The Executive Board of the International Monetary Fund (IMF) recently completed its 2024 Article IV consultation with Thailand, approving the staff appraisal without convening a formal meeting. This decision was made on February 11.
Thailand's economy is experiencing a gradual recovery, albeit at a slower pace than its peers. The country's economic activity grew modestly by 1.9% in 2023 and by 2.3% during the first three quarters of 2024, mainly due to increased private consumption and a rebound in tourism. Inflation remained low, averaging 0.4% annually in 2024, which is below the Bank of Thailand’s target range of 1-3%. Factors contributing to this low inflation include both external influences such as declining global energy and food prices and domestic elements like energy subsidies and price controls.
The IMF projects a continued cyclical recovery for Thailand, with real GDP expected to grow by 2.7% in 2024 and further increase to 2.9% in 2025. This forecast is supported by an expansionary fiscal stance planned under the 2025 budget, including additional cash transfers and increased public investment. Growth is also anticipated from tourism-related sectors and private consumption bolstered by government cash transfers.
Despite these positive projections, risks remain skewed towards potential downsides for Thailand's economic outlook. Global trade tensions or geoeconomic fragmentation could hinder export recovery and reduce foreign direct investment inflows. Additionally, commodity price volatility might affect growth prospects and cause inflation spikes.
In their assessment, IMF Executive Directors acknowledged that Thailand's economic recovery has been slow compared to ASEAN peers due to structural weaknesses within the country along with emerging external challenges. They emphasized that as economic slack narrows, there should be a shift toward rebuilding fiscal space while maintaining support for the recovery.
The IMF suggests that strengthening Thailand’s fiscal framework would involve improving fiscal rules to support debt management effectively. Furthermore, they recommend enhancing data provision for government finance statistics and state-owned enterprises (SOEs).
Monetary policy adjustments were also addressed, with staff welcoming the Bank of Thailand's decision to cut the policy rate in October while recommending further reductions to aid inflation control and borrower debt servicing capacity improvement.
To manage adverse scenarios effectively, coordinated policy tools supported by adequate buffers are crucial according to the IMF staff appraisal. The flexible exchange rate should continue acting as a shock absorber while complementing foreign exchange interventions when necessary.
Lastly, resolute structural reforms aimed at boosting productivity and competitiveness were highlighted as essential steps forward for Thailand’s economy.