Press Release No. 18/115

IMF Staff Completes 2018 Article IV Mission to Thailand

March 29, 2018

• Thailand’s economic performance continues to be favorable, with growth rising to 3.9 percent in 2017 and exports taking advantage of the strong recovery of global trade.
• However, growth has not been broad-based and the current account surplus remains large. To achieve a more balanced growth, the mission recommends an expansionary policy mix based on fiscal stimulus and monetary easing, with macroprudential policy preserving financial stability.
• A comprehensive package of structural reforms will help strengthen key drivers of long-run growth.

An International Monetary Fund (IMF) staff team, led by Mr. Lamin Leigh, visited Bangkok from March 7 – 20, 2018, to hold discussions on the 2018 Article IV Consultation with Thailand. The 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.

At the conclusion of the visit, Mr. Leigh issued the following statement:

“Thailand’s economic performance continues to improve. Growth averaged 3.9 percent in 2017, largely driven by strong exports of manufacturing goods and tourism services. Headline inflation averaged 0.7 percent, below the target range, reflecting global factors, low food prices, and weak core inflation. Growth, however, has not been broad-based, and export gains have not sufficiently trickled down to household incomes and investments in other sectors. The current account surplus remains large as structural factors, such as economic transformation and aging, continued to weigh down on domestic demand. The growth momentum is expected to continue in 2018-19 albeit with an unbalanced composition.

“To achieve stronger and more balanced growth, the team recommends an expansionary policy mix based on fiscal stimulus and monetary easing. A frontloaded infrastructure push on macro-critical projects, accompanied by a more accommodative monetary stance, would help support faster growth in domestic demand, including by crowding in private investment. Monetary easing, coupled with strengthened communication on the commitment to price stability, would help steer inflation back to the target. A flexible exchange rate should be the first line of defense against external shocks, with foreign exchange intervention confined to addressing disorderly market conditions. The team took note of the progressive liberalization of capital outflows as part of the authorities’ strategy to promote more balanced capital flows.

“The authorities have taken important measures to strengthen the financial system. Banking sector resilience has increased further, with capital adequacy well above regulatory requirements. Macroprudential policies should be used to preserve financial stability.

“The team recommends a comprehensive package of reforms to enhance the key drivers of long-run growth. Priority should focus on measures to facilitate public and private investment, address the impact of population aging, and increase productivity. These include strengthening social safety nets, promoting labor force participation, improving the quality of education, and facilitating skilled labor migration. These reforms would support Thailand’s economic and financial integration in the region.

“The team would like to thank the authorities for the constructive dialogue and unstinting hospitality. The IMF’s Executive Board is tentatively scheduled to discuss the Staff Report in May.”