World Bank Lowers Thailand’s GDP Growth Forecast from 2.8% to 2.4%
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Loading... - Emiko Ming
- 11 Oct 2024
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The World Bank has revised Thailand's GDP growth forecast for 2024, lowering it from 2.8% to 2.4%. This adjustment comes amid broader regional economic challenges, including a projected decline in China's growth from 4.8% this year to 4.3% in 2025, attributed to a weak property market and low consumer and investor confidence.
The World Bank's East Asia and Pacific Economic Update forecasts that the region's economy will expand by 4.8% in 2024 but slow to 4.4% in 2025. China's economic slowdown is a significant factor, driven by structural challenges such as an ageing population and global conflicts. However, other parts of the region are expected to see growth driven by increased domestic consumption, with goods exports recovering and tourism rebounding.
Among larger countries, only Indonesia is expected to maintain growth levels in 2024 and 2025 that match or exceed pre-COVID-19 pandemic levels. In contrast, other nations, including Thailand, are projected to remain below their pre-pandemic growth rates. The Thai economy is forecast to expand by 2.4% in 2024 and 3.0% in 2025, slightly down from previous projections.
Aditya Mattoo, the World Bank's chief economist for the East Asia and Pacific region, highlighted several challenges facing Thailand during an online press conference. Since 2010, Thailand's GDP growth has averaged just 2.6% annually, lagging behind regional peers. The country faces weak investment and productivity growth, stalled structural transformation, and significant inequality. Additionally, a rapidly ageing population poses challenges for future growth.
Rising geopolitical tensions have led to fragmentation in international investment and trade, while rapid technological advancements are transforming consumer behavior and production processes. The emergence of disruptive technologies, including green technologies, could challenge Thailand's traditional export model, which relies on low-cost labor.
To achieve high-income country status by 2037, Thailand needs to maintain an average growth rate of 5% over the next 13 years. This requires bold reforms focusing on accelerating private investment and innovation growth by reducing policy uncertainty, strengthening competition policy, and opening up the services sector.
Mattoo emphasized the importance of increasing public investment in human capital, climate adaptation, and infrastructure development in underserved regions. Developing secondary cities to drive investments in high-growth potential areas is also crucial for promoting balanced economic development and fostering inclusive growth.
As the population ages, extending working lives, enhancing female labor force participation, and adopting strategic approaches to migration are vital. Reforms aimed at improving education and labor market outcomes are necessary to ensure the workforce has the skills required to meet private sector demands.
Mattoo noted that Thailand's revenue collection is low relative to its income level. To boost revenue, he suggested measures such as increasing the value-added tax rate, broadening the personal income tax base, and expanding property tax collection. The government must also mobilize sustainable sources of climate financing to meet its spending commitments and investment needs while maintaining fiscal sustainability.
