Press Release No. 21/67

IMF Staff Completes 2021 Article IV Mission to Thailand

March 15, 2021

• Thailand’s economy contracted by 6.1 percent in 2020 amid stringent measures to contain the COVID‑19 pandemic and a sudden stop in tourism flows. The authorities responded decisively with a multi‑pronged policy package to protect households, firms, and the financial system.
• The economic recovery in 2021 is expected to be sluggish with growth at 2.6 percent, and divergent across sectors. Uncertainty surrounding the outlook is high and hinges partly on the timely availability and distribution of an effective vaccine.
• The mission recommends an accommodative macroeconomic policy mix to support the recovery focusing on protecting vulnerable groups and scaling up of public investment. Structural reforms should contribute to limiting economic scarring from the pandemic and fostering a sustainable and inclusive recovery.

Washington, DC: An International Monetary Fund (IMF) staff team, led by Mr. Lamin Leigh, held the virtual 2021 Article IV Consultation with Thailand from February 24–March 11. At the conclusion of the discussions, Mr. Leigh issued the following statement:

“The Thailand economy is showing incipient signs of recovery from the COVID-19 downturn.

At the onset of the pandemic, ample policy buffers underpinned by the country’s long-standing tradition of judicious management of the public finances, enabled the authorities to deploy a multi-pronged policy package to manage risks from the pandemic and protect households, businesses, and the financial system.

“The COVID‑19 pandemic has significantly impacted the Thailand economy. Real GDP growth in 2020 contracted by 6.1 percent. Containment measures and the sudden stop in tourism flows have depressed activity. Subsequently, real GDP recovered in both Q3 and Q4 2020 and grew by 6.2 percent and 1.3 percent respectively on a quarter-to-quarter basis.

“The outlook remains challenging. Growth is projected to reach 2.6 percent in 2021, led by a recovery in domestic demand. The recovery in tourism is expected to be slow for most of 2021, hinging partly on a successful vaccine deployment and resumption of global travel. Here, the authorities have taken important measures to access and distribute the COVID 19 vaccine. Exports are expected to pick up on a stronger recovery in global demand. Inflation is forecast to recover somewhat in 2021 staying near the lower bound of the Bank of Thailand’s 1 to 3 percent target range.

“Against this backdrop, the mission recommends continuing accommodative policies to support the recovery, reduce scarring, and tackle long‑standing economic challenges, while avoiding a premature withdrawal of policy support until the recovery is secured. A fiscal expansion should focus on protecting the vulnerable through stronger social safety nets and scaling up of public investment in macro-critical and climate resilient projects. Once the recovery is firmly underway, a comprehensive consolidation strategy, including tax reforms and expenditure prioritization, will be needed to gradually restore pre‑crisis buffers and preserve fiscal sustainability over the medium term.

“Targeted and more effective financial sector support to hard‑hit firms and households, complemented with additional monetary easing in a data dependent manner would also support the recovery. The authorities stand ready to implement additional financial measures, if necessary. The exchange rate should remain flexible as a shock absorber to volatile capital flows while using macroprudential policies to address possible financial stability risks.

“Structural policies should aim to limit economic scarring from the pandemic, strengthen the resilience of the economy, and promote inclusiveness. The pandemic has had a profound impact on the labor market, particularly in contact‑intensive sectors and active labor market policies should be introduced in a coordinated fashion across government agencies to upskill workers dislocated by the pandemic. Coordinated and multi‑pronged policies are needed to shift to more sustainable tourism models over the medium term and promote green investment.

“The IMF team exchanged views on recent economic developments and the outlook with officials in the government, the Bank of Thailand, other public institutions, and representatives of the private sector. The team would like to thank the authorities and other interlocutors in Bangkok for the productive discussions. The IMF’s Executive Board is tentatively scheduled to discuss the Staff Report in May 2021.”