Thailand 20241025: Hampered, Epochal, Demanding
Mekong Memo Thailand Weekly: Business, politics, finance, trade & legal news.
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Here is your Mekong Memo Thailand for the week.
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Headlines:
Structural Hurdles and Innovation Gaps a Trap
New Travel Tax to Launch Mid-2025
Auto Sector Hits Speed Bumps
Economic Growth Trails Regional Peers
BOT Holds Firm on Inflation Target
Bangkok Property Market Shows Stress
Expansive Infrastructure Push
Thai SMEs Struggling
Digital Economy Expansion
Healthcare at Systemic Risk
Cross-Border Trade Growth
Regional Cooperation Efforts with Indonesia
144 Billion Baht in Aid to Vulnerable Groups
Digital Economy at Center Stage in 2025 Forums
Alarming Reports of Pesticide Contamination
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Structural Hurdles and Innovation Gaps a Trap
Thailand, once a promising middle-income economy, remains stuck in the "middle-income trap," with GDP per capita hovering around $7,000—far behind regional peers. While it is true that the 1997-98 Asian financial crisis hit Thailand hard, slowing growth and destabilizing its financial systems, that is long in the past. Today, a lack of innovation, a reliance on low-skill labor, and limited investment in technology are holding back Thailand's transition to a high-income economy. Despite infrastructure growth, sustainable advancements in productivity and domestic innovation are going to be necessary if Thailand will meet its promise of long-term economic success.
Read more: South China Morning Post
New Travel Tax to Launch Mid-2025
Thailand plans to asses a "travel tax" in mid-2025, initially applying to air travelers with a fee of 300 baht a head. Funds will reportedly support insurance for foreign visitors and improve tourism infrastructure, including accessibility facilities. A future expansion of the tariff may apply the tax to land and sea arrivals. The controversial tax exempts cross-border merchants, and insurance coverage includes payouts up to one million baht in case of death and 500,000 baht for injuries.
Read more: The Straits Times
Auto Sector Hits Speed Bumps
The automotive industry is getting pummeled as car production dropped more than a quarter year-on-year this September. The decline is seen in both domestic sales and exports; production cutbacks came with weakening global demand and changes in consumer preferences. Industry leaders say they are making market adjustments and are recalibrating production plans for Q4 2023.
Read more: Bangkok Post (Production Data), Channel News Asia (Industry Analysis), Bangkok Post (Auto Loan Rejections)
Economic Growth Trails Regional Peers
The IMF is saying that Thai growth will lag behind ASEAN neighbors, with a tiny 2.8% expansion forecast for 2024-25. The Bank of Thailand is standing firm on its inflation targeting policy as concerns mount over possible credit rating downgrades. The government has talked up balanced budgets at World Bank meetings while continuing to put measures in place that it claims will help to maintain financial stability.
Read more: Nation Thailand (IMF Forecast), Bangkok Post (Growth Data), Nation Thailand (Credit Rating)
BOT Holds Firm on Inflation Target
The Bank of Thailand (BOT) reaffirmed its stance on maintaining the current inflation target range of 1% to 3%, despite government calls for an increase to stimulate economic activity. BOT Deputy Governor Piti Disyatat described last week’s rate cut as a “recalibration” rather than a shift to an easing cycle, aiming to ease borrower debt without sparking inflation. The central bank emphasized that altering the target could elevate inflation expectations and bond yields, impacting private and government financing.
Read more: Reuters (Inflation Target), Bangkok Post (Rate Policy)
Bangkok Property Market Shows Stress
The capital’s real estate sector is showing weakness with rising office vacancy rates and declining housing market activity. Poor economic conditions and oversupply are putting pressure on both the commercial and residential segments. Market analysts are seeing continued softness through 2024 unless there is a big shift in market sentiment.
Read more: Bangkok Post (Housing), Bangkok Post (Sentiment), Bangkok Post (Offices)
Expansive Infrastructure Push
The first phase of a 950-km coastal road, known as the Riviera project, has opened, connecting Samut Sakhon to Chumphon and linking the Gulf of Thailand and Andaman Sea. Plans are underway for additional segments to improve access across 12 provinces. COSCO has invested $110 million in Laem Chabang Port, a cornerstone of Thailand’s Eastern Economic Corridor. Other projects include a high-speed rail linking Bangkok airports, set to begin construction in early 2025, and a controversial congestion fee initiative in Bangkok to reduce traffic.
