Abstract
IMF Country Report No. 22/300
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IMF Country Report No. 22/300
THAILAND
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THAILAND
September 2022
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 2022 Article IV consultation with Thailand, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its August 31, 2022, consideration of the staff report that concluded the Article IV consultation with Thailand.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on August 31, 2022, following discussions that ended on June 10, 2022, 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 August 30, 2022.
An Informational Annex prepared by the IMF staff.
A Supplementary Information updating information on recent developments.
A Statement by the Executive Director for Thailand.
The documents listed below have been or will be separately released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
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© 2022 International Monetary Fund
Press Release
PR/22/299
IMF Executive Board Concludes 2022 Article IV Consultation with Thailand
FOR IMMEDIATE RELEASE
Washington, DC – August 31, 2022: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Thailand.
Economic activity in Thailand is recovering from an unprecedented crisis, supported by a swift and bold policy response, while inflation is on an upward trend reflecting rising commodity prices. Thailand’s economy grew by 1.5 percent in 2021 bolstered by the implementation of a multi-pronged policy support package, and a rebound in exports. The current account balance turned into a deficit of 1.7 percent of GDP in 2021, from a surplus of 4.2 percent of GDP in 2020, largely reflecting a sharp decline in tourism receipts and soaring shipping costs amid supply chain disruptions. The growth momentum continued so far this year based on strong consumption and exports. Reflecting rising energy prices, headline inflation accelerated to 5.9 percent y/y during Jan-July 2022 from a 1.2 percent average inflation recorded in 2021.
The economic recovery continues in 2022 but is clouded by the deteriorated global outlook. Real GDP is projected to grow by 2.8 percent in 2022, lower than initially expected, as the prolonged war in Ukraine dampens domestic demand through rising commodity prices and lowers external demand. As the pandemic subsides, GDP growth is expected to rebound to about 4 percent in 2023 before trending down to its potential rate of about 3 percent in the medium term. Headline inflation is expected to average 6.1 percent in 2022 driven by high commodity prices, before decelerating to 2.5 percent in 2023—within the Bank of Thailand’s (BOT) target range. The current account deficit is expected to narrow to -0.8 percent of GDP in 2022 as tourism receipts gradually pick up along with the removal of COVID-19 entry restrictions, and to return to a surplus of around 3-3.5 percent of GDP over the medium term. Growth prospects critically hinge on the return of foreign tourists, while soaring energy prices due to the prolonged war in Ukraine could further weigh on private consumption and external demand. A disorderly tightening of global financial conditions and spillovers from a sharper growth slowdown in China amidst already-stretched private sector balance sheets could derail the economy’s rebound.
Executive Board Assessment2
Executive Directors commended the authorities for their bold and appropriate policy response, which helped maintain macroeconomic and financial stability and facilitated a growth rebound despite the severe impact of the COVID-19 pandemic. Directors acknowledged that the recovery is fragile and uneven with risks to the outlook tilted to the downside. In that context, they encouraged the authorities to remain agile in their policy response under fast-changing circumstances and to press ahead with structural reforms to support sustainable, inclusive growth. Directors also emphasized the importance of a well-coordinated and integrated approach to recalibrate monetary, exchange rate, and fiscal policies should an adverse scenario materialize.
Directors welcomed the Bank of Thailand’s efforts to ensure that inflation expectations remain well anchored. They emphasized the importance of a data-dependent monetary policy normalization path and welcomed the recent policy rate increase and clear communication of a gradual normalization on the back of continued economic recovery. Directors also welcomed ongoing progress in strengthening financial sector risk analysis, specialized financial institutions’ supervision and bank resolution, as well as efforts to accelerate household debt restructuring, which should be accompanied by a gradual tapering of the financial sector support measures. Continued efforts to enhance the AML/CFT framework are also important.
Directors agreed with the near-term fiscal consolidation while encouraging the authorities to continue to gradually replace untargeted energy subsidies with targeted support to vulnerable groups. Over the medium term, a more gradual fiscal consolidation underpinned by enhanced domestic revenue mobilization could support structural reforms to strengthen the economy’s resilience while rebuilding policy buffers. Enhancing fiscal governance and transparency also remains a priority.
Most Directors noted that Thailand’s external position remains moderately stronger than warranted by medium term fundamentals and desirable policies, while some other Directors called for a more cautious interpretation of the external balance assessment given the pandemic-induced structural shifts in the global economy. Directors welcomed the authorities’ commitment to exchange rate flexibility and the easing of foreign exchange regulations and concurred that FX interventions should be limited to avoiding disorderly market conditions.
