.
  - Cyberthreats — High likelihood; could trigger financial instability. Policy response: strengthen IT risk management, contingency plans, temporary targeted support (liquidity assistance, rapid service restoration).
  - Climate Change — Medium likelihood; extreme events could disrupt activity in tourism and agriculture. Policy response: enhance climate adaptation and mitigation, targeted fiscal support to affected populations and sectors.
- Domestic risks:
  - Increased social discontent and political uncertainty — High likelihood; could undermine confidence and reforms. Policy response: maintain macro stability, strengthen social support, scale up education and health expenditure, strengthen governance and anti-corruption, improve public communication on reforms.
  - Weakening fiscal discipline — High likelihood; could delay consolidation and raise public debt and borrowing costs. Policy response: strengthen fiscal rules, enhance transparency and accountability in public financial management.
  - Further buildup of private sector debt — High likelihood; could impair banks and reduce credit growth. Policy response: prevent excessive leverage via comprehensive credit information systems, provide legal and financial advice to indebted consumers, extend macroprudential coverage to saving cooperatives and NBFIs.

### Thailand’s integration in a shifting global landscape (selected findings)
- Thailand’s trade profile:
  - Exports increasingly outward-oriented; extra-regional partners account for bulk of recent export growth.
  - Exports to the United States: 18 percent of merchandise exports.
  - Chinese mainland: about 13 percent of services exports.
  - Exports to other ASEAN countries: around 24 percent of goods exports and 16 percent of services exports.
- Intra-ASEAN trade:
  - Thailand’s intra-ASEAN goods export share: approximately 19 percent of total exports.
  - Thailand’s intra-ASEAN services export share: around 12 percent of total exports.
  - Recent decline in Thailand’s intra-ASEAN services trade share is among the largest in the region while its goods trade share remained flat.
- Analytical findings:
  - A gravity model using global bilateral trade data indicates enhancements in digital governance, logistics performance, and human capital are strongly correlated with increased trade flows.
  - Quantitative estimates suggest coordinated improvements in these areas across ASEAN could yield substantial gains in intra-regional trade and deeper integration with global markets.

*Annex III. External Sector Assessment*

### 3.      Structural factors such as digital governance, logistics performance, and human capital

### 3.      Structural factors such as digital governance, logistics performance, and human capital

### Structural drivers and empirical findings
- Improvements in digital governance, logistics performance, and human capital are strongly associated with higher trade flows across ASEAN, with particularly large effects in services where digital infrastructure facilitates cross-border delivery and coordination.
- Enhanced logistics performance—reflected in customs efficiency, infrastructure, and shipment tracking—positively correlates with goods exports, underscoring the importance of trade facilitation.
- Higher scores on the Human Capital Index are linked to stronger export performance, especially in services sectors that rely heavily on skilled labor.
- Coordinated regional efforts (not only domestic improvements) matter: importer-side logistics performance improvements generate positive spillovers that are statistically and economically significant for Thailand’s exports.

### Thailand: position, gaps, and estimated export potential
- Thailand is positioned well within ASEAN on structural trade enablers:
  - At the frontier of logistics performance relative to its level of development.
  - Ranks above the regional median in both the Human Capital Index and the Online Services Index (GovTech proxy), with remaining scope to strengthen these areas to support services trade.
- Aggregate potential export gains for Thailand from closing policy gaps are estimated at about 1.7 percent of GDP.
  - From advancing GovTech: 1.2 percent of GDP.
  - From improvements in human capital: 0.3 percent of GDP.
  - From improvements in logistics: 0.2 percent of GDP (including positive spillovers from other ASEAN members improving their logistics performance).

### Quantitative elasticities and illustrative magnitudes
- Exporter-side GovTech:
  - A 0.1 point increase in the GovTech index is associated with roughly 2 percent higher goods exports.
  - The same 0.1 point increase is associated with about 1 percent higher services exports.
- Heterogeneity: gains vary markedly across ASEAN members depending on (i) economic structure (trade openness and reliance on services/merchandise), (ii) distance from the frontier (shortfall across the three indicators relative to computed benchmarks), and (iii) the estimated gravity elasticities.

