IMF Staff Completes 2024 Article IV Mission to Thailand

IMF News, November 26, 2024

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Growth is projected at 2.7 percent in 2024 and 2.9 percent in 2025.
Inflation remains low but is expected to increase gradually and to return to the authorities’ target range (1 to 3 percent) by end-2024.
Economic activity expanded by 1.9 percent in 2023 and by 2.3 percent in the first three quarters of 2024.
International tourist arrivals recovered to around 90 percent of the pre-pandemic levels, although tourism receipts remain somewhat lower.
Public consumption increased by only 1.6 percent in the first three quarters of 2024.
Public investment contracted by -2.3 percent in the first three quarters of 2024.
The mission’s report is to be presented to the IMF’s Executive Board, which is tentatively scheduled to discuss the Staff Report in February 2025.

Outlook described as highly uncertain with risks tilted to the downside.
External risks:
- Escalation of global trade tensions or heightened trade uncertainty could slow global and regional growth, disrupt Thailand’s export recovery, and dampen FDI inflows.
- Increased commodity price volatility could affect growth, lead to inflation spikes, and potentially tighter-for-longer global financial conditions.
Domestic risks:
- The private sector debt overhang could lead to increased defaults and non-performing loans (NPLs), impair credit supply, and negatively affect growth.

As the cyclical recovery continues and economic slack narrows, policy focus should shift to rebuilding policy space.
Near term:
- A somewhat smaller fiscal expansion than currently envisaged would help support the recovery while preserving fiscal space.
- Alternatively, reallocating at least part of the planned cash transfers toward productivity-enhancing investments or social protection reforms.
From FY26:
- A credible, revenue-based medium-term fiscal consolidation should proceed to rebuild fiscal space and bring down public debt.
- Starting in FY26, a gradual, growth-friendly medium-term fiscal consolidation is needed to bring down public debt and create fiscal space for rising spending needs to address population aging and climate change risks.
The FY2025 budget envisages planned fiscal stimulus measures and a pickup in public investment.

The mission welcomes the Bank of Thailand (BOT)’s decision to cut the policy rate by 25 bps in October.
A further reduction in the policy rate would support the ongoing recovery and improve borrowers’ debt-servicing capacity.
Given remaining high uncertainty and two-sided risks to inflation, authorities should stand ready to adjust monetary policy in a data and outlook-dependent manner.
The flexible exchange rate should continue to act as a shock absorber.

Addressing the persistent household debt overhang requires a resolute, well-coordinated and comprehensive approach.
Staff welcomes authorities’ measures to:
- Enhance financial literacy.
- Implement responsible lending guidelines.
- Provide debt restructuring options to viable borrowers while limiting moral hazard.
Staff recommends simultaneous and forceful implementation of personal debt workouts via more effective bankruptcy proceedings to address the existing household debt stock and allow impaired borrowers a “fresh start.”

To reverse the downward trend in potential growth, resolute structural reforms are needed, including:
- Facilitating competition and openness.
- Increasing export sophistication by leveraging digitalization.
- Upskilling and reskilling the labor force.
- Liberalizing the service sector.
- Strengthening governance.
Infrastructure priorities:
- Upgrading physical and ICT infrastructure to harness digital and green economy benefits, boost productivity and resilience, raise private investment, and improve social outcomes.
Social protection:
- Enhancing social protection could help low-income households better withstand shocks and address structural drivers of household debt accumulation.
Together, these policies would support stronger and more inclusive growth and facilitate external rebalancing.

An IMF staff team, led by Ms. Corinne Deléchat, held the 2024 Article IV Consultation with Thailand between November 11 and 26, 2024.
End-of-Mission press release date: November 26, 2024.
Press Release No. 24/442.
The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Source: IMF Staff Completes 2024 Article IV Mission to Thailand (Press Release No. 24/442, November 26, 2024).