Directors encouraged the authorities to implement a well-coordinated structural reform agenda, supported by capacity development, to boost potential output and capitalize on the growth opportunities provided by the ongoing digital and green transformations. In this regard, measures to enhance human capital to close the skills gap will be important. They welcomed the authorities’ efforts to reposition Thailand’s financial sector for a sustainable, digital economy and highlighted the importance of balancing efficiency gains from financial innovation against financial stability risks.
Thailand: Selected Economic Indicators, 2018–23
This series reflects the new GDP data based on the chain volume measure methodology, introduced by the Thai authorities in May 2015.
On a fiscal year basis. The fiscal year ends on September 30.
Includes budgetary central government, extrabudgetary funds, and local governments.
Includes general government and SOEs.
Includes errors and omissions.
With remaining maturity of one year or less.
Excludes debt of state enterprises.
Percent of exports of goods and services.
Thailand: Selected Economic Indicators, 2018–23
| Projections | ||||||
|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
| Real GDP growth (y/y percent change) 1/ | 4.2 | 2.2 | -6.2 | 1.5 | 2.8 | 4.0 |
| Consumption | 4.1 | 3.4 | -0.6 | -0.2 | 5.1 | 0.5 |
| Gross fixed investment | 3.9 | 2.0 | -4.8 | 2.0 | 4.5 | 1.2 |
| Inflation (y/y percent change) | ||||||
| Headline CPI (period average) | 1.1 | 0.7 | -0.8 | 1.2 | 6.1 | 2.5 |
| Core CPI (period average) | 0.7 | 0.5 | 0.3 | 0.2 | 2.6 | 1.7 |
| Saving and investment (percent of GDP) | ||||||
| Gross domestic investment | 25.2 | 23.8 | 23.7 | 29.1 | 29.2 | 27.7 |
| Private | 16.9 | 16.9 | 16.8 | 17.0 | 18.4 | 18.1 |
| Public | 5.8 | 5.7 | 6.4 | 6.6 | 6.3 | 5.7 |
| Change in stocks | 2.4 | 1.2 | 0.4 | 5.5 | 4.6 | 3.9 |
| Gross national saving | 30.8 | 30.8 | 27.9 | 26.9 | 28.5 | 29.9 |
| Private, including statistical discrepancy | 25.3 | 26.7 | 26.8 | 27.8 | 27.8 | 27.3 |
| Public | 5.5 | 4.1 | 1.1 | -0.8 | 0.7 | 2.6 |
| Foreign saving | -5.6 | -7.0 | -4.2 | 2.2 | 0.8 | -2.2 |
| Fiscal accounts (percent of GDP) 2/ | ||||||
| General government balance 3/ | 0.1 | -0.8 | -4.7 | -7.0 | -5.6 | -3.2 |
| SOEs balance | 0.5 | 0.6 | -0.1 | -0.4 | -0.7 | 0.2 |
| Public sector balance 4/ | 0.6 | -0.3 | -4.8 | -7.4 | -6.2 | -3.0 |
| Public sector debt (end of period) 4/ | 41.9 | 41.1 | 49.5 | 58.4 | 61.2 | 61.4 |
| Monetary accounts (end of period, y/y percent change) | ||||||
| Broad money growth | 4.7 | 3.6 | 10.2 | 4.8 | -0.2 | 3.5 |
| Narrow money growth | 2.8 | 5.7 | 14.2 | 3.5 | 6.9 | 5.0 |
| Credit to the private sector by depository corporations | 5.8 | 2.4 | 4.5 | 4.5 | 6.9 | 5.0 |
| Balance of payments (In billions of U.S. dollars) | ||||||
| Current account balance | 28.4 | 38.0 | 21.2 | -11.0 | -4.2 | 12.5 |
| (In percent of GDP) | 5.6 | 7.0 | 4.2 | -2.2 | -0.8 | 2.2 |
| Exports, f.o.b. | 251.1 | 242.7 | 227.0 | 270.6 | 301.7 | 312.5 |
| Growth rate (dollar terms) | 7.5 | -3.3 | -6.5 | 19.2 | 11.5 | 3.6 |
