The IMF has completed a mission to Thailand from 15 to 29 January 2015 to hold discussions in connection with the Article IV Consultation. The IMF is expecting Thailand to continue a gradual economic recovery in 2015 and growth is estimated at 3.5%. Private investment is however being held back by low capacity utilization, weak external demand and political uncertainty. Private consumption is hindered by high household debt and tight credit conditions. The international demand for exports from Thailand is currently weak and exports are forecast to grow only modestly though they may be helped by lower oil prices.
The IMF supports Thailand’s plans to stimulate the economy, increase investment and strengthen financial institutions. The IMF considers that Thailand should prioritize the fuel subsidy reform, and fully reinstate the diesel taxes. The government should consider an increase in the VAT rate from 7% to 10% but only when the economic recovery is well under way and combined with programs to shield vulnerable social groups from adverse effects.
The IMF also recommends reforms to the rice scheme and the introduction of infrastructure projects. Tax administration and expenditures should also be reformed to strengthen confidence and transparency. The IMF is also supporting efforts by the government to strengthen investment in higher skilled and value added industries in Thailand and to relocate the labor intensive industries to special economic zones at the borders with other countries.
