Thailand’s economic growth potentially in decline, SCB EIC warns

The Siam Commercial Bank’s research wing, SCB Economic Intelligence Center (EIC), expressed concern over the potential decline in Thailand’s long-term economic growth. It has attributed this to enduring structural problems, such as low investment, diminished total factor productivity, and the economic impact of the pandemic.

Chief Economist at SCB EIC, Somprawin Manprasert, revealed that Thailand’s economic recovery has been more sluggish than its neighbouring countries, including Malaysia, Vietnam, and China.

Thailand experienced rapid growth, at an annual rate of around 8%, before the Asian Financial Crisis in 1997. Growth slowed to an average of 3.9% during 2000–2014, declining to around 3% at present, and it will be at this level for the next few years. The subpar GDP growth is mainly due to a significant slowdown of private investment, Somprawin stated.

Furthermore, he indicated that the Thai economy is fragile due to high levels of debt among households and businesses, particularly among low-income earners and small to medium-sized enterprises (SMEs). The economy also faces external uncertainties, such as climate change and escalating geopolitical conflicts, and internal concerns like government policies that require close monitoring.

Unstable state policies could strain the fiscal buffer required for additional spending to address these economic uncertainties and boost investment, which would enhance Thailand’s long-term potential, Somprawin warned.

In response to these concerns, SCB EIC has proposed long-term economic policies aimed at improving Thailand’s competitiveness and sustainable growth. One suggestion is for the government to promote fair competition and support Thailand’s membership in the Organisation for Economic Co-operation and Development (OECD). Being an OECD member could offer Thailand access to expansive export markets and strengthen its position in the global supply chain.

The proposed policies also include tax policy restructuring to reduce inequality, and avoiding tax schemes that could distort business or household decision-making.

SCB EIC forecast

Additionally, SCB EIC has revised its growth forecasts for this year and next year downwards from 3.2% and 3.5% to 2.6% and 3% respectively. This is due to lower-than-expected foreign arrivals, predicted at 36.2 million in 2024, down from the previous forecast of 37.7 million.

However, they predict that exports, which are expected to increase as global trade grows, will support the economy. Private investment is also expected to rise in response to an export recovery, increased investment approvals from Thailand’s Board of Investment, and economic stimulus schemes from the government.

The Bank of Thailand is predicted to maintain the policy interest rate at 2.5% throughout 2024, which is in a neutral zone in line with the country’s ongoing recovery. Inflation, driven by supply pressures, is anticipated to slowly rise to within the target range of 1-3% next year, reported Bangkok Post.