| Growth rate (volume terms) | 3.9 | -3.7 | -5.8 | 15.4 | 3.1 | 2.1 |
| Imports, f.o.b. | 228.7 | 216.0 | 186.1 | 230.7 | 271.9 | 280.9 |
| Growth rate (dollar terms) | 13.7 | -5.6 | -13.8 | 23.9 | 17.9 | 3.3 |
| Growth rate (volume terms) | 7.6 | -5.8 | -10.4 | 18.8 | 6.2 | 4.5 |
| Capital and financial account balance 5/ | -21.2 | -24.5 | -2.8 | 3.5 | 4.2 | -12.5 |
| Overall balance | 7.3 | 13.6 | 18.4 | -7.5 | 0.0 | 0.0 |
| Gross official reserves (including net forward position, end of period) (In billions of U.S. dollars) | 239.4 | 258.7 | 287.4 | 279.2 | 279.2 | 279.2 |
| (Months of following year’s imports) | 13.3 | 16.7 | 15.0 | 12.3 | 11.9 | 11.2 |
| (Percent of short-term debt) 6/ | 288.4 | 325.8 | 310.4 | 299.2 | 312.7 | 299.7 |
| (Percent of ARA metric) | 224.7 | 232.6 | 253.3 | 236.3 | 227.4 | 213.5 |
| Forward position of BOT (end of period) | -33.7 | -34.3 | -29.3 | -33.2 | … | … |
| Exchange rate (baht/U.S. dollar) | 32.3 | 31.0 | 31.3 | 32.0 | … | … |
| NEER appreciation (annual average) | 4.0 | 6.9 | -0.5 | 4.1 | … | … |
| REER appreciation (annual average) | 3.0 | 5.7 | -2.6 | 3.2 | … | … |
| External debt | ||||||
| (In percent of GDP) | 32.2 | 31.6 | 38.2 | 39.0 | 39.4 | 39.0 |
| (In billions of U.S. dollars) | 163.1 | 171.9 | 190.7 | 197.5 | 210.3 | 225.5 |
| Public sector 7/ | 35.7 | 38.0 | 37.2 | 41.5 | 41.8 | 42.4 |
| Private sector | 127.4 | 133.9 | 153.5 | 156.0 | 168.5 | 183.0 |
| Medium- and long-term | 65.9 | 74.6 | 80.0 | 84.1 | 99.1 | 109.7 |
| Short-term (including portfolio flows) | 61.5 | 59.3 | 73.5 | 71.8 | 69.4 | 73.3 |
| Debt service ratio 8/ | 6.0 | 6.3 | 6.3 | 7.3 | 7.3 | 7.3 |
| Memorandum items: | ||||||
| Nominal GDP (billions of baht) | 16,373.3 | 16,892.4 | 15,636.9 | 16,178.7 | 17,295.2 | 18,156.5 |
| (In billions of U.S. dollars) | 506.5 | 544.0 | 499.7 | 505.9 | … | … |
This series reflects the new GDP data based on the chain volume measure methodology, introduced by the Thai authorities in May 2015.
On a fiscal year basis. The fiscal year ends on September 30.
Includes budgetary central government, extrabudgetary funds, and local governments.
Includes general government and SOEs.
Includes errors and omissions.
With remaining maturity of one year or less.
Excludes debt of state enterprises.
Percent of exports of goods and services.
Thailand: Selected Economic Indicators, 2018–23
| Projections | ||||||
|---|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
| Real GDP growth (y/y percent change) 1/ | 4.2 | 2.2 | -6.2 | 1.5 | 2.8 | 4.0 |
| Consumption | 4.1 | 3.4 | -0.6 | -0.2 | 5.1 | 0.5 |
| Gross fixed investment | 3.9 | 2.0 | -4.8 | 2.0 | 4.5 | 1.2 |
| Inflation (y/y percent change) | ||||||
| Headline CPI (period average) | 1.1 | 0.7 | -0.8 | 1.2 | 6.1 | 2.5 |
| Core CPI (period average) | 0.7 | 0.5 | 0.3 | 0.2 | 2.6 | 1.7 |
| Saving and investment (percent of GDP) | ||||||
| Gross domestic investment | 25.2 | 23.8 | 23.7 | 29.1 | 29.2 | 27.7 |
| Private | 16.9 | 16.9 | 16.8 | 17.0 | 18.4 | 18.1 |
| Public | 5.8 | 5.7 | 6.4 | 6.6 | 6.3 | 5.7 |
| Change in stocks | 2.4 | 1.2 | 0.4 | 5.5 | 4.6 | 3.9 |
| Gross national saving | 30.8 | 30.8 | 27.9 | 26.9 | 28.5 | 29.9 |
