The government is being urged to make Thailand the regional front-runner for clean energy, promoting the sector as a new economic growth engine.
Burin Adulwattana, managing director and chief economist of Kasikorn Research Center (K-Research), said this issue should be a top priority for the government to ensure Thailand has clean energy at competitive prices.
"If this matter is not addressed promptly, Thai products may face adverse impacts in the future from trade barriers for goods emitting greenhouse gases," he said.
"The EU implemented the Carbon Border Adjustment Mechanism, while the US passed Clean Competition measures to restrict the import of goods with high carbon emissions."
NEW GLOBAL TRENDS
Mr Burin said last year the impact of these two measures on the Thai economy was worth about 18 billion baht, equivalent to 0.1% of GDP, with the figures projected to increase to 167 billion by 2026.
He said if developed countries enforce such measures for all sectors and products in the future, the potential impact on Thailand could be as high as 32% of GDP.
"There are three crucial trends in the world: decarbonisation, digitisation and deglobalisation. If we act on these trends, we may break even, but failure to do so will have negative consequences for the Thai economy," said Mr Burin.
"Energy is the vital force driving the economy. For instance, having clean energy can help Thailand promote itself as a hub for data centres, which require clean and affordable electricity. The impact of clean energy will have ripple effects, akin to the butterfly effect."
He said generative artificial intelligence is expected to significantly increase demand for data centres. Thailand ranks third in Southeast Asia in terms of data centre size, behind Singapore and Malaysia.
Market analysts project between 2024 and 2027, Thailand will invest up to US$7.8 billion in data centres, while Malaysia will invest $23.4 billion.
This investment in Thai data centres is projected to have around 540 billion baht, or 2.3% of GDP, worth of impact on the Thai economy in 2027.
Mr Burin said Thailand should promote clean energy because the country has a potential advantage over its regional peers and can develop it in a shorter period of time.
In contrast, educational obstacles and ageing demographics pose long-term challenges to Thailand's economic development and require more time to address, he said.
Energy costs are a crucial factor for every business as they rely on energy for production, said Mr Burin.
If Thailand succeeds in transitioning production factors to clean energy, it will benefit all businesses, he said.
SUPPLY CHAIN IMPACT
Mr Burin said small and medium-sized enterprises are affected by the decarbonisation trend because these firms are integral parts of the global supply chain.
As the world shifts towards greener practices, businesses will be compelled by large-scale supply chains to adapt, he said.
"The Thai government's plans are moving towards clean energy, such as initiating the development of green electricity," said Mr Burin.
"However, driving this transition requires a multifaceted approach involving both the public and private sectors."
Thailand set a target to have 30% of the country's total electricity production capacity generated from renewable energy by 2030, similar to other countries in Asean except Vietnam, which set a target of 50%.
Electricity production costs from solar energy are twice as cheap as fossil fuels, with prices falling by 76% from a decade ago.
However, Thailand's electricity prices still exceed its regional counterparts, including Malaysia, Vietnam and Indonesia.
Yet Thailand has the potential to produce sufficient clean electricity to meet the nation's demand, he said.
GROWTH ENGINE LACKING
Thailand faced structural economic challenges in recent years and lacked a new growth engine to drive the economy, Mr Burin said.
If the Thai economy continues to grow at the current rate, within five years Vietnam's GDP is projected to surpass it, he said.
Thailand's economic recovery following the pandemic has been slower than its regional peers.
Mr Burin also highlighted the slow growth of Thailand's investments over the past decade, with Thailand's investment-to-GDP ratio significantly lower than the rates of Vietnam and Indonesia.
For private sector investments in Thailand, the average annual growth rate was only 1% over the past decade.
Thailand's agricultural sector, which constitutes 30% of the country's workforce, some 13-14 million people, has lower productivity than competing neighbours such as Vietnam, he said.
The farming sector also earns a much lower income than other sectors, with an annual income of only 112,000 baht per person, five times less than the service sector and eight times less than the industrial sector, said Mr Burin.
In terms of education systems, Thailand's scores on the Programme for International Student Assessment were lower than those of Singapore, Vietnam and Malaysia.
In a related development, K-Research downgraded Thailand's GDP growth for this year to 2.8% from 3.1%, citing sluggish domestic demand, a persistent contraction in the manufacturing sector, and elevated levels of household debt, reflected by consecutive months of declining car sales.