### Methodology and data
- Gravity model of bilateral trade flows estimated for both goods and services using panel data from:
  - BACI-CEPII (goods).
  - WTO-OECD BATIS (services).
- Baseline specification includes lagged exporter and importer GDP and population, GovTech (UN’s Online Services Index), Logistics (World Bank’s Logistics Performance Index), Human Capital Index (World Bank), and bilateral applied tariffs. All main economic variables are lagged by one year.
- Estimation technique: Poisson Pseudo Maximum Likelihood (PPML) estimator, accommodating zero trade flows and heteroskedasticity.
- Policy-gap definition: shortfall from the policy frontier defined as the minimum of the fitted 95th-percentile benchmark and the indicator’s maximum possible value. Counterfactual bilateral exports in 2023 simulated by applying statistically significant exporter- and importer-side coefficients to each ASEAN member’s adjusted gaps; aggregate gains reported as percent of GDP.

### Adverse global scenario and macroeconomic policy simulations (QIPF)
- Adverse scenario assumptions (shocks affecting global economy starting in 2025Q4, aligned with October 2025 WEO Box 1.2 Scenario A) include four layers: (i) higher U.S. tariffs and temporary supply chain disruptions; (ii) higher inflation expectations; (iii) higher sovereign yields and tighter global financial conditions; and (iv) lower global demand for U.S. assets.
- Global impacts incorporated from WEO/GIMF exercise:
  - U.S. output: 1.6 percent decline.
  - U.S. inflation: 0.7 percent increase in 2026 relative to the baseline.
- Thailand-specific projected impacts under the adverse scenario:
  - Thailand’s exports: decline by about 3.4 percent in 2028.
  - Thailand’s output: reduced in 2026 by approximately 2.0 percent relative to the baseline.
  - Inflation: reduces by 0.3 percentage points relative to the baseline.
  - Public debt-to-GDP ratio: rise by 2.0 percentage points by 2027 if no discretionary fiscal stimulus is undertaken.
  - Monetary policy reaction estimated: additional 100 bps policy rate cut in the baseline adverse scenario.

### Alternative policy responses simulated
- More aggressive monetary easing:
  - Policy rate cut of 160 bps (instead of 100 bps) considered for illustration (noting feasibility constraints under prevailing policy rate without negative rates).
  - Outcome: helps mitigate deflationary pressures, supports a faster recovery via enhanced exports from baht depreciation, and helps contain the rise in public debt relative to the adverse scenario.
- Combined fiscal-monetary response:
  - Fiscal stimulus equivalent to 1.5 percent of GDP:
    - 0.5 percent of GDP in targeted transfers to vulnerable households.
    - 1 percent of GDP in additional government expenditures.
  - Outcome: further mitigates output decline, supports inflation via increased domestic demand and greater exchange rate depreciation (reflecting higher imports), allows monetary rate cuts to be limited to around 100 bps, but raises the public debt-to-GDP ratio below but close to 2 percent (additional increase) and keeps debt elevated over an extended period.

### Policy implications and recommendations
- Coordinated investments in digital systems (GovTech), logistics performance, and human capital can yield substantial gains in regional and global trade integration, especially for services trade.
- Regional cooperation in improving importing partners’ logistics and digital public infrastructure amplifies export gains through positive spillovers.
- In the face of adverse global shocks, effective monetary-fiscal policy coordination is important:
  - Monetary easing can mitigate deflationary pressures and support output but may require deploying much of remaining policy space.
  - Complementary fiscal support can reduce the need for very large monetary adjustments but entails higher public debt; monetary easing can help by lowering borrowing costs and containing the rise in debt levels.

*Source: Chapter 3 and accompanying annexes and technical appendix of the provided IMF Thailand staff report (policy simulations and gravity model results).*

### 5. Debt consolidation across sectors:

### 5. Debt consolidation across sectors

### Public debt structure and coverage
- Public debt perimeter: includes central government, non-financial state-owned enterprises, the Financial Institutions Development Fund, government agencies, and guaranteed debt of Special Financial Institutions.
- Revised perimeter: excludes the Social Security Fund and local governments because they are "not expected to accumulate debt in the medium term"; debt coverage "will need to be reassessed as the Social Security Fund begins to incur losses."
- Currency and investor composition:
  - Public debt is "predominantly composed of domestic currency debt, with 99.2 percent held by domestic investors."
- Maturity and instruments:
  - The share of shorter maturities "has risen due to increased borrowing since the pandemic," but the maturity structure is "expected to gradually lengthen."
- Reporting/valuation notes:
  - Face value, nominal value, market value distinctions are noted; market values available only for traded debt securities.
  - Stock of arrears may be used as proxy for accounts payable in absence of accrual data.
  - Insurance, Pension, and Standardized Guarantee Schemes (IPSGSs) typically include government employee pension liabilities.

