The World Trade Organization (WTO) has prepared a Trade Policy Review report for Thailand as a WTO member, which is not legally binding regarding the rights and obligations of members, nor does it imply that the measures mentioned in the report comply with WTO agreements.

The report published on November 24, 2020, highlights the structure of the Thai economy based on 2019 data, indicating that Thailand experienced an average economic growth rate of 3.4% per year over the past five years (2015-2019). The main factors contributing to this growth were private consumption and exports, along with a service sector structure, including construction, which accounted for 61% of GDP, up from 58% in 2015. Meanwhile, the share of manufacturing and agriculture in GDP has been declining.

Additionally, it was found that the average income of Thais in 2019 was $8,000 per person per year, or an average of 240,000 baht, which positions Thailand among upper-middle-income countries. However, Thailand is facing an economic downturn due to the global economic slowdown and tense international trade conditions, resulting in a contraction in exports, as well as investment and consumption. The Thai government has implemented measures to support the economy's growth in the latter half of 2019.

In 2020, Thailand continued to face difficulties from COVID-19 which has led to a contraction in global trade, affecting Thailand in various aspects, including exports and the tourism sector, a key driver of the country's GDP, which has been severely impacted. This has resulted in risks to employment, consumption, disruptions in global supply chains, and a contraction in investment, leading to uncertainty in market demand, employment, and weak public income.

These issues have led to the introduction of an economic support package, accounting for 14% of GDP, and several Thai economic agencies estimate that this year, GDP will contract by 8.1% due to the impacts on various economic components, with an estimated 8.4 million jobs at risk.

Moreover, Thailand's fiscal position, with high foreign reserves of $224.3 billion at the end of 2019, has put pressure on the appreciation of the baht and competitiveness in international trade, even though the baht weakened earlier this year due to the COVID outbreak.

“We must thank the Thai government for its strict adherence to fiscal health in the past, implementing the Fiscal Responsibility Act (FRA), which enforces strict targets for debt, budget usage, and various investments,” 

Regarding foreign direct investment (FDI), Thailand has an advantage as a key connector in ASEAN and the region, which has become a significant factor in increasing Thai investments abroad and positioning Thailand as a notable investor-exporter.

The report looks ahead, stating that the Thai economy must face significant challenges from domestic economic structures that have limitations, including low levels of investment from both public and private sectors, compounded by the damage from natural disasters and political tensions that are assessed to impact the overall Thai economy.

Thailand also faces challenges regarding income inequality, which has seen increasing disparities in recent years, exacerbated by fiscal burdens related to spending for the aging population, which will pose problems for labor market structures in the future.

Another challenge is the effort to increase productivity and competitiveness, which requires increased investment from both public and private sectors, as well as promoting free trade and investment, and enhancing the service sector's contribution to the economy.

“Thailand is driving the country forward with the Thailand 4.0 initiative, which focuses on technological knowledge as a crucial foundation for the industrial sector and upgrading physical infrastructure,”

In the past, Thailand has entered into several free trade agreements and has made efforts to adjust regulations to facilitate trade, such as customs procedures. However, on the contrary, regulations for investment or foreign business operations have not seen significant changes, such as strict regulations on foreign ownership in various sectors like media, mining, financial services, telecommunications, tourism, and transportation.

Regarding tax rates, it has been observed that Thailand's (MFN tariff) tax rates have been trending upward, with the average tax rate in 2014 at 13.4%, increasing to 14.5% in 2020. Imports still face various conditions, such as licensing requirements and tariff quotas on certain products.

The various challenges are acting as a catalyst for Thailand to undergo transformation, but whether this can be achieved depends on incorporating external perspectives to expedite the success of these goals.

SOURCE : www.bangkokbiznews.com