IMF Staff Concludes 2022 Article IV Mission to Thailand
June 13, 2022
End-of-mission press releases include statements from IMF staff conveying preliminary findings after a country visit. The views expressed in this statement are those of IMF staff and do not necessarily represent the views of the IMF Executive Board. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
- Thailand’s economy continues to recover from the COVID-19 pandemic, supported by a comprehensive policy package and an accelerated vaccination program. Real GDP grew by 1.5% in 2021 and is expected to grow by around 3% in 2022. The recovery, however, is uneven across sectors, with the economy still operating below potential, while inflation increases due to energy prices. The outlook is very uncertain and full of risks.
- The gradual reduction in political support for the pandemic planned by the authorities is broadly appropriate, while the remaining programs should be targeted to protect hard-hit and vulnerable segments of the population. Timely and data-driven normalization of the monetary policy stance is necessary to control inflation.
- Comprehensive structural reforms remain a priority to address long-standing structural challenges, minimize the scars of the pandemic, improve social outcomes, and build economic resilience. To support the structural reform agenda, staff recommends gradual fiscal consolidation underpinned by increased revenue mobilization to rebuild fiscal buffers.
The International Monetary Fund (IMF) team, led by Ms. Corinne Deléchat, held the 2022 Article IV consultation with Thailand between May 17 and June 10, 2022. Following the discussions, Ms. Deléchat made the following statement:
Thailand’s economy is gradually recovering from the COVID-19-induced slowdown, with real GDP growth reaching 1.5% in 2021 and 2.2% (year-on-year) in the first quarter of 2022. The multiple waves of the pandemic in 2021 brought additional containment measures, hampering reopening efforts, and weighing on tourism and growth. The authorities’ judicious use of vast economic reserves, combined with an accelerated deployment of the vaccine, helped maintain economic stability and protect households, businesses and the financial system during the pandemic. With over 75% of the population fully immunized, the government has gradually eased travel restrictions. »
“The recovery is expected to continue, but the outlook is clouded by the lingering effects of the pandemic and rising global commodity prices. Growth is expected to reach around 3% in 2022, driven by the recovery in domestic and external demand, and to strengthen further to reach 4.3% in 2023. The recovery is likely to be uneven, with some hard hit sectors such as tourism and transport being expected. to recover at a slower pace.
Headline inflation is expected to average 6.1% in 2022, driven by high energy prices, well above the Bank of Thailand’s upper 3% target range.
“In the short term, policy support should be nimble and increasingly targeted, with a focus on strengthening the recovery, protecting vulnerable segments of the population, and minimizing the economic scars of the pandemic.
“The current accommodative monetary policy stance remains broadly appropriate given the supply-side nature of inflation, well-anchored inflation expectations and a significant economic slowdown. Nonetheless, price risks energy costs and the pass-through of rising production costs to consumers have increased significantly and may require an earlier start to standardization.
“A close and continued monitoring of inflation developments is warranted, and clear communication from the Bank of Thailand on a data-dependent normalization path is welcome. Exchange rate flexibility should be the first line of defense against capital flow volatility The envisaged fiscal consolidation in FY2022 is broadly appropriate given the extraordinary pandemic-induced fiscal expansion in FY2020-21.
“While staff welcomes the authorities’ plans to phase out broad-based energy subsidies, targeted support to vulnerable groups would help mitigate the impact of the rising cost of living. For the medium term, the mission recommends a more gradual but growth-oriented consolidation strategy by prioritizing spending on productivity-enhancing investments in education, ICT, resilient green infrastructure and the extension of social protection coverage. Improved revenue mobilization would help fund priority spending while supporting efforts to rebuild buffers.
“Given that support measures for the financial sector have become more targeted and are expected to be phased out as the economy recovers, risks to financial stability need to be closely monitored. In particular, the high stock of private debt remains an important source of financial sector vulnerability. The authorities should accelerate ongoing efforts to facilitate private debt restructurings, particularly for household debt, and conduct timely asset quality reviews to identify non-viable borrowers. Complementary measures, such as lower debt thresholds, stricter lending standards based on comprehensive credit information systems and a generalized debt service-to-income ratio, could help prevent excessive accumulation of the debt. Staff welcomes the Bank of Thailand’s work on strengthening risk analysis, including stress testing, and expanding surveillance to all relevant segments of the financial sector.
“Mutually reinforcing structural reforms are needed to limit the economic scars of the pandemic, strengthen the resilience of the economy, improve competitiveness and promote inclusion. The pandemic has had a profound impact on the labor market, particularly in contact-intensive sectors, and coordinated skills-building efforts will be essential to meet the needs of the post-pandemic economy and reverse the downward trend. decline in labor productivity. At the same time, modernizing physical and ICT infrastructure will be key to harnessing the benefits of a growing digital and green economy, boosting productivity and economic resilience, and improving social outcomes.
“The IMF team exchanged views on recent economic developments and prospects with government officials, the Bank of Thailand, other public institutions, and private sector representatives. The team would like to thank the authorities and other interlocutors in Bangkok for the fruitful discussions. The IMF Executive Board is tentatively expected to discuss the staff report in August 2022.”
IMF Communications Department
PRESS OFFICER: Brian Walker
Call: +1 202 623-7100E-mail: [email protected]