Press Release No. 23/384

IMF Staff Completes 2023 Article IV Mission to Thailand

November 8, 2023

• Thailand’s growth is projected at 2.7 percent in 2023, slightly higher than 2.6 percent in 2022, while inflation is expected to remain well-within the authorities’ target range. The outlook remains highly uncertain with downside risks prevailing.
• Continued normalization of macroeconomic policies in the near term will help rebuild fiscal buffers and ensure financial stability. A high-quality, gradual medium-term fiscal consolidation supported by enhanced revenue mobilization and improved spending efficiency will provide space for essential investments, while keeping public debt on a sustainable downward path.
• The successful formation of the new government is an opportunity to implement decisive and comprehensive reforms to boost productivity and support sustained and inclusive growth.

Bangkok, Thailand: An International Monetary Fund (IMF) staff team, led by Ms. Corinne Deléchat, held the 2023 Article IV Consultation with Thailand between October 24 and November 7, 2023. At the conclusion of the discussions, Ms. Deléchat issued the following statement:

“Thailand’s economy expanded by 2.6 percent in 2022, and by 2.2 percent in the first half of 2023, as the large increase in commodity prices since 2022, faster-than-expected monetary policy normalization in advanced economies, global financial turmoil, and the slowdown in China have slowed the recovery. In response, the authorities gradually tightened monetary and fiscal policies while mitigating the impact of high inflation on the population and safeguarding financial stability.”

“The recovery is expected to be gradual in 2023 and accelerate in 2024, amidst a highly uncertain global environment. Thailand’s growth is projected at 2.7 percent in 2023, slightly higher than in 2022, as the contraction in investment and goods exports caused by the slowdown in external demand is expected to partially offset the robust private consumption growth following the tourism recovery. Growth is projected to increase to 3.6 percent in 2024, 0.4 percentage points higher than our projection in mid-October, driven by improvements in external demand and continued solid growth in private consumption. Headline inflation is projected to average 1.3 percent in 2023, helped by continued measures to keep energy prices low and further improvements in global supply chains. With strengthening growth in 2024, headline inflation is expected to slightly accelerate to 1.6 percent.

“Continued normalization of macroeconomic policies in the near term will help rebuild fiscal buffers and ensure financial stability. Heightened global uncertainty, prospects of tighter-for-longer global financial conditions, weakening global growth, including in China, and risks of sharp commodity prices fluctuations stemming from an escalation of the conflict in the Middle East put an extra premium on prudent macroeconomic management.

“Given diminished fiscal space, already robust private consumption, and a shock-prone global context, maximizing the efficiency of government interventions while minimizing their cost is essential. In this regard, the Medium-Term Fiscal Framework (MTFF) remains an important guiding framework. Therefore, the mission recommends well-targeted support, within the budget envelope provided by the MTFF, to vulnerable groups such as Social Welfare Card holders that may not have benefited from the ongoing recovery. This would also have a higher return on public money spent because the growth multiplier of targeted measures is much higher than for universal transfers. Starting in FY25[1], a gradual, growth-friendly medium-term fiscal consolidation supported by enhanced revenue mobilization would create room for needed investment in infrastructure and skills while keeping public debt on a declining path.

“The current neutral monetary policy stance is appropriate. Nevertheless, if inflationary risks from external shocks or domestic policies materialize, the Bank of Thailand (BOT) should stand ready to tighten the monetary stance further. In addition, the BOT should continue to closely monitor financial stability risks as vulnerabilities may arise from sharp swings in real interest rates.

“The authorities have continued the gradual tapering of pandemic-related financial sector support measures through 2022 and 2023. In parallel, the authorities should continue to strengthen the financial safety net and enhance the coverage of the macroprudential framework in line with the 2019 Financial Sector Assessment Program recommendations. Additionally, the mission welcomes the BOT's plans to introduce new measures to address high household debt, with a focus on responsible lending guidelines, while also assisting those with persistent debt issues. The mission recommends proactive debt restructurings combined with the strengthening of the insolvency regime to contain elevated private debt going forward.

“Fully harnessing the benefits of the digital and green transformations, while mitigating the negative effects of geo-economic fragmentation and climate change will require comprehensive structural reforms. Enhancing competition and streamlining regulations, upskilling the labor force, increasing investments in digital infrastructure and research and development to boost productivity and move up value chains would be key to unlocking the country’s growth potential. Effective carbon pricing will help Thailand meet its climate goals.

“The IMF team exchanged views on recent economic developments and the outlook with officials in the government, the BOT, other public institutions, and representatives of the private sector. The team would like to thank the authorities and other interlocutors for the productive and open discussions.”