Thailand’s economy has significantly slowed down, with a growth rate of just 1.9 percent last year, clearly lagging behind its Southeast Asian neighbours.
Countries like the Philippines, Vietnam, and Indonesia have experienced growth rates exceeding 5 percent.
This disparity highlights the challenges Thailand is facing, such as high household debt, which is nearly 91 percent of GDP, with a considerable portion being high-interest informal loans.
The halt in economic progress is attributed to several factors, including delayed demand recovery from key export markets and a global trend towards high-value services requiring more advanced local skills.
Thailand finds itself in a situation often referred to as the middle-income trap, characterized by widespread employment in low-wage, low-skill jobs, compounded by low productivity and educational deficiencies.
Meanwhile, countries like Indonesia are adapting to shifts in globalization by enhancing their competitiveness.
Thailand’s economic leaders and the Bank of Thailand are tasked with addressing these fundamental issues to prevent falling further behind their rapidly advancing neighbors.
Pavida Pananond, a professor at Thammasat Business School, notes, “Thailand suffers not only from the slow return of demand from major export markets but also from the changing nature of globalization that impairs its competitiveness.”
The need to upgrade the labour force and improve the innovation capabilities of local businesses is becoming increasingly critical for Thailand as it confronts these challenges.
The ability of Thailand to escape the middle-income trap and implement reforms aimed at fostering growth and innovation could be crucial for its economic future.
This year, the Thai economy is expected to grow by 2.6%, driven by improvements in tourism, exports, and sustained private consumption.
However, with Bangkok having neglected essential economic reforms for years, there is concern that the economy may not quickly recover.
Prime Minister Srettha Thavisin, who assumed office in August last year after nearly a decade of military governance, has declared the economic state a “crisis.”
Mr. Srettha, making the transition from real estate tycoon to politician, has embraced the role of Thailand’s “salesman.”
After taking office through an agreement with the royalist establishment, which blocked the reformist Move Forward Party from gaining power, Mr. Srettha has been actively involved in international diplomacy.
He has been seeking free trade agreements worldwide and promoting Thailand as an ideal location for international manufacturing supply chains.