| Private, including statistical discrepancy | 25.3 | 26.7 | 26.8 | 27.8 | 27.8 | 27.3 |
| Public | 5.5 | 4.1 | 1.1 | -0.8 | 0.7 | 2.6 |
| Foreign saving | -5.6 | -7.0 | -4.2 | 2.2 | 0.8 | -2.2 |
| Fiscal accounts (percent of GDP) 2/ | ||||||
| General government balance 3/ | 0.1 | -0.8 | -4.7 | -7.0 | -5.6 | -3.2 |
| SOEs balance | 0.5 | 0.6 | -0.1 | -0.4 | -0.7 | 0.2 |
| Public sector balance 4/ | 0.6 | -0.3 | -4.8 | -7.4 | -6.2 | -3.0 |
| Public sector debt (end of period) 4/ | 41.9 | 41.1 | 49.5 | 58.4 | 61.2 | 61.4 |
| Monetary accounts (end of period, y/y percent change) | ||||||
| Broad money growth | 4.7 | 3.6 | 10.2 | 4.8 | -0.2 | 3.5 |
| Narrow money growth | 2.8 | 5.7 | 14.2 | 3.5 | 6.9 | 5.0 |
| Credit to the private sector by depository corporations | 5.8 | 2.4 | 4.5 | 4.5 | 6.9 | 5.0 |
| Balance of payments (In billions of U.S. dollars) | ||||||
| Current account balance | 28.4 | 38.0 | 21.2 | -11.0 | -4.2 | 12.5 |
| (In percent of GDP) | 5.6 | 7.0 | 4.2 | -2.2 | -0.8 | 2.2 |
| Exports, f.o.b. | 251.1 | 242.7 | 227.0 | 270.6 | 301.7 | 312.5 |
| Growth rate (dollar terms) | 7.5 | -3.3 | -6.5 | 19.2 | 11.5 | 3.6 |
| Growth rate (volume terms) | 3.9 | -3.7 | -5.8 | 15.4 | 3.1 | 2.1 |
| Imports, f.o.b. | 228.7 | 216.0 | 186.1 | 230.7 | 271.9 | 280.9 |
| Growth rate (dollar terms) | 13.7 | -5.6 | -13.8 | 23.9 | 17.9 | 3.3 |
| Growth rate (volume terms) | 7.6 | -5.8 | -10.4 | 18.8 | 6.2 | 4.5 |
| Capital and financial account balance 5/ | -21.2 | -24.5 | -2.8 | 3.5 | 4.2 | -12.5 |
| Overall balance | 7.3 | 13.6 | 18.4 | -7.5 | 0.0 | 0.0 |
| Gross official reserves (including net forward position, end of period) (In billions of U.S. dollars) | 239.4 | 258.7 | 287.4 | 279.2 | 279.2 | 279.2 |
| (Months of following year’s imports) | 13.3 | 16.7 | 15.0 | 12.3 | 11.9 | 11.2 |
| (Percent of short-term debt) 6/ | 288.4 | 325.8 | 310.4 | 299.2 | 312.7 | 299.7 |
| (Percent of ARA metric) | 224.7 | 232.6 | 253.3 | 236.3 | 227.4 | 213.5 |
| Forward position of BOT (end of period) | -33.7 | -34.3 | -29.3 | -33.2 | … | … |
| Exchange rate (baht/U.S. dollar) | 32.3 | 31.0 | 31.3 | 32.0 | … | … |
| NEER appreciation (annual average) | 4.0 | 6.9 | -0.5 | 4.1 | … | … |
| REER appreciation (annual average) | 3.0 | 5.7 | -2.6 | 3.2 | … | … |
| External debt | ||||||
| (In percent of GDP) | 32.2 | 31.6 | 38.2 | 39.0 | 39.4 | 39.0 |
| (In billions of U.S. dollars) | 163.1 | 171.9 | 190.7 | 197.5 | 210.3 | 225.5 |
| Public sector 7/ | 35.7 | 38.0 | 37.2 | 41.5 | 41.8 | 42.4 |
| Private sector | 127.4 | 133.9 | 153.5 | 156.0 | 168.5 | 183.0 |
| Medium- and long-term | 65.9 | 74.6 | 80.0 | 84.1 | 99.1 | 109.7 |
| Short-term (including portfolio flows) | 61.5 | 59.3 | 73.5 | 71.8 | 69.4 | 73.3 |
| Debt service ratio 8/ | 6.0 | 6.3 | 6.3 | 7.3 | 7.3 | 7.3 |
| Memorandum items: | ||||||
| Nominal GDP (billions of baht) | 16,373.3 | 16,892.4 | 15,636.9 | 16,178.7 | 17,295.2 | 18,156.5 |
| (In billions of U.S. dollars) | 506.5 | 544.0 | 499.7 | 505.9 | … | … |
This series reflects the new GDP data based on the chain volume measure methodology, introduced by the Thai authorities in May 2015.
