Thailand

Thailand experienced comparatively moderate GDP growth in the decade prior to the Covid-19 crisis, with an average annual growth rate of +3.6%. However, the pandemic significantly impacted the economy, resulting in a contraction of -6.1% in 2020 and a slow recovery in 2021 (+1.5%) and 2022 (+2.6%). Efforts to revive domestic consumption, promote tourism and attract foreign investment are underway. As a result, we expect real GDP to expand by around +3.5% in 2023 – which will eventually bring annual GDP back to the pre-pandemic level – and similar growth in 2024. However, a stronger economic recovery will be limited in the short term by the global slowdown in exports of goods and services, given weakening demand in key export markets. In the medium term, Thailand may benefit from US-China competition if multinational companies decide to diversify their regional supply chains. Incentives for the production of electric vehicles should boost the competitiveness of the automotive sector amid rising competition in the region.

Due to the global commodity price surge, headline inflation rose to 6.1% in 2022 in Thailand. Although energy prices have eased in 2023, inflationary pressure will remain elevated owing to demand-pull factors, given greater job opportunities in the service sector and improving wage growth prospects. We expect consumer price inflation to slow down gradually to about 3% in 2023 and return to around the 2010s average (1.6%) in 2024. The Bank of Thailand (BOT, the central bank) switched to monetary tightening in August 2022, given a considerable depreciation of the baht against the US dollar. Gradual tightening has continued in the first half of 2023 but we expect the BOT to pivot around the end of the year, taking slowing global economic growth and declining domestic inflation into consideration.

Thailand’s business environment has deteriorated over the past few years, according to our assessment of 185 economies, in which the country now ranks just below average. The Heritage Foundation’s Index of Economic Freedom 2023 survey assigns Thailand rank 80 out of 184 economies, down from rank 42 in the 2021 survey, reflecting deteriorations with regard to property rights, judicial effectiveness, government integrity, business freedom, labor freedom and trade freedom. Meanwhile, the World Bank Institute’s annual Worldwide Governance Indicators surveys indicate moderate weaknesses in the regulatory and legal frameworks but significant shortcomings with regard to measures to combat corruption. Our proprietary Environmental Sustainability Index puts Thailand at rank 154 out of 210 economies, reflecting weaknesses in terms of renewable electricity output, the recycling rate and overall climate-change vulnerability. However, the country scores better with regard to energy use and CO₂ emissions per GDP as well as water stress.