IMF Executive Board Concludes 2021 Article IV Consultation with Thailand

IMF News, June 4, 2021

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Published: June 4, 2021

Macroeconomic overview and recent developments

On May 17, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the 2021 Article IV consultation with Thailand.
The Thai economy is showing incipient signs of recovery from the COVID‑19 downturn, owing in part to a multi‑pronged policy package of fiscal, monetary, and financial policies.
After the economic contraction of 9.4 percent q/q in 2020:Q2, far exceeding the fall during the Global Financial Crisis (GFC), real GDP, buttressed by policy support, rebounded in the second half of 2020 limiting the overall GDP decline for the year to 6.1 percent.
Weak domestic demand, coupled with a subdued global economy, contributed to both weak headline and core inflation throughout the year.
The current account (CA) surplus narrowed from 7 percent of GDP in 2019 to 3.2 percent of GDP in 2020, largely reflecting the collapse in tourism receipts.
The economic recovery is expected to be sluggish, uneven, and subject to heightened uncertainty.

Growth, inflation, external balances, and risks

Real GDP is projected to expand by 2.6 percent in 2021, led by a gradual recovery in domestic demand and goods exports.
The drag on tourism is expected to continue for most of 2021 due to uncertainty around vaccine rollouts and full resumption of global travel.
The economy is projected to rebound by 5.6 percent in 2022 supported by an acceleration in tourism and continued strength in the global recovery.
Headline inflation is forecast to recover somewhat in 2021, buoyed by the recovery in oil prices, while core inflation would likely show some inertia given the continued sizable slack in the economy.
With recovering domestic demand pushing up imports and the continued weaknesses in tourism, the CA surplus is projected to decline further to about 0.5 percent of GDP in 2021 and slowly recover to around 3−3½ percent of GDP through the medium term as tourism strengthens.
The uncertainty surrounding the growth outlook is larger than usual:
- A faster distribution of an effective vaccine is a positive risk.
- The unknown path of the pandemic and potential bottlenecks on vaccination plans could challenge the pace of the recovery.
- A prolonged pandemic could amplify vulnerabilities in the nonfinancial corporate sector raising the risk of scarring.
- Both distributional and long‑term scarring risks also loom large.

Executive Board assessment and policy guidance

Directors commended the authorities for their timely and multipronged policy support, which helped to cushion the impact of the pandemic on households and firms.
Directors welcomed Thailand’s accelerated vaccination rollout plan and called for continued accommodative policies to support the recovery.
Directors encouraged the authorities to leverage the post‑COVID economic recovery towards greener, digital, and more sustainable and inclusive growth.
Fiscal policy:
- Directors called for further fiscal expansion to support the recovery, with an emphasis on public investment and support to the most vulnerable, while ensuring fiscal governance and transparency.
- Premature tapering should be avoided.
- Once the recovery is firm, a comprehensive medium‑term consolidation strategy anchored on a strengthened fiscal framework would be necessary to rebuild buffers and preserve fiscal sustainability.
Monetary and financial policies:
- Directors welcomed the Bank of Thailand’s accommodative monetary policy stance, including targeted policy measures to enhance the efficiency of intermediation and shore up viable firms.
- Given the large output gap and fragile inflation expectations, many Directors saw scope for further monetary easing, including unconventional monetary measures if downside risks materialize to enhance the impact of the financial measures and fiscal stimulus.
- Many other Directors concurred that such measures would be less effective given Thailand’s specific circumstances.
- Noting the resilience of the financial sector, Directors called for continued vigilance and close monitoring of emerging risks and vulnerabilities to safeguard financial system stability.
External sector and capital flows:
- Directors welcomed the authorities’ commitment to exchange rate flexibility and supported that FX interventions should be limited for addressing disorderly market conditions.
- Directors concurred with staff’s recommendation to phase out the remaining capital flow management (CFM) measures on non‑resident baht accounts.
- Many Directors noted that Thailand's external position remains stronger than warranted by medium term fundamentals and desirable policies; many other Directors called for a more cautious interpretation citing Thailand-specific issues and the pandemic-led structural shifts in the global economy.
Structural and labor market policies:
- Directors emphasized that coordinated and multipronged policies are needed to heal pandemic-induced scars and address long-standing structural challenges.
- Suggested measures include active labor market policies to upskill dislocated workers, government-supported initiatives to incentivize formal employment and human capital accumulation, measures to support private sector-led investment to reshape the tourism sector, and policies to encourage digitalization.
- The authorities' commitment to adopt well-designed green policies was noted as an important step towards enhanced sustainability and economic resilience.

