IMF Executive Board Concludes 2022 Article IV Consultation with Thailand
IMF News, September 1, 2022
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- Published: September 1, 2022
Economic Outlook and Recent Developments
- Thailand’s economy grew by 1.5 percent in 2021, supported by a multi-pronged policy support package and a rebound in exports.
- The current account balance turned into a deficit of 1.7 percent of GDP in 2021, from a surplus of 4.2 percent of GDP in 2020, largely reflecting a sharp decline in tourism receipts and soaring shipping costs amid supply chain disruptions.
- Headline inflation accelerated to 5.9 percent y/y during Jan-July 2022 from a 1.2 percent average inflation recorded in 2021, reflecting rising energy prices.
- Real GDP is projected to grow by 2.8 percent in 2022, with GDP growth expected to rebound to about 4 percent in 2023 before trending down to its potential rate of about 3 percent in the medium term.
- Headline inflation is expected to average 6.1 percent in 2022, before decelerating to 2.5 percent in 2023 (within the Bank of Thailand’s target range).
- The current account deficit is expected to narrow to -0.8 percent of GDP in 2022 as tourism receipts pick up, and to return to a surplus of around 3-3.5 percent of GDP over the medium term.
- Key downside risks identified: prolonged war in Ukraine (soaring energy prices), a disorderly tightening of global financial conditions, spillovers from a sharper growth slowdown in China, and fragile private sector balance sheets.
Executive Board Assessment and Policy Guidance
- Directors commended the authorities for a bold and appropriate policy response that maintained macroeconomic and financial stability and supported the growth rebound.
- Recovery characterization: fragile and uneven; risks to the outlook tilted to the downside.
- Policy stance: authorities should remain agile and press ahead with structural reforms to support sustainable, inclusive growth.
- Coordination: importance of a well-coordinated and integrated approach to recalibrate monetary, exchange rate, and fiscal policies if adverse scenarios materialize.
Monetary and Financial Policy
- Directors welcomed the Bank of Thailand’s efforts to ensure inflation expectations remain well anchored.
- Emphasized a data-dependent monetary policy normalization path; welcomed the recent policy rate increase and clear communication of gradual normalization.
- Welcomed progress in strengthening financial sector risk analysis, supervision of specialized financial institutions, and bank resolution.
- Encouraged acceleration of household debt restructuring, accompanied by gradual tapering of financial sector support measures.
- Continued efforts to enhance the AML/CFT framework are important.
- FX policy: Directors welcomed the authorities’ commitment to exchange rate flexibility and easing of foreign exchange regulations; concurred that FX interventions should be limited to avoiding disorderly market conditions.
Fiscal Policy
- Directors agreed with near-term fiscal consolidation and encouraged gradual replacement of untargeted energy subsidies with targeted support to vulnerable groups.
- Over the medium term, recommended a more gradual fiscal consolidation underpinned by enhanced domestic revenue mobilization to support structural reforms and rebuild policy buffers.
- Enhancing fiscal governance and transparency remains a priority.
Structural Reforms
- Encouraged implementation of a well-coordinated structural reform agenda, supported by capacity development, to boost potential output and capture digital and green transformation opportunities.
- Highlighted importance of enhancing human capital to close the skills gap.
- Welcomed efforts to reposition Thailand’s financial sector for a sustainable, digital economy and emphasized balancing efficiency gains from financial innovation against financial stability risks.
Key Statistics and Projections (selected figures from Table 1)
- Real GDP growth (y/y percent change): 2018: 4.2; 2019: 2.2; 2020: -6.2; 2021: 1.5; 2022: 2.8; 2023: 4.0.
- Consumption (growth): 2018: 4.1; 2019: 3.4; 2020: -0.6; 2021: -0.2; 2022: 5.1; 2023: 0.5.
- Gross fixed investment (growth): 2018: 3.9; 2019: 2.0; 2020: -4.8; 2021: 4.5; 2022: 1.2.
- Headline CPI (period average): 2018: 1.1; 2019: 0.7; 2020: -0.8; 2021: 1.2 (average); 2022: 6.1 (projection); 2023: 2.5 (projection).