Read more: Nation Thailand (Rail), Bangkok Post (Airports), Port Technology (Ports), Bangkok Post (Congestion Fee), VnExpress (Coastal Road)
Thai SMEs Struggling
Thailand's SMEs are under financial pressure as debt, falling sales, and flood damage strain resources, reports the Federation of Thai Industries (FTI). Recent floods in the north caused losses up to 50 billion baht, hammering the Thai Industries Sentiment Index. At the same time, low-cost Chinese imports are stiff competition for domestic SMEs. The Industry Ministry is trying to alleviate these issues with 1.9 billion baht in low-interest loans to support liquidity and competitiveness, as FTI is asking for further government support to stabilize the sector.
Read more: Bangkok Post
Digital Economy Expansion
The card payment market is expected to reach $90 billion by 2028 and Thailand is pulling in data center investments, with Colliers saying it could be a bright spot for growth as work continues to build Thailand into a regional tech hub. NVIDIA is reportedly keen on building out some infrastructure locally and is expected to announce investments during CEO Jensen Huang’s visit to Bangkok in December.
Read more: Bangkok Post (Payments), Bangkok Post (Data Centers), Seeking Alpha (NVIDIA)
Healthcare at Systemic Risk
Experts are warning of a potential collapse in Thailand's healthcare system. The alarm comes as the sector is hampered by resource constraints and rising demand. Structural reforms are needed to ensure the long-term sustainability of medical services.
Read more: Nation Thailand
Cross-Border Trade Growth
Cambodia-Thai trade increased 10% to rise above $3 billion in January-September. Both countries are push for expanded economic cooperation, but talks are needed to reduce trade barriers and grease bilateral commerce.
Read more: Nation Thailand (Trade Data), Bangkok Post (Bilateral Relations)
Regional Cooperation Efforts with Indonesia
During the recent BRICS Summit, Indonesia and Thailand committed to more work toghther on global issues through ASEAN, the United Nations, and BRICS forums. The foreign ministers said they would coordinat efforts to address regional challenges, particularly in Myanmar, and to reinforce ASEAN’s central role in regional stability. The countries will celebrate 75 years of diplomatic relations next year.
Read more: Antara News
144 Billion Baht in Aid to Vulnerable Groups
The Fiscal Policy Office announced that 14.1 million vulnerable individuals have received the government’s 10,000-baht cash handout, throwing 144 billion baht into the economy. Despite this, some eligible recipients say they have had problems accessing the cash due to unlinked bank accounts or expired disability cards. A second phase of payments is planned, though details on timing and distribution remain under review.
Read more: Bangkok Post
Digital Economy at Center Stage in 2025 Forums
Thailand’s Digital Economy and Society Ministry will host two forums in 2025: the ASEAN Digital Ministers Meeting (ADGMIN) in January and the Global Forum on the Ethics of AI in June. ADGMIN will focus on advancing ASEAN’s Digital Masterplan with input from major partners, while the AI forum will address “AI Governance in Action” to promote responsible AI development.
Read more: Bangkok Post
And now for something completely different.
While the focus of The Memo is on news for business, we often wrap up with a less business-focused article.
If you have some spare cash, there is a sweet island for sale, Moto GP stars reportedly filmed a promo video in Buriram to promote Thailand, national parks a seeing a booming revitalization, and four new plant species have been discovered in the north. Most concerning of all, however, is this story that impacts public health:
Alarming Reports of Pesticide Contamination
Lab tests have shown high levels of harmful chemicals in Shine Muscat grapes imported from China, with 23 of 24 samples containing residues of pesticides, including the banned substance chlorpyrifos. Thai consumer groups are calling for tighter safety checks on imported produce, warning that the chemicals used are systemic and cannot be removed through washing. The grapes, popular in Thailand due to their low cost, may jeopardize consumer health without better regulation and accountability from importers. The grapes were reportedly sold widely throughout Thailand, including at major retailers who remain unnamed.
Read more: Thai PBS World
That’s it for this week, thanks for reading!
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