Table 1 — Thailand: Selected Economic Indicators, 2017–22 (projections)

Real GDP growth (y/y percent change) 1/: 2017 4.2; 2018 2.3; 2019 -6.1; 2020 2.6; 2021 5.6
Consumption: 2017 2.4; 2018 3.4; 2019 -0.6; 2020 3.7; 2021 2.7
Gross fixed investment: 2017 1.8; 2018 3.8; 2019 2.0; 2020 -4.8; 2021 5.3; 2022 3.3
Inflation (y/y percent change)
- Headline CPI (end of period): 2017 0.8; 2018 0.4; 2019 0.9; 2020 -0.3; 2021 1.0; 2022 1.1
- Headline CPI (period average): 2017 0.7; 2018 -0.8; 2019 1.3
- Core CPI (end of period): 2017 0.6; 2018 0.5; 2019 0.2
- Core CPI (period average): 2017 0.3
Saving and investment (percent of GDP)
- Gross domestic investment: 2017 22.9; 2018 25.2; 2019 23.7; 2020 23.9; 2021 24.4; 2022 23.8
- Private: 2017 17.1; 2018 16.9; 2019 16.8; 2020 16.6; 2021 17.5; 2022 17.2
- Public: 2017 6.0; 2018 5.9; 2019 5.7; 2020 6.4; 2021 6.9; 2022 6.7
- Change in stocks: 2017 -0.2; 2018 1.2; 2019 0.0
- Gross national saving: 2017 32.6; 2018 30.8; 2019 27.1; 2020 24.9; 2021 26.5
- Private, including statistical discrepancy: 2017 26.7; 2018 25.3; 2019 25.4; 2020 22.8; 2021 22.1
- Foreign saving: 2017 5.8; 2018 5.5; 2019 4.1; 2020 1.7; 2021 4.4
Fiscal accounts (percent of GDP) 2/
- Central government budgetary balance: 2017 -9.6; 2018 -5.6; 2019 -7.0; 2020 -3.2; 2021 -0.5; 2022 -2.6
- Revenue and grants: 2017 -2.4; 2018 -2.5; 2019 -5.0; 2020 -4.0; 2021 -3.6; 2022 (not shown)
- Expense and net acquisition of non-financial assets: 2017 17.8; 2018 17.9; 2019 15.1; 2020 17.0; 2021 17.4; 2022 (not shown)
- Net acquisition of non-financial assets: 2017 20.3; 2018 20.4; 2019 20.5; 2020 20.2; 2021 21.0; 2022 21.1
- General government balance 3/: 2017 1.9; 2018 2.1; 2019 (not shown); 2020 General government balance -4.7; 2021 -4.9; 2022 -1.5
- SOEs balance: 2017 -0.1
- Public sector balance 4/: 2017 -5.2; 2018 -1.2
- Including quasi-fiscal activities: 2017 3.9; 2018 4.9
- Public sector debt (end of period) 4/: 2017 41.8; 2018 42.0; 2019 41.0; 2020 49.6; 2021 55.9; 2022 54.7
Monetary accounts (end of period, y/y percent change)
- Broad money growth: 2017 5.0; 2018 4.7; 2019 3.6; 2020 10.1; 2021 3.2
- Narrow money growth: 2017 9.4; 2018 2.8; 2019 14.2; 2020 3.5; 2021 6.1
- Credit to the private sector by depository corporations: 2017 4.6; 2018 4.5
Balance of payments (billions of U.S. dollars)
- Current account balance: 2017 44.0; 2018 28.4; 2019 38.2; 2020 16.3; 2021 15.3
- (In percent of GDP): 2017 9.6; 2018 7.0
- Exports, f.o.b.: 2017 233.7; 2018 251.1; 2019 242.7; 2020 226.7; 2021 250.2; 2022 261.9
