The high rates of economic development shown by Thailand in recent decades have allowed the country to significantly improve its socio-economic indicators, as evidenced by obtaining the status of a state with incomes above the average level (according to the World Bank classification).
However, a number of economic and social upheavals in the last 30 years have significantly slowed down the country's development. Thus, the GDP growth rate in the ten years before the recession caused by the Asian financial crisis (1997-1998) averaged over 9%, while already in 1999-2007 real GDP increased by only 5% per year. In addition, the 2008 crisis also had a negative impact on the country's economic development, after which the dynamics of Thailand's real GDP growth slowed to 3.6% in 2010-2019. Thus, by the beginning of the COVID-19 pandemic, there was a decrease in the growth rate of the country's economy.
Thailand's export potential has significantly decreased due to a decrease in the growth of the overall productivity index and, as a result, stagnation in output volumes. In addition, the World Bank has recorded a drop in the share of private investment in the country's GDP and an unstable inflow of foreign direct investment. Demographic problems, expressed by the low birth rate and the continuing aging of the population, also limit the socio-economic development of the country. Thus, today Thailand is in a middle income trap, a situation characterized by a continued decline in economic growth and stagnation in the income level of the country's citizens.
In 2020, Thailand's real GDP declined by 6.1%, which was the largest drop since 1998. According to a World Bank study, incomes of about 70% of households declined during the COVID-19 pandemic. In 2021, the country's economy grew by only 1.5%, due to ongoing disruptions in logistics chains, the crisis in the tourism sector, as well as weak domestic demand.
Pre-pandemic economic growth indicators were achieved in 2022, when real GDP growth amounted to 2.5%, which was made possible by the recovery of consumer activity and export supplies, as well as the gradual withdrawal of restrictions in the tourism sector. Despite the positive prerequisites for accelerating economic growth, real GDP increased by 1.9% in 2023 (one of the lowest levels among Southeast Asian countries). Thailand continues to experience a lack of investment in expanding production capacities, in education, as well as in increasing labor productivity in general, which, combined with risky short-term fiscal measures, negatively affects the country's economic development.
According to forecasts, Thailand's real GDP will grow by 2.9% in 2024, primarily due to sustainable private consumption, the restoration of tourist flow and high demand for export goods from key trading partners. The IMF and the World Bank expect GDP growth to accelerate in 2024 relative to 2023, but a more moderate pace is forecast in the medium term. The main risk factors for further economic development are restrained external demand and a slowdown in the global economy in the context of geopolitical uncertainty against the background of demographic, institutional and climatic challenges in Thailand.
Thailand is a country with a historically low inflation rate. In 2020, the decline in consumer demand in the context of the COVID-19 pandemic led to deflation of 0.8%. Similar trends were noted in the country in 2009 and in 2015, reflecting the crisis state of the economy in these periods. Already in 2021, with the recovery of consumer activity of the population, the inflation rate was 1.2%, in 2022, following the global trend, prices immediately increased by 6.1%, which became one of the highest values in the country since 1998. In order to curb the growth of consumer prices, the Thai government introduced a price ceiling for certain types of socially important goods in 2022. In addition, the country's central Bank tightened monetary policy and gradually raised the key rate during 2022-2023. According to forecasts, in the coming years, inflation in Thailand will stabilize at 1-2%, which corresponds to the target range set at 1-3%.
