07/12/2023 - Thailand has achieved remarkable economic and social progress over the past decades. The economy has picked up since the COVID-19 pandemic, buoyed by a strong rebound of tourism. Bold reforms are now needed to make the recovery more solid and inclusive, according to a new OECD report.
The second OECD Economic Survey of Thailand says that strong fiscal support has helped to avoid a sharp economic contraction during the pandemic but public debt has increased rapidly over the past years and fiscal consolidation should now continue at a gradual pace.
Continued fiscal consolidation would strengthen debt sustainability and support the efforts of monetary policy, which should remain tight to reduce inflation pressures. Emergency support to households that was implemented during the pandemic should be phased out, while continuing to support those most in need through regular social protection.
The Thai economy is projected to continue its gradual recovery, with real GDP expected to grow by 3.6% in 2024. Private consumption is projected to remain strong, despite the gradual phase-out of government relief measures and high levels of household debt. The labour market is recovering well, but young people have not fully benefited from the recovery. Weaker global demand has weighed on exports, but this is set to change amid rising tourist arrivals.
The country now needs to address a number of key structural challenges, including population ageing, the digital transition, possible reconfigurations of global value chains and the green transition.
Further policy action to raise productivity will be key to support convergence towards higher income levels amid a declining working-age population. Stronger efforts to improve the business climate, adopt digital technologies and foster competition will be important, including by relaxing remaining restrictions to market entry and foreign direct investment, especially in the services sector, and expanding trade agreements to benefit from changing patterns of global trade. Initiatives to prevent and fight corruption should be continued.
Recent developments have highlighted the need for Thailand to build a more comprehensive social safety net to support vulnerable households. Income inequality has significantly declined since the 1990s, but further efforts will be needed to achieve more inclusive growth, as more than 50% of workers are in the informal sector and remain outside the reach of the formal social security system.
Achieving current net zero emission pledges will require bold policy action. This calls for a comprehensive strategy for carbon pricing in combination with tighter regulations and targeted support for vulnerable social groups adversely affected by the transition, while phasing out other government interventions in energy prices. Stronger incentives are needed for both domestic and foreign investment in higher energy efficiency, renewables and green innovation.
See an Overview of the Survey, with key findings and charts (this link can be included in news articles).
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