- Growth rate (dollar terms): 2017 9.5; 2018 7.5; 2019 -3.3; 2020 -6.6; 2021 10.4
- Growth rate (volume terms): 2017 -3.7; 2018 -5.9; 2019 8.8
- Imports, f.o.b.: 2017 201.1; 2018 228.7; 2019 216.0; 2020 186.9; 2021 215.3; 2022 226.2
- (percent changes): 2017 13.2; 2018 13.7; 2019 -13.5; 2020 15.2; 2021 7.2; 2022 7.7; 2019 -5.7; 2020 -11.7
- Capital and financial account balance 5/: 2017 -18.0; 2018 -21.2; 2019 -24.6; 2020 -15.3
- Overall balance: 2017 26.0; 2018 7.3; 2019 13.6; 2020 18.4
- Gross official reserves (including net forward position, end of period) (billions of U.S. dollars): 2017 239.3; 2018 239.4; 2019 258.7; 2020 287.4
- (Months of following year's imports): 2017 12.6; 2018 13.3; 2019 16.0
- (Percent of short-term debt) 6/: 2017 326.8; 2018 288.4; 2019 325.3; 2020 313.6; 2021 334.4; 2022 311.6
- Forward position of BOT (end of period): 2017 -36.7; 2018 -33.7; 2019 -34.3; 2020 -29.3
- Exchange rate (baht/U.S. dollar): 2017 33.9; 2018 32.3; 2019 31.0; 2020 31.3
- NEER appreciation (annual average): 2017 4.0
- REER appreciation (annual average): 2017 3.0
External debt
- (In percent of GDP): 2017 34.2; 2018 32.2; 2019 31.6; 2020 37.9; 2021 36.2; 2022 36.0
- (In billions of U.S. dollars): 2017 155.9; 2018 163.1; 2019 171.9; 2020 190.0; 2021 195.1; 2022 208.1
- Public sector 7/: 2017 35.7; 2018 38.0; 2019 37.0; 2020 36.7; 2021 36.4; 2022 36.4
- Private sector: 2017 124.4; 2018 127.4; 2019 133.9; 2020 147.6; 2021 158.4; 2022 171.7
- Medium- and long-term: 2017 59.7; 2018 65.9; 2019 74.6; 2020 76.1; 2021 92.0; 2022 99.5
- Short-term (including portfolio flows): 2017 64.7; 2018 61.5; 2019 59.3; 2020 71.5; 2021 66.4; 2022 72.2
- Debt service ratio 8/: 2017 6.3
Memorandum items:
- Nominal GDP (billions of baht): 2017 15,488.7; 2018 16,368.7; 2019 16,896.3; 2020 15,703.0; 2021 16,245.2; 2022 17,244.0
- Additional memorandum entries: 2017 456.5; 2018 506.4; 2019 544.2; 2020 501.9
Sources: Thai authorities; CEIC Data Co. Ltd.; and IMF staff estimates and projections.
Notes included in the table:

1/ This series reflects the new GDP data based on the chain volume measure methodology, introduced by the Thai authorities in May 2015. 2/ On a fiscal year basis. The fiscal year ends on September 30. 3/ Includes budgetary central government, extrabudgetary funds, and local governments. 4/ Includes general government and SOEs. 5/ Includes errors and omissions. 6/ With remaining maturity of one year or less. 7/ Excludes debt of state enterprises. 8/ Percent of exports of goods and services.

Press Release No. 21/154; June 3, 2021. IMF Communications Department.