### Baseline projections and key fiscal numbers (percent of GDP unless indicated)
- Public debt (Actual/Projection): 64.8 (actual), 66.8, 67.8, 68.5, 69.1, 69.5, 69.6, 69.5, 69.4, 69.2, 68.9
- Change in public debt: 1.6, 2.0, 1.0, 0.7, 0.6, 0.4, 0.1, -0.1, -0.1, -0.2, -0.3
- Contribution of identified flows: 1.5, 2.0, 1.0, 0.7, 0.6, 0.4, 0.1, -0.1, -0.1, -0.2, n.a.
- Primary deficit: 1.4, 1.6, 1.3, 1.3, 1.3, 1.4, 1.3, 1.3, 1.2, 1.2, 1.1
- Noninterest revenues: 47.2 (repeated across projection horizon)
- Noninterest expenditures: 48.7, 48.8, 48.6, 48.6, 48.7, 48.7, 48.6, 48.6, 48.6, 48.5, 48.5
- Automatic debt dynamics: 0.1, 0.4, -0.3, -0.6, -0.9, -1.0, -1.2, -1.4, -1.4, -1.4, n.a.
- Real interest rate and relative inflation (component): 1.6, 1.5, 1.1, 0.9, 0.8, 0.7, 0.5, 0.3, 0.3, 0.3, n.a.
- Real growth rate (selected entries): -1.5, -1.1, -1.3, -1.5, -1.6, -1.7, -1.7, -1.7, -1.7, -1.7
- Gross financing needs: 17.8, 10.2, 11.7, 13.5, 13.5, 13.7, 11.9, 14.1, 12.8, 13.3, 13.6
  - of which debt service: 16.4, 8.6, 10.4, 12.2, 12.0, 12.3, 10.6, 12.8, 11.6, 12.1, 12.5
  - Local currency GFN: 16.2, 8.4, 10.3, 12.1, 11.9, 12.2, 10.5, 12.8, 11.6, 12.1, 12.5
  - Foreign currency GFN: 0.1, 0.1, 0.1, 0.1, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0
- Memo indicators:
  - Real GDP growth (percent): 2.4, 1.7, 2.0, 2.3, 2.4, 2.5, 2.5, 2.5, 2.5, 2.5
  - Inflation (GDP deflator; percent): 0.1, 0.3, 0.9, 1.2, 1.3, 1.4, 1.8, 1.9, 2.0, 2.0, 2.0
  - Nominal GDP growth (percent): 2.6, 2.0, 2.9, 3.4, 3.8, 4.0, 4.3, 4.5, 4.5, 4.5, 4.5
  - Effective interest rate (percent): 2.8, 2.6, 2.5, 2.5, 2.5, 2.4, 2.5, 2.5, 2.4, 2.4, 2.4
- Commentary summary: "Public debt increased sharply during the pandemic and its immediate aftermath. With a gradual fiscal consolidation and subdued growth prospects, public debt is expected to remain elevated, close to the authorities' ceiling of 70 percent of GDP over the medium term."

### Medium-term risk assessment
- Debt Fanchart module:
  - Debt fanchart index (DFI): 2.0
  - Fanchart width: 50.7, 0.7 (values shown)
  - Risk signal: Moderate
  - Terminal debt-to-GDP x: 38.4, 0.8 (values shown)
- Gross Financing Needs (GFN) module:
  - Average baseline GFN: 12.4, 4.2 (percent of GDP; values shown)
  - Initial Banks' claims on the general government (pct bank assets): 12.1, 3.9
  - Change in banks' claims in stress (pct bank assets): 0.3, 0.1
  - GFN financeability index (GFI): 8.3
  - Risk signal: Moderate
- Final assessment:
  - Medium-term index: Risk signal 5/ (final assessment: Moderate-to-elevated; see commentary)
  - Prob. of missed crisis, 2026-2031, if stress not predicted: 18.2 pct.
  - Prob. of false alarms, 2026-2031, if stress predicted: 27.3 pct.
- Commentary summary: "The Debt Fanchart module points to moderate risks around the projected debt baseline, reflecting a relatively large Fanchart width. The GFN Module also indicates moderate risks due to elevated GFN in the near term, which is driven by a combination of increased primary deficit and large amortization of COVID-19 related borrowing."

