Key Findings

Thailand’s economy has shown resilience to recent global shocks, with output surpassing its pre-pandemic level in the third quarter of 2022.

• Economic growth accelerated to 4.5% in the third quarter of this year fueled by resurgent private consumption and strong tourism inflows.

• Tourism arrivals reached 45% of the pre-pandemic level in September, surpassing those in Indonesia and the Philippines.

• Despite higher revenue from tourism, the current account deficit reached 5.7% of GDP in the third quarter of 2022 due to structurally large net oil imports and a cyclical deterioration in the goods trade balance.

• Price pressures remained elevated, with headline inflation at 6% registering second highest among major ASEAN economies and have broadened to core inflation.

• The government largely maintained proactive fiscal policy to support the recovery and to mitigate the rising cost-of-living pressures.

• Total public spending remained relatively high at 23.4% of GDP in fiscal year 2022 due to the COVID-19 related relief measures and energy subsidies, including subsidies on diesel and cooking gas prices estimated at around 3% of GDP.

Severe global headwinds are projected to slow the recovery momentum in 2023-2024, testing Thailand’s resilience.

• The economy is projected to expand by 3.4% in 2022 and 3.6% in 2023.

• The current account balance is expected to reverse from its deep deficit in the past 2 years and return to positive territory in 2023.

• Price pressures are expected to remain elevated with headline inflation staying above the Bank of Thailand’s target in the first half of 2023 before moderating.

• Public debt is projected to peak at 60.7% of GDP in fiscal year 2022.

• Additional shocks, including a prolonged period of high energy prices, may increase inequality or further erode fiscal space unless more targeted social assistance spending is introduced.

According to the report, fiscal policy serves as an important tool to reduce poverty and inequality.

• This was well illustrated by how Thailand’s social assistance response to COVID-19 crisis helped to offset loss of income and poverty increase.

• Without this assistance, poverty would have reached 8.1% in 2021 (27% higher than observed levels), while inequality would have been over 40% higher than its current level.

• However, Thailand’s social spending is low by international standards, as is tax revenue collection.

Designing policies that supports an inclusive recovery, accelerates poverty and inequality reduction and protects households against ongoing and future shocks in a narrowed fiscal space is very challenging. To strengthen fiscal policy, the report recommends:

• Increase the efficiency of social spending by improving targeting of social assistance transfers.

• Increase spending on critical public services for human development and long-term growth.

• Raise revenue for this additional spending in a progressive manner. This may include implementing reforms to increase tax revenues, which should minimize negative impacts on vulnerable households and should be accompanied with targeted measures to protect their income.