World Bank Slashes Thai GDP to Grow 3.5% in 2019 from Prolonged Political Uncertainty

On July 8, 2019, the World Bank states on its website that Thailand’s economic growth began to moderate in early 2019 in the context of weaker global growth. The country’s growth rate is projected to fall from 4.1% in 2018 to 3.5% in 2019, according to the World Bank’s Thailand Economic Monitor, released today.

Exports contracted by 4% in the first quarter of 2019 —the first quarterly contraction in three years. Private investment and household consumption continued to grow close to their three-year high, helped by low inflation, increasing employment and rising recurrent fiscal spending. At the same time, public investment weakened as the implementation of “megaprojects” slowed due to election-related delays. As a result, the economy’s pace of expansion slowed to 2.8% in the first quarter of 2019, falling below 3% for the first time since the mid-2015.

The World Bank projects growth to gradually increase from the expected 3.5% in 2019 to 3.6% and 3.7% in 2020 and 2021, assuming private consumption can be sustained, and public investment accelerates.

“Policy continuity and the implementation of planned public infrastructure projects in the Eastern Economic Corridor will be of vital importance to sustain growth,” said Birgit Hansl, World Bank Country Manager for Thailand, “Increased regional integration and making better use of Thailand’s strategic location could support trade in goods and services.”

Prolonged political uncertainty is a key risk for Thailand’s economic outlook going forward. Lingering doubts about the cohesiveness of the newly established 19-party coalition government could adversely impact investor and consumer confidence and contribute to a further delay in the timely implementation of large public infrastructure projects. Externally, ongoing trade tensions between the US and China could further weaken demand for Thailand’s exports and discourage private investment in export-oriented industries.

This edition of the Thailand Economic Monitor highlights the importance of harnessing financial technology (fintech) for financial inclusion. Thailand has made large strides in expanding access to financial services. Today, 82% of Thai adults have a formal bank account and the gender gap is small. However, the report finds that challenges remain in the quality of digital financial services, as well as in access to broadband services.

“Expansion of digital services to the underserved would bring about new economic opportunities and support a reduction of inequality as envisaged in Thailand’s national strategy,” said Kiatipong Ariyapruchya, World Bank Senior Economist for Thailand. “As fintech activities continue to grow in Thailand, inter-governmental collaboration and building a supportive environment for a sound fintech ecosystem would be important.”

Among the report’s policy recommendations to leverage the full potential of fintech are: lifting barriers to firms seeking to enter the financial sector; encouraging collaboration between traditional banks and fintech firms; improving coordination among regulators for example on regulatory sandboxes; encouraging public-private and private-private collaboration; and supporting initiatives such as incubators and early-stage seed funding vehicles, as well as providing matching grants to help a fintech firms to take off in Thailand.