The World Bank has slashed its forecast for Thailand's GDP growth in 2024 to 2.8%, citing a global trade slowdown and delays in the country's fiscal budget disbursement.
Yesterday, the World Bank announced the downgrade from its previous estimate of 3.2%. Nevertheless, the bank anticipates a slight uptick in GDP growth to 3% in 2025, down marginally from its earlier projection of 3.1%.
The softer growth outlook for Thailand in 2024 stems from a combination of external and internal influences. A deceleration in global trade is expected to impact Thailand's export growth, while the delayed disbursement of the 2024 fiscal budget is likely to affect government spending, according to Kiatipong Ariyapruchya, the World Bank's senior economist for Thailand.
According to the World Bank's Systematic Country Diagnostic (SCD) Update for Thailand, the country needs development in five core areas. These encompass building strong human capital, creating a competitive and innovative economy, unlocking growth in secondary cities, ensuring sustainable and climate-resilient development, and strengthening fiscal institutions and public finance.
Fabrizio Zarcone, country manager for Thailand at the World Bank, emphasised the potential of the government's digital wallet scheme to boost the country's economic growth by one percentage point.
However, he cautioned that the cash handout programme could pose downside risks to fiscal policy, potentially increasing the country's public debt-to-GDP ratio by more than two percentage points.
Thailand's public debt-to-GDP ratio currently stands at 61.3%. The digital wallet initiative is estimated to require 500 billion baht in funding, likely facilitated through the issuance of loan bills by the Finance Ministry.
Under the scheme, the government plans to distribute 10,000 baht to 50 million Thais to be spent in their local communities via a digital wallet.
"Thailand has experienced remarkable growth and poverty reduction over the past several decades, greatly enhancing the quality of life for its citizens," said Mr Zarcone.
According to the World Bank report, the Covid-19 pandemic, rising geopolitical tensions, rapid technological advancements, and climate change have exerted substantial pressure on Thailand's economy, environment, and population.
Although growth gained momentum in 2022 and 2023, the recovery trails peers within Asean, primarily because of Thailand's significant exposure to global tourism and trade.
Reduced investment, decelerating productivity growth, and an ageing population are additional factors contributing to the slowdown in growth.
"The pace of growth has now entered a pronounced and enduring downturn. Stepping up the reforms identified in the SCD Update can help drive Thailand's inclusive and sustainable growth. These reforms are pivotal for Thailand to ascend to the status of an advanced economy in the foreseeable future, characterised by greater societal equity and a more sustainable, climate-resilient economy," said the report.