IMF Executive Board Concludes 2019 Article IV Consultation with Thailand
IMF News, October 7, 2019
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- Published: October 7, 2019
Growth and inflation
- Real GDP growth:
- 2018:H1: 4.8 percent (y/y)
- 2018:H2: 3.4 percent (y/y)
- 2019:Q1: 2.8 percent (y/y)
- 2019:Q2: 2.3 percent (y/y)
- Headline inflation:
- 2018 period average: 1.1 percent
- August 2019: 0.5 percent
- Core inflation:
- remains subdued at 0.5 percent
- Output gap:
- "seems to be closing by some measures," but low inflation and a large current account surplus suggest a still negative gap
- Drivers:
- Private consumption held up
- Global trade tensions impacted exports, particularly electronics through global value chains
Credit and housing markets
- Credit growth and composition:
- Total credit growth moderated in 2019:Q1, led by declines in corporate borrowing
- Loans to households picked up in 2018 and remained buoyant through 2019:Q1, driven by auto loans and new mortgages
- Housing market:
- Following tightening of LTVs in April 2019, housing loan demand softened
- Condo prices declined by 1¾ percent (y/y)
- Adjustment consistent with broad-based cooling of the Thai economy
External sector, reserves, and exchange rate
- Current account:
- Narrowed to 6.4 percent of GDP in 2018 from 9.7 percent in 2017
- Exports contracted by 2.2 percent y-o-y as of end-June 2019, driven by electronics and computer parts
- China-bound goods: 14.9 percent decline
- U.S.-bound goods: 2.2 percent decline
- Imports declined by 9.4 percent y-o-y, with lower capital goods, raw materials, and intermediate goods imports
- Tourism receipts softened, led by a slowdown in Chinese tourists
- Exchange rate and reserves:
- Since December 2018, baht appreciated by about 5.5 percent against the U.S. dollar
- Level of reserves increased by nearly US$11 billion by end-June 2019 to US$250.3 billion
- Reserves well above Fund adequacy metrics
- Policy response to capital flows:
- Since May 2019 capital inflows accelerated, contributing to sharper appreciation of the baht
- On July 12, 2019, Bank of Thailand measures: reduction in limit of outstanding balance for non-resident baht accounts; tightening reporting requirements for non-resident holdings of debt securities issued in Thailand
Outlook and risks
- Growth projections:
- Growth projected to slow to about 3 percent in 2019–20 reflecting external and domestic headwinds
- External risks:
- Projected slowdown in global demand and uncertainty about trade tensions expected to weigh on exports
- Risks to the outlook tilted to the downside, notably from escalation of protectionism threatening the global trading system
- Domestic headwinds:
- Weakening in consumption growth as the debt overhang weighs on credit growth
- Drought depresses farm incomes
- Medium-term prospects:
- Private consumption and investment expected to strengthen, supported by dissipating political uncertainty and scale-up in public investment
- External rebalancing expected as demand feeds into higher imports
Executive Board assessment and policy recommendations
- General assessment:
- Directors noted Thailand’s robust policy framework and ample buffers created through judicious public finance management underpin resilience to shocks
- Progress in improving coverage and effectiveness of financial supervision and macroprudential policies has enhanced financial stability
- External and domestic headwinds challenge near-term growth; risks tilted to the downside
- Fiscal policy:
- Directors encouraged an expansionary policy mix to support domestic demand