On a fiscal year basis. The fiscal year ends on September 30.
Includes budgetary central government, extrabudgetary funds, and local governments.
Includes general government and SOEs.
Includes errors and omissions.
With remaining maturity of one year or less.
Excludes debt of state enterprises.
Percent of exports of goods and services.
Title page
THAILAND
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
August 30, 2022
KEY ISSUES
Context. Thailand’s economy is recovering from an unprecedented crisis emanating from multiple waves of the COVID-19 pandemic. Ample policy space has allowed a swift and bold policy response and vaccine rollout has accelerated. However, the recovery is weak and uneven across sectors, with inflation rapidly rising driven by energy prices. Downside risks dominate the outlook, sharpening policy tradeoffs. The pandemic has also brought to the fore the urgency for Thailand to identify new growth drivers to reverse the pre-pandemic trend of declining productivity growth and meet the challenges of the post-pandemic world.
Policies. An agile and carefully calibrated policy mix is required to deal with rapidly-evolving circumstances, harness the growth benefits of the digital and green transformation and improve social outcomes.
Monetary. A data-dependent monetary policy normalization path will be critical to avoid the risk of de-anchoring inflation expectations. The Bank of Thailand (BOT) should continue to closely monitor inflation developments and react timely to generalized price pressures.
Financial. An acceleration of ongoing efforts to facilitate private debt restructurings is needed, including by addressing remaining gaps in the insolvency regime, complemented by macro-prudential measures to limit excessive private leverage and related financial stability risks.
Fiscal. While the gradual withdrawal of the unprecedented pandemic-era fiscal stimulus is appropriate, fiscal policy should continue to play an active role in protecting vulnerable groups and support the still-fragile recovery. A slower medium-term consolidation, buttressed by revenue mobilization could help balance the objectives of rebuilding buffers and supporting needed structural reforms.
Structural. Well-coordinated efforts to upskill Thailand’s labor force, increase investments in digital infrastructure and R&D, and ease business regulations will be key in enabling Thailand to capitalize on the growth opportunities of the digital and green transformations and meet the needs of the post pandemic economy.
Approved By
Anne-Marie Gulde-Wolf (APD) and Maria Gonzalez (SPR)
Discussions took place in Bangkok during May 17-31, 2022, and the concluding meeting was held by video conference on June 10, 2022. The team comprised C. Deléchat (head), S. Kaendera, U. Rawat, A. Stepanyan, and M. Sy (all APD). The mission met with the Minister of Finance Arkom Termpittayapaisith, Bank of Thailand Governor Sethaput Suthiwartnarueput, senior government officials, private sector representatives and development partners. Ms. Lim, Executive Director, and Mr. Dacharux (OED) accompanied the mission. Mr. Nahata (APD) provided analytical inputs. Ms. Reis and Ms. Tanseco (APD) coordinated the production of the report.
Contents
CONTEXT: BUILDING BACK BETTER POST-PANDEMIC
RECENT DEVELOPMENTS: A FRAGILE AND UNEVEN RECOVERY
OUTLOOK AND RISKS: GATHERING CLOUDS
POLICY DISCUSSIONS: TOWARDS A NEW, SUSTAINABLE AND INCLUSIVE GROWTH MODEL
A. Monetary and Exchange Rate Policies
B. Financial Sector Policies
C. Fiscal Policy
D. Structural Policies
STAFF APPRAISAL
BOX
1. Thailand: Alternative Fiscal Scenario
FIGURES
1. Fiscal Sector Developments
2. Recent Real Sector and Price Dynamics
3. Financial Sector Developments
4. Financial Soundness Indicators of Commercial Banks
5. External Sector Developments
6. Structural Challenges
TABLES
1. Selected Economic Indicators, 2018–23
2. Macroeconomic Framework, 2018–27
3a. Medium-Term Fiscal Scenario, FY2018–FY2027 (In billions of baht)
3b. Medium-Term Fiscal Scenario, FY2018–FY2027 (In percent of fiscal year GDP)
4. Financial Soundness Indicators, 2016–21
5. Monetary Survey, 2016–22
6. Balance of Payments, 2018–27
7. Risk Assessment Matrix
8 Implementation of the Main Recommendations of the 2021 Article IV Consultation
9. Implementations of 2019 FSAP Key Recommendations
ANNEXES
I. Policy Support During the Pandemic
II. External Sector Assessment
III. An Assessment of Potential Output and Output Gap
IV. An Integrated Policy Approach
V. Debt Sustainability Analysis
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
