World Bank keeps Thai growth forecast at 2.5%
Reforms urged for long-term growth
The World Bank has maintained Thailand's economic growth forecast this year at 2.5% due to impetus from fiscal stimulus and increasing tourism revenue.
But the figure remains the lowest GDP growth projection among Asean member states excluding Brunei and Singapore.
Timely implementation of public infrastructure projects this year and next can contribute to a more positive outlook for the Thai economy, said Kiatipong Ariyapruchya, the bank's senior country economist.
However, growth could be below 2.5% if fiscal disbursement in the second and third quarters cannot be accelerated, he said.
In April, the World Bank revised up Thailand's GDP growth forecast from 2% to 2.5% on the back of state stimulus measures implemented late last year and signs of improving exports.
The Bank of Thailand recently forecast economic growth will be 3.1% this year, while the Fiscal Policy Office is predicting 3.3% and the National Economic and Social Development Board 3-3.5%.
GDP growth hit a three-year high of 3.2% year-on-year in the first quarter, up from the final quarter's 2.8%, mainly attributed to government stimulus measures and rapid improvement in the tourism sector.
The prolonged economic slowdown has highlighted structural challenges such as implementing public investment, maintaining and raising export competitiveness, and addressing critical skills mismatches, said Mr Kiatipong.
Implementing reforms to address these challenges will be key to stimulate long-term growth, he said.
"Looking forward, Thailand's economy will continue to expand but by no more than the 3% projected in 2018," said Mr Kiatipong. The bank forecasts Thailand's GDP to grow by 2.6% in 2017.
The economy expanded by 2.8% last year, supported by fiscal stimulus and tourism expansion as private consumption remained dented by high household debt and low farm income.
Following an economic rebound of 6.5% in 2012 largely due to the base effect from the 2011 flood crisis, Southeast Asia's second-largest economy expanded at a lacklustre pace of 2.9% in 2013 and 0.8% in 2014.
Critics have dubbed Thailand the "sick man of Southeast Asia" as its economic growth in recent years has been hit by political unrest, swelling household debt denting private consumption, ebbing private sector investment, continuous contraction in exports and low worker productivity.
Thailand's merchandise exports are projected to contract by 0.1% this year but exports of goods and services are expected to grow by 1.8%, said Mr Kiatipong.
Ageing of the workforce will begin to affect the economy in the next five years. The working-age population is expected to shrink by around 11% by 2040 from just under 49 million people to around 40.5 million, said the World Bank.
"This projected decline is higher in Thailand than in any developing country in East Asia. Enhancing labour productivity therefore will be key," the bank said.
Ulrich Zachau, the bank's country director for Southeast Asia, said preparing for an ageing population will make it especially important for Thailand to improve education and upgrade workers' skills.
Increasing women's participation in the job market and ensuring affordable care for older people are other key reforms, he said.