### Realism of baseline assumptions and historical context
- Realism assessments: "do not raise major concerns," but note a "relatively large stock-flow adjustment in the past" that warrants caution; this may reflect limited data on state-owned enterprises’ operations or other unidentified quasi-fiscal operations.
- Projected interest rates reflect "recent decline in government bond yields driven by stronger market demand," with rates "expected to rise gradually as the maturity profile lengthens."
- Projected 3-year fiscal adjustment and debt reduction are "well within historical norms," and the "real GDP growth trajectory is consistent with the assumed fiscal adjustment and potential growth."

### Long-term risks: pensions, health, climate, and large amortizations
- Large amortizations:
  - Overall, the Large Debt Amortization Module "does not signal heightened risks, but elevated level of amortization shows risk indication."
- Pensions:
  - Updated projections using authorities' data: total pension benefits estimated at 2.5 percent of GDP as of 2024 (includes Old-Age Allowance, Civil Service Pension, Social Security Fund).
  - Demographic impact: "Thailand’s aging population is expected to widen the gap between pension benefits and contributions, leading to increased financing needs."
  - Permanent adjustment needed to keep pension assets positive (illustrated in charts).
- Health:
  - Demographics-driven increase in health costs: "Thailand’s aging population is also expected to increase health costs."
  - Policy focus: scale up health expenditures while "carefully managed to ensure spending efficiency and effectively support the buildup of human capital."
- Climate change:
  - Adaptation: "Climate adaptation costs can be sizeable," including resilient infrastructure, water scarcity, soil degradation, and R&D; investments could unlock growth opportunities (not incorporated into quantitative analysis).
  - Mitigation: "Meeting Thailand’s climate mitigation goals would require significant upfront investments ... Phasing out broad-based energy subsidies and implementing effective carbon pricing mechanism are essential to finance the transition and mitigation costs." The analysis "does not account for the growth effect of investment in climate change mitigation."

### Policy implications and recommendations (drawn from commentary)
- Fiscal consolidation:
  - Continue "gradual fiscal consolidation" to keep public debt close to but below the authorities' 70 percent of GDP ceiling over the medium term.
- Debt perimeter and data coverage:
  - Reassess debt coverage as the Social Security Fund "begins to incur losses."
  - Improve data on state-owned enterprises’ operations and other quasi-fiscal activities to reduce stock-flow adjustment uncertainty.
- Debt management:
  - Lengthen the maturity profile over time to reduce rollover risk, acknowledging near-term increase in shorter maturities from pandemic borrowing.
  - Monitor and manage elevated Gross Financing Needs (GFN) in the near term to preserve financeability.
- Long-term fiscal sustainability:
  - Implement permanent adjustments to pension system to keep pension assets positive given aging population and 2.5 percent of GDP total benefits as of 2024.
  - Scale up health expenditures with strong emphasis on spending efficiency and human capital outcomes.
  - Finance climate mitigation and adaptation by phasing out broad-based energy subsidies and implementing effective carbon pricing mechanisms; consider growth benefits from green investments in future analyses.

*Source: IMF staff estimates and projections (figures and commentary as provided in the chapter).*

### Annex VIII. Data Issues

### Annex VIII. Data Issues

### Data Adequacy Assessment (Table 1)
- Sectoral questionnaire heatmap top-line codes: National Accounts: AABAABA; Prices: Coverage BABAA; Government Finance Statistics: AAAA; External Sector Statistics: AB; Monetary and Financial Statistics: Inter-sectoral ConsistencyBB; Median Rating: B.
- Granularity cell notes: Government Finance Statistics — top cell: granularity of reported government operations data; bottom cell: granularity of public debt statistics. Monetary and Financial Statistics — top cell: granularity of Monetary and Financial Statistics data; bottom cell: granularity of Financial Soundness indicators.
- Overall conclusion: "The data provided to the Fund are adequate for surveillance." and also that "The data provided to the Fund have some shortcomings but are broadly adequate for surveillance." (both statements appear in source text as part of assessment options and narrative).