- Undertake an investment-led expansion through judicious use of existing fiscal space while preserving buffers and ensuring fiscal sustainability
- Strong implementation of macro-critical public infrastructure projects to crowd in private investment and stimulate domestic demand in short run and lift potential growth in long run
- Emphasized better targeting of social assistance to protect vulnerable households while minimizing distortions
- Welcomed intention to strengthen revenue mobilization over medium to long run to prepare for aging-related expenditure pressures
- Monetary and macroprudential policy:
- Welcomed Bank of Thailand’s August decision to cut the policy rate
- Some Directors saw scope for further monetary easing to help steer inflation back to target; many others considered current monetary stance sufficiently accommodative and recommended calibration based on financial stability risks
- Complementary use of macroprudential policy to address financial stability concerns
- External position and CFMs:
- Many Directors considered Thailand’s external position substantially stronger than warranted by medium-term fundamentals and desirable policies; others urged cautious interpretation citing Thailand-specific factors
- Emphasized importance of exchange rate flexibility; foreign exchange intervention should be limited to avoiding disorderly market conditions
- Mixed views on capital flow management measures (CFMs): some recognized recent tightening mitigates short-term volatility; others considered these measures should be phased out and replaced with appropriate macroeconomic, financial and structural policies
- Financial sector and supervision:
- Financial stability risks appear contained though household indebtedness relatively high and pockets of corporate sector vulnerability exist
- In line with FSAP recommendations, Directors encouraged strengthening crisis management and resolution framework, closing leakages in macroprudential toolkit, and establishing overarching body to enhance coordination among supervisors
- Recommended strengthening supervision and regulation of Specialized Financial Institutions and Credit Cooperatives to enhance oversight of non-bank sector
- Noted recommendations on institutional arrangements should be tailored to country-specific context
- Structural reforms:
- Start of new government is timely opportunity for a concerted reform agenda
- Targeted policies to enhance labor productivity across regions to boost competitiveness, raise potential growth, and enhance inclusiveness
- Key priorities: address population aging through pension reform and investment in human capital (education, health, equalizing opportunities)
- Took note of authorities’ efforts to strengthen anti-corruption institutions; called for improving operational aspects of procurement law and addressing AML/CFT deficiencies
Selected economic indicators and key statistics
- Main exports (percent of total 2015): machinery (44), food (12)
- GDP per capita (2017): US$6,732
- Unemployment rate (2017): 1.2 percent
- Poverty headcount ratio at national poverty line (2014): 10.5 percent
- Net FDI (2017): US$-10.59 billion
- Population (2016): 65.9 million
- Real GDP growth (y/y percent change) 1/:
- 2015: 3.1
- 2016: 3.4
- 2017: 4.0
- 2018: 4.1
- 2019 (Prel.): 2.9
- 2020 (Proj.): 3.0
- Consumption growth:
- 2015: 2.4
- 2016: 2.7
- 2017: 2.3
- 2018: 3.6
- 2019: 3.8
- Gross fixed investment:
- 2015: 4.4
- 2016: 1.8
- 2017: 5.2
- 2018: 8.5
- Headline CPI (end of period):
- 2015: -0.9
- 2016: 1.1
- 2017: 0.8
- 2018: 0.4
