AMRO’s 2021 Annual Consultation Report on Thailand

Thailand’s economy should recover gradually — although unevenly across sectors — with growth likely to register 0.8 percent in 2021 before rebounding to 5.8 percent in 2022.

Downside risks to growth stem mainly from uncertainties due to possible recurrent waves of COVID-19 infections and the pace of vaccination.

Domestic demand will likely remain weak, while exports and public sector expenditures should prove the main drivers of growth until herd immunity is achieved from nationwide immunization against the COVID-19 virus and international travel fully reopens.

Inflationary pressure remains subdued.

Despite the weakening of the current account balance, the country’s external position remains strong, underpinned by substantial international reserves.

Risks to financial stability remain contained so far, although they require vigilant monitoring. Overall, the banking system’s non-performing loan ratio has been broadly stable, but household debt-to-GDP, which is high when compared to regional peers, has increased even further due to the pandemic.

Expansionary fiscal policy is needed to finance COVID-related expenses, support vulnerable sectors, minimize scarring effects, and sustain the recovery momentum.

While monetary policy is appropriately accommodative, the authorities should be ready to act if the current or a new wave of infections causes the economy to weaken further.

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