Front Matter Page
IMF Country Report No. 15/114
May 2015
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2015 Article IV consultation with Thailand, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF, for Executive Board’s consideration on March 30, 2015, following discussions that ended on January 29, 2015, with the officials of Thailand on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 10, 2015.
An Informational Annex prepared by the IMF.
A Press Release summarizing the views of the Executive Board as expressed during its March 30, 2015 consideration of the staff report that concluded the Article IV consultation with Thailand.
A Statement by the Executive Director for Thailand.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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© 2015 International Monetary Fund
Front Matter Page
THAILAND
STAFF REPORT FOR THE 2015 ARTICLE IV CONSULTATION
March 10, 2015
Key Issues
Context. Thailand’s economy is undergoing a modest recovery after a sharp contraction in early 2014, when domestic demand was adversely affected by political unrest in Bangkok. The government was replaced in May 2014 in a military coup, which led to the end of large-scale street demonstrations and an improvement of business and consumer confidence.
Outlook. The recovery is expected to continue, with GDP increasing 3.7 percent in 2015, although the economy is lacking a strong growth engine. With output below potential and sharply lower fuel prices, annual CPI inflation is projected to fall to 0.1 percent, undershooting the new target range. Risks to the outlook are slightly to the downside, reflecting political and policy uncertainty and potential surge in global financial volatility.
Macroeconomic policy mix. The government’s plans for near-term fiscal stimulus followed by consolidation within a medium-term framework are appropriate. Monetary accommodation remains appropriate, and a further loosening may be useful if fiscal stimulus is delayed. The exchange rate is broadly consistent with medium-term fundamentals.
Fiscal policy. Fuel price reform and elimination of the rice pledging scheme have reduced distortions by replacing price interventions with targeted income support. They have also freed up some fiscal room, which can be used to finance the government’s much-needed infrastructure investment program. An increase in the VAT, once the recovery is firmly entrenched, will help keep public debt sustainable in the medium term.
Financial stability. Thailand has taken a number of important steps to strengthen the financial stability framework, including the decision to extend the Bank of Thailand’s supervisory and regulatory mandate to Specialized Financial Institutions. Credit growth has moderated considerably. Nevertheless, pockets of vulnerability remain; mainly, high household debt and the growth of nonbank financial intermediaries.
Structural policies. Thailand’s growth has slowed significantly in the last few years. Looking forward, an aging population will present new challenges. Measures to augment dwindling labor supply, increase infrastructure investment, improve education and training, provide new incentives for R&D and high-value-added production, and step up regional integration are expected to boost inclusive growth.
Approved By
Hoe Ee Khor and Catherine Pattillo
Discussions took place in Bangkok and Khon Kaen during January 15–29, 2015. The staff comprised Messrs. Breuer (head), Klyuev, Sun, and Yoneyama (all APD). Mr. Khor (APD) participated in policy discussions. Ms. Tangcharoenmonkong (OED) accompanied the mission.
Contents
OVERVIEW
ECONOMIC CONTEXT
A. Macroeconomic Developments
B. Outlook and Risks
REGAINING MOMENTUM WHILE SAFEGUARDING STABILITY
A. Fiscal Policy—Boosting Potential Growth in a Sustainable Way
B. Monetary Policy—Supporting Growth in a Low-Inflation Environment
C. Maintaining External Resilience
STRENGTHENING FINANCIAL STABILITY FRAMEWORK
REINVIGORATING INCLUSIVE GROWTH
STAFF APPRAISAL
FIGURES
1. Real Sector Developments
2. Inflation and Capacity Indicators
3. Public Finances
4. Monetary Policy Instruments
5. External Sector
6. Financial Sector Developments
7. Financial Soundness Indicators
8. Asset Prices and Private Debt
9. Structural Challenges
TABLES
1. Selected Economic Indicators, 2010–15
2. Macroeconomic Framework, 2009–20
3. Balance of Payments, 2010–20
4. Monetary Survey, 2008–14
5. Medium-Term Fiscal Scenario, 2010/11–2019/20
6. Banks’ Financial Soundness Indicators, 2009–14
APPENDICES
I. Reform Agenda
II. Risk Assessment Matrix
III. Energy Price Reform in Thailand
IV. Public Debt Sustainability Analysis
V. External Debt Sustainability Analysis
VI. External Assessment
VII. Thailand’s Regional Integration
VIII. Global Liquidity Transmission and the Changing Financial Landscapes in the ASEAN-5 Countries
IX. Thailand’s Demographic Challenge
X. Thailand’s Structural Transformation in Regional Perspective
XI. Staff Policy Advice from the 2013 Article IV Consultation
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THAILAND
STAFF REPORT FOR THE 2015 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
March 10, 2015
Prepared By
Asia and Pacific Department
Contents
FUND RELATIONS
BANK-FUND COLLABORATION
STATISTICAL ISSUES
Front Matter Page
Press Release No. 15/166
FOR IMMEDIATE RELEASE
April 9, 2015
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