- 2019 (Prel.): 1.3
- 2020 (Proj.): 1.2
- Headline CPI (period average):
- 2015: 0.2
- 2016: 0.7
- 2017: 0.9
- Core CPI (end of period):
- 2015: 0.6
- 2016: 0.5
- Core CPI (period average):
- 2015: 0.6
- 2016: 0.5
- Saving and investment (percent of GDP):
- Gross domestic investment:
- 2015: 22.4
- 2016: 20.9
- 2017: 22.8
- 2018: 25.0
- 2019 (Prel.): 24.9
- 2020 (Proj.): 25.3
- Private:
- 2015: 18.2
- 2016: 17.4
- 2017: 17.2
- 2018: 16.9
- 2019: 17.1
- 2020: 17.9
- Public:
- 2015: 6.3
- 2016: 6.4
- 2017: 6.0
- 2018: 5.9
- 2019: 6.2
- 2020: 6.5
- Change in stocks:
- 2015: -2.2
- 2016: -2.8
- 2017: -0.3
- 2018: 2.1
- 2019: 1.7
- Gross national saving:
- 2015: 29.3
- 2016: 31.5
- 2017: 32.5
- 2018: 31.4
- 2019: 31.0
- 2020: 30.7
- Foreign saving:
- 2015: -7.1
- 2016: -5.4
- 2017: -5.7
- 2018: -6.9
- 2019: -10.5
- 2020: -9.7
- Fiscal accounts (percent of GDP) 2/:
- Public sector debt (end of period) 4/:
- 2015: 42.6
- 2016: 41.8
- 2017: 41.9
- 2018: 42.1
- 2019: 42.4
- 2020: 43.0
- Monetary accounts (end of period, y/y percent change):
- Broad money growth:
- 2015: 4.2
- 2016: 5.0
- 2017: 4.7
- Narrow money growth:
- 2015: 4.8
- 2016: 9.4
- 2017: 2.8
- 2018: 3.7
- Credit to the private sector by depository corporations:
- 2015: 5.6
- 2016: 4.6
- 2017: 5.8
- Balance of payments (billions of U.S. dollars):
- Current account balance (billions):
- 2015: 27.8
- 2016: 43.4
- 2017: 44.1
- 2018: 32.4
- 2019 (Prel.): 31.8
- 2020 (Proj.): 30.1
- Current account (percent of GDP):
- 2015: 6.9
- 2016: 10.5
- 2017: 9.7
- 2018: 6.4
- Exports, f.o.b. (billions of U.S. dollars):
- 2015: 213.4
- 2016: 213.5
- 2017: 233.7
- 2018: 251.1
- 2019 (Prel.): 245.2
- 2020 (Proj.): 263.0
- Imports, f.o.b. (billions of U.S. dollars):
- 2015: 187.2
- 2016: 177.7
- 2017: 201.1
- 2018: 228.7
- 2019 (Prel.): 223.0
- 2020 (Proj.): 243.1
- Capital and financial account balance 5/:
- 2015: -21.9
- 2016: -30.6
- 2017: -18.1
- 2018: -25.1
- 2019: -20.9
- 2020: -30.1
- Gross official reserves (including net forward position, end of period) (billions of U.S. dollars):
- 2015: 168.2
- 2016: 197.6
- 2017: 239.3
- 2018: 239.4
- Months of following year's imports:
- 2015: 11.4
- 2016: 11.8
- 2017: 12.6
- 2018: 12.9
- 2019: 12.4
- 2020: 11.5
- Percent of short-term debt 6/:
- 2015: 280.2
- 2016: 273.8
- 2017: 326.8
- 2018: 301.9
- 2019: 307.0
- 2020: 298.2
- Percent of ARA metric:
- 2015: 203.9
- 2016: 211.2
- 2017: 221.2
- 2018: 222.2
- Forward position of BOT (end of period):
- 2015: -11.7
- 2016: -25.8
- 2017: -36.7
- 2018: -33.7
- Exchange rate (baht/U.S. dollar):
- 2015: 34.2
- 2016: 35.3
- 2017: 33.9
- 2018: 32.3
- External debt (percent of GDP):
- 2015: 32.7
- 2016: 32.0
- 2017: 34.1
- 2018: 31.9
- External debt (billions of U.S. dollars):
- 2015: 131.1
- 2016: 132.2
- 2017: 155.2
- 2018: 160.9
- 2019 (Prel.): 169.3
- 2020 (Proj.): 180.4
- Public sector:
- 2015: 20.6
- 2016: 22.6
- 2017: 35.7
- 2018: 36.2
- 2019: 36.5
- 2020: 36.5
- Private sector:
- 2015: 110.5
- 2016: 109.5
- 2017: 123.7
- 2018: 125.2
- 2019: 133.1
- 2020: 144.0
- Medium- and long-term:
- 2015: 58.3
- 2016: 56.7
- 2017: 59.0
- 2018: 65.0
- 2019: 69.4
- 2020: 77.9
- Short-term (including portfolio flows):
- 2015: 52.2
- 2016: 52.8
- 2017: 64.7
- 2018: 60.2
- 2019: 63.7
- 2020: 66.1
- Debt service ratio 8/:
- 2015: 7.6
- Memorandum items:
- Nominal GDP (billions of baht):
- 2015: 13,743
- 2016: 14,555
- 2017: 15,452
- 2018: 16,318
- 2019 (Prel.): 16,922
- 2020 (Proj.): 17,536
- Nominal GDP (billions of U.S. dollars):
- 2015: 401.3
- 2016: 412.4
- 2017: 455.4
- 2018: 505.0
IMF Executive Board press release, October 7, 2019.
