After being severely hit by a surge of COVID-19 cases in the third quarter, economic activity has subsequently rebounded.
- The economy is expected to grow by 1.0 percent in 2021, unchanged from our previous projection published in October.
- This reflects weakness in private consumption due to COVID-19, and the expectation that tourist arrivals will remain negligible through to the end of 2021, despite the recent reopening of international borders.
- Exports of goods have supported growth, reflecting strength in global demand, and investment is expected to expand strongly.
- Cash transfers, public health initiatives, economic recovery programs and other forms of fiscal support have helped shore up private demand while supporting consumption among vulnerable households and attenuating the impact of the crisis on poverty.
Economic activity is expected to return to its pre-pandemic levels end-2022, with progress on vaccinations and a resumption of tourist arrivals providing support for the recovery.
- Growth is projected to accelerate to 3.9 percent in 2022 and 4.3 percent in 2023, driven by a recovery in service sector activity.
- Private consumption would expand by just under 4 percent per year in 2022 and 2023, a significant acceleration from the 1 percent growth expected in 2021.
- The number of international tourists is projected to pick up to just under 7 million in 2022, with a sharp rise in the second half of the year and increase further in 2023 to around 20 million arrivals, or about half of the 2019 level. Tourism is expected to contribute 2 percentage points to the growth rate in 2022 and 4 percent in 2023.
- Inflation is expected to remain contained, with the output gap remaining substantial in 2021 and 2022.
The adoption of digital technologies has the potential to support Thailand’s recovery from COVID-19 and ensure a more competitive economy over the longer-term.
- The use of digital technologies and consumption of digital services has increased during the pandemic in response to extended mobility restrictions.
- The adoption of digital technology by businesses has been linked to increases in commerce and productivity.
- Digital commerce is an important outlet for MSMEs in Thailand, reducing transaction costs and allowing small entrepreneurs to reach new markets.
The Thai government has already shown a strong commitment to advance the digital agenda under the banner of industry 4.0 but more can be done to develop digital services and the digitalization of businesses.
- First, efforts to boost competition and ensure a level playing field are necessary to promote market contestability and increase the interoperability of digital systems.
- Second, the availability of digital skills – together with complementary skills such as managerial and organizational capabilities – is a key contributor to digital transformation.
- Third, expanding access to innovation financing would boost the ability of firms, especially SMEs, to adopt new business models and digital technology.