IMF Executive Board Concludes 2022 Article IV Consultation with Thailand

September 1, 2022

Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Thailand.

Economic activity in Thailand is recovering from an unprecedented crisis, supported by a swift and bold policy response, while inflation is on an upward trend reflecting rising commodity prices. Thailand’s economy grew by 1.5 percent in 2021 bolstered by the implementation of 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. The growth momentum continued so far this year based on strong consumption and exports. Reflecting rising energy prices, headline inflation accelerated to 5.9 percent y/y during Jan-July 2022 from a 1.2 percent average inflation recorded in 2021.

The economic recovery continues in 2022 but is clouded by the deteriorated global outlook. Real GDP is projected to grow by 2.8 percent in 2022, lower than initially expected, as the prolonged war in Ukraine dampens domestic demand through rising commodity prices and lowers external demand. As the pandemic subsides, GDP growth is 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 driven by high commodity prices, before decelerating to 2.5 percent in 2023—within the Bank of Thailand’s (BOT) target range. The current account deficit is expected to narrow to -0.8 percent of GDP in 2022 as tourism receipts gradually pick up along with the removal of COVID‑19 entry restrictions, and to return to a surplus of around 3-3.5 percent of GDP over the medium term. Growth prospects critically hinge on the return of foreign tourists, while soaring energy prices due to the prolonged war in Ukraine could further weigh on private consumption and external demand. A disorderly tightening of global financial conditions and spillovers from a sharper growth slowdown in China amidst already-stretched private sector balance sheets could derail the economy’s rebound.

Executive Board Assessment [2]

Executive Directors commended the authorities for their bold and appropriate policy response, which helped maintain macroeconomic and financial stability and facilitated a growth rebound despite the severe impact of the COVID-19 pandemic. Directors acknowledged that the recovery is fragile and uneven with risks to the outlook tilted to the downside. In that context, they encouraged the authorities to remain agile in their policy response under fast-changing circumstances and to press ahead with structural reforms to support sustainable, inclusive growth. Directors also emphasized the importance of a well-coordinated and integrated approach to recalibrate monetary, exchange rate, and fiscal policies should an adverse scenario materialize.

Directors welcomed the Bank of Thailand’s efforts to ensure that inflation expectations remain well anchored. They emphasized the importance of a data-dependent monetary policy normalization path and welcomed the recent policy rate increase and clear communication of a gradual normalization on the back of continued economic recovery. Directors also welcomed ongoing progress in strengthening financial sector risk analysis, specialized financial institutions’ supervision and bank resolution, as well as efforts to accelerate household debt restructuring, which should be accompanied by a gradual tapering of the financial sector support measures. Continued efforts to enhance the AML/CFT framework are also important.

Directors agreed with the near-term fiscal consolidation while encouraging the authorities to continue to gradually replace untargeted energy subsidies with targeted support to vulnerable groups. Over the medium term, a more gradual fiscal consolidation underpinned by enhanced domestic revenue mobilization could support structural reforms to strengthen the economy’s resilience while rebuilding policy buffers. Enhancing fiscal governance and transparency also remains a priority.

Most Directors noted that Thailand's external position remains moderately stronger than warranted by medium term fundamentals and desirable policies, while some other Directors called for a more cautious interpretation of the external balance assessment given the pandemic-induced structural shifts in the global economy. Directors welcomed the authorities’ commitment to exchange rate flexibility and the easing of foreign exchange regulations and concurred that FX interventions should be limited to avoiding disorderly market conditions.

Directors encouraged the authorities to implement a well-coordinated structural reform agenda, supported by capacity development, to boost potential output and capitalize on the growth opportunities provided by the ongoing digital and green transformations. In this regard, measures to enhance human capital to close the skills gap will be important. They welcomed the authorities’ efforts to reposition Thailand’s financial sector for a sustainable, digital economy and highlighted the importance of balancing efficiency gains from financial innovation against financial stability risks.  



[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. 

 

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm. 
 