### Key Findings and Sectoral Issues
- National Accounts
  - Mostly adequate for surveillance.
  - Could benefit from additional granularity in terms of activities on the production side.
- Government Finance Statistics (GFS) and Public Debt
  - Authorities publish general government operations data consistent with the GFSM 2014.
  - Large discrepancies exist between GFS and national budget figures, hindering timely assessment of the fiscal position.
  - Authorities have begun sharing data to reconcile the two series, but further clarification is needed on sources of adjustment data and operations of extra-budgetary funds.
  - GFS presentation of the annual budget could be enhanced to better align with GFS-based fiscal outturns.
  - Debt data have broad coverage, but arrears, PPPs, and other contingent liabilities are not distinctly identified.
  - Lack of data on SOEs' operations limits consistency between public debt and identified debt-creating flows.
- Monetary and Financial Statistics
  - Monetary statistics are adequate in coverage, granularity, and frequency and timeliness.
  - Financial sector statistics could be enhanced.
  - Financial soundness indicators for main systemically important institutions are mostly available.
  - Lack of data for Specialized Financial Institutions, saving cooperatives, and other non-bank financial institutions may affect assessment of financial sector risks.
  - More granular data on credit provision disaggregated by type of financial institution is needed to monitor macro-financial risks.
- External Sector Statistics
  - Broadly adequate, but inter-sectoral consistency could be improved by reducing net errors and omissions.
- Cross-cutting issues
  - Economic data provision can be more centralized to ensure easy access and improved findability.
  - Coverage of the informal economy can be strengthened.

### Changes since last Article IV and Other Data Gaps
- Authorities have released GFSM 2014-based data for selected nonfinancial state-owned enterprises (SOEs).
- Authorities shared the adjustment items between the budget execution and GFS data.
- Other data gaps noted: arrears, PPPs, and other contingent liabilities not distinctly identified; limited SOE operations data; incomplete coverage of Specialized Financial Institutions, saving cooperatives, and other non-bank financial institutions.

### Corrective Actions and Capacity Development Priorities
- Completed Technical Assistance (TA) mission: Government Finance Statistics and Public Sector Debt Statistics mission completed in October 2025, supporting improvements to reconciliation table between budget implementation data and GFS.
- Recommended further support:
  - Enhance mapping of the budget plan to GFS classifications to ensure greater consistency in fiscal reporting.
  - Clarify sources of adjustment data and the operations of extra-budgetary funds.
  - Improve identification and reporting of arrears, PPPs, and other contingent liabilities.
  - Expand financial sector data coverage to include Specialized Financial Institutions, saving cooperatives, and other non-bank financial institutions.
  - Provide more granular credit data by type of financial institution.

### Data Standards and Dissemination (Table 3 and related text)
- Thailand subscribes to the Special Data Dissemination Standard (SDDS) since August 1996 and publishes data on its National Summary Data Page.
- "The latest SDDS Annual Observance Report is available on the Dissemination Standards Bulletin Board (https://dsbb.imf.org/)." (text preserved from source).
- Table of Common Indicators Required for Surveillance: As of January 14, 2026 (table entries and frequencies present in source; frequency/timeliness codes include “D”, “W”, “M”, “Q”, “A”, "SA", "I", "NA", and "NLT" with meanings preserved in footnote).
- Specific data items mentioned as tracked: Reserve/Base Money; Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest Rates; Consumer Price Index; Revenue, Expenditure, Balance and Composition of Financing – General Government and Central Government; International Investment Position; Stocks of Central Government and Central Government-Guaranteed Debt; External Current Account Balance; Exports and Imports of Goods and Services; GDP/GNP; Gross External Debt; Exchange Rates; International Reserve Assets and Reserve Liabilities of the Monetary Authorities.

### Rationale for Overall Staff Assessment
- Staff assessment: "Data provision has some shortcomings but is broadly adequate for surveillance."
- The overall data adequacy rating is assessed as "B", lower than the median of the sectoral ratings ("A"), considering:
  - Importance of fiscal data and greater weight staff assigned to its assessment.
  - The need for more centralized data provision and enhanced coverage of the informal economy.

*Source: Annex VIII. Data Issues, Thailand — Staff Report for the 2025 Article IV Consultation (as provided).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1thaea2026001-source-pdf.pdf_