On 28 March 2016 the IMF issued a report following discussions in Thailand under Article IV of the IMF’s articles of agreement.
The economy of Thailand recovered in 2015 following a slowdown and output reached 2.8%. The recovery is expected to slightly strengthen with economic growth of 3% in 2016 and 3.2% in 2017. The IMF report recommends measures to safeguard financial stability.
Despite some external risks Thailand’s strong economic fundamentals provide room to maneuver to improve the economic prospects. The IMF considers that fiscal buffers should be built over time to prepare for the economic challenges of the ageing population. The IMF report therefore recommends that Thailand should gradually raise the VAT rate to 10% as soon as the economic recovery is on a sound footing.
The government of Thailand intends to revise incentives available in Special Economic Zones, to take advantage of Thailand’s location and encourage higher value-added activities. The IMF considers that the cost effectiveness of the incentives could be increased by careful coordination and periodic evaluation of their effect.
Reform of pension schemes would help Thailand to deal with the problems of an ageing population. Productivity could be enhanced by measures in education. Trade integration could also enhance external competitiveness and could facilitate structural reforms.