- Core CPI (period average): 2018: 0.3; 2019: 0.2; 2020: 2.6; 2021: 1.7.
- Gross domestic investment (percent of GDP): 2018: 25.2; 2019: 23.8; 2020: 23.7; 2021: 29.1; 2022: 29.2; 2023: 27.7.
- Gross national saving (percent of GDP): 2018: 30.8; 2019: 27.9; 2020: 26.9; 2021: 28.5; 2022: 29.9.
- Foreign saving (percent of GDP): 2018: -5.6; 2019: -7.0; 2020: -4.2; 2021: 0.8; 2022: -2.2.
- Public sector balance (percent of GDP): 2018: -0.3; 2019: -7.4; 2020: -3.0; 2021: (table shows values for later years).
- Public sector debt (end of period): 2018: 41.9; 2019: 41.1; 2020: 49.5; 2021: 58.4; 2022: 61.2; 2023: 61.4.
- Broad money growth (end of period, y/y percent change): 2018: 4.7; 2019: 3.6; 2020: 10.2; 2021: 4.8; 2022: 3.5.
- Current account balance (In billions of U.S. dollars): 2018: 28.4; 2019: 38.0; 2020: 21.2; 2021: -11.0; 2022: 12.5 (projection).
- Current account balance (In percent of GDP): 2018: 5.6; 2019: 7.0; 2020: (table entries include 2021 negative and projections).
- Exports, f.o.b. (In billions of U.S. dollars): 2018: 251.1; 2019: 242.7; 2020: 227.0; 2021: 270.6; 2022: 301.7; 2023: 312.5.
- Imports, f.o.b. (In billions of U.S. dollars): 2018: 228.7; 2019: 216.0; 2020: 186.1; 2021: 230.7; 2022: 271.9; 2023: 280.9.
- Gross official reserves (end of period, In billions of U.S. dollars): 2018: 239.4; 2019: 258.7; 2020: 287.4; 2021: 279.2.
- Months of following year's imports (reserves): 2018: 13.3; 2019: 16.7; 2020: 15.0; 2021: 12.3; 2022: 11.9; 2023: 11.2.
- External debt (percent of GDP): 2018: 32.2; 2019: 31.6; 2020: 38.2; 2021: 39.0; 2022: 39.4.
- External debt (In billions of U.S. dollars): 2018: 163.1; 2019: 171.9; 2020: 190.7; 2021: 197.5; 2022: 210.3; 2023: 225.5.
- Public sector external debt (In billions of U.S. dollars, excludes state enterprises): 2018: 35.7; 2019: 37.2; 2020: 41.5; 2021: 41.8; 2022: 42.4.
- Private sector external debt (In billions of U.S. dollars): 2018: 127.4; 2019: 133.9; 2020: 153.5; 2021: 156.0; 2022: 168.5; 2023: 183.0.
- Medium- and long-term external debt (In billions of U.S. dollars): 2018: 65.9; 2019: 74.6; 2020: 80.0; 2021: 84.1; 2022: 99.1; 2023: 109.7.
- Short-term (including portfolio flows) external debt (In billions of U.S. dollars): 2018: 61.5; 2019: 59.3; 2020: 73.5; 2021: 71.8; 2022: 69.4; 2023: 73.3.
- Nominal GDP (billions of baht): 2018: 16,373.3; 2019: 16,892.4; 2020: 15,636.9; 2021: 16,178.7; 2022: 17,295.2; 2023: 18,156.5.
Notable Assessments and Observations
- Most Directors judged Thailand's external position as moderately stronger than warranted by medium term fundamentals and desirable policies; some Directors urged more cautious interpretation due to pandemic-induced structural shifts.
- Authorities’ commitments: exchange rate flexibility and easing foreign exchange regulations.
- Recovery prospects critically hinge on return of foreign tourists.
- Policy buffers: rebuilding buffers through prudent fiscal and macroeconomic management emphasized.
IMF Press Release No. 22/299 — Executive Board Concludes 2022 Article IV Consultation with Thailand