Table 1. Thailand: Selected Economic Indicators, 2018–23

Projections

2018

2019

2020

2021

2022

2023

Real GDP growth (y/y percent change) 1/

4.2

2.2

-6.2

1.5

2.8

4.0

Consumption

4.1

3.4

-0.6

-0.2

5.1

0.5

Gross fixed investment

3.9

2.0

-4.8

2.0

4.5

1.2

Inflation (y/y percent change)

Headline CPI (period average)

1.1

0.7

-0.8

1.2

6.1

2.5

Core CPI (period average)

0.7

0.5

0.3

0.2

2.6

1.7

Saving and investment (percent of GDP)

Gross domestic investment

25.2

23.8

23.7

29.1

29.2

27.7

Private

16.9

16.9

16.8

17.0

18.4

18.1

Public

5.8

5.7

6.4

6.6

6.3

5.7

Change in stocks

2.4

1.2

0.4

5.5

4.6

3.9

Gross national saving

30.8

30.8

27.9

26.9

28.5

29.9

Private, including statistical discrepancy

25.3

26.7

26.8

27.8

27.8

27.3

Public

5.5

4.1

1.1

-0.8

0.7

2.6

Foreign saving

-5.6

-7.0

-4.2

2.2

0.8

-2.2

Fiscal accounts (percent of GDP) 2/

General government balance 3/

0.1

-0.8

-4.7

-7.0

-5.6

-3.2

SOEs balance

0.5

0.6

-0.1

-0.4

-0.7

0.2

Public sector balance 4/

0.6

-0.3

-4.8

-7.4

-6.2

-3.0

Public sector debt (end of period) 4/

41.9

41.1

49.5

58.4

61.2

61.4

Monetary accounts (end of period, y/y percent change)

Broad money growth

4.7

3.6

10.2

4.8

-0.2

3.5

Narrow money growth

2.8

5.7

14.2

3.5

6.9

5.0

Credit to the private sector by depository corporations

5.8

2.4

4.5

4.5

6.9

5.0

Balance of payments (In billions of U.S. dollars)

Current account balance

28.4

38.0

21.2

-11.0

-4.2

12.5

(In percent of GDP)

5.6

7.0

4.2

-2.2

-0.8

2.2

Exports, f.o.b.

251.1

242.7

227.0

270.6

301.7

312.5

Growth rate (dollar terms)

7.5

-3.3

-6.5

19.2

11.5

3.6

Growth rate (volume terms)

3.9

-3.7

-5.8

15.4

3.1

2.1

Imports, f.o.b.

228.7

216.0

186.1

230.7

271.9

280.9

Growth rate (dollar terms)

13.7

-5.6

-13.8

23.9

17.9

3.3

Growth rate (volume terms)

7.6

-5.8

-10.4

18.8

6.2

4.5

Capital and financial account balance 5/

-21.2

-24.5

-2.8

3.5

4.2

-12.5

Overall balance

7.3

13.6

18.4

-7.5

0.0

0.0

Gross official reserves (including net forward position,

end of period) (In billions of U.S. dollars)

239.4

258.7

287.4

279.2

279.2

279.2

(Months of following year's imports)

13.3

16.7

15.0

12.3

11.9

11.2

(Percent of short-term debt) 6/

288.4

325.8

310.4

299.2

312.7

299.7

(Percent of ARA metric)

224.7

232.6

253.3

236.3

227.4

213.5

Forward position of BOT (end of period)

-33.7

-34.3

-29.3

-33.2

…

…

Exchange rate (baht/U.S. dollar)

32.3

31.0

31.3

32.0

…

…

NEER appreciation (annual average)

4.0

6.9

-0.5

4.1

…

…

REER appreciation (annual average)

3.0

5.7

-2.6

3.2

…

…

External debt

(In percent of GDP)

32.2

31.6

38.2

39.0

39.4

39.0

(In billions of U.S. dollars)

163.1

171.9

190.7

197.5

210.3

225.5

Public sector 7/

35.7

38.0

37.2

41.5

41.8

42.4

Private sector

127.4

133.9

153.5

156.0

168.5

183.0

Medium- and long-term

65.9

74.6

80.0

84.1

99.1

109.7

Short-term (including portfolio flows)

61.5

59.3

73.5

71.8

69.4

73.3

Debt service ratio 8/

6.0

6.3

6.3

7.3

7.3

7.3

Memorandum items:

Nominal GDP (billions of baht)

16,373.3

16,892.4

15,636.9

16,178.7

17,295.2

18,156.5

(In billions of U.S. dollars)

506.5

544.0

499.7

505.9

…

…

Sources: Thai authorities; CEIC Data Co. Ltd.; and IMF staff estimates and projections.

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.

 

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