IMF Staff Completes 2016 Article IV Mission to Thailand

An International Monetary Fund (IMF) mission, led by Ana Corbacho, visited Bangkok from March 3–18, 2016, to conduct the 2016 Article IV Consultation discussions. The mission exchanged views on recent economic developments and the outlook with officials in the government, the Bank of Thailand (BOT), and other public institutions. It also met with private sector analysts and academics.
According to the IMF, the Thai economy recovered in 2015 after a slowdown induced by political uncertainty. Output grew by 2.8 percent, while headline inflation dropped to -0.9 percent. Core inflation and inflation expectations also declined. The current account surplus rose to 8.8 percent of GDP, thanks to a sizable improvement in the terms of trade, soaring tourism, and import compression associated with tepid domestic demand. Thailand’s financial markets weathered relatively well repeated episodes of global financial volatility. The recovery is expected to strengthen moderately, with real GDP growth projected at 3 percent in 2016 and 3.2 percent in 2017. Public investment would remain a key driver, rising over the next few years and crowding in private investment.
Important risks cloud the outlook. On the external front, rebalancing in China may result in a faster slowdown or larger negative spillovers. A bout of global financial volatility could accelerate capital outflows and further tighten financial conditions. On the domestic front, slower-than-expected execution of mega projects would reduce domestic demand. Negative inflation could linger longer than expected, resulting in higher real interest rates and a rising real debt burden. Household debt overhang could create headwinds to consumption and, in an adverse scenario, affect financial institutions’ balance sheets.
The mission’s recommendations focus on three main areas: (i) deploying an expansionary macroeconomic policy mix that aligns short- and long-term goals; (ii) safeguarding financial stability; and (iii) enhancing potential growth.
Press-release at the IMF official web-site