Economic analysis
Thailand

Thailand

Population 70.0 million
GDP per capita 7,232 US$
A4
Country risk assessment
A3
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Synthesis

major macro economic indicators

  2020 2021 2022 (e) 2023 (f)
GDP growth (%) -6.2 1.6 2.6 3.4
Inflation (yearly average, %) -0.8 1.2 6.1 5.5
Budget balance (% GDP) -4.7 -7.8 -4.9 -3.9
Current account balance (% GDP) 4.2 -2.1 -3.8 1.5
Public debt (% GDP) 49.5 58.1 61.4 61.7

(e): Estimate (f): Forecast *Fiscal year 2023 from 1st October 2022 to 30th September 2023

STRENGTHS

  • Regional hub, long coastlines, proximity to fast-growing Asian markets
  • Richly endowed in agricultural resources (natural rubber, rice and sugar cane)
  • Diversified exports: tourism, machinery, vehicles and automotive parts, electronic components, agri-food products, fish and shellfish
  • Well capitalised commercial banks with high loan-loss provisions

WEAKNESSES

  • Inadequate infrastructure
  • Ageing population and shortage of skilled labour
  • Uncertain political situation; antagonism between rural and urban populations
  • High corruption perception and large informal economy
  • High household debt levels

RISK ASSESSMENT

Faster growth thanks to domestic demand and tourism

Thailand’s economic growth is set to accelerate in 2023, allowing real GDP to finally exceed its pre-pandemic (2019) level. Tourism-related sectors will continue to recover thanks to the lifting of mobility restrictions both globally and domestically. In 2022, international tourist arrivals in the January-November period were 25% of those posted in the same period in 2019, while this share was only 0.6% in 2021. In 2023, tourism should also benefit from the reopening of the Chinese borders as China was the top source of international tourists before the pandemic (27.6% of the total in 2019). Tourism recovery will help the labour market improve and will consequently support private consumption (55% of GDP in 2021). Although the unemployment rate remained higher than in 2019 when it averaged 1%, it nevertheless declined from a 16-year high of 2.3% in the third quarter of 2021 to 1.2% in the same period in 2022. Inflation is expected to significantly decline from a 14-year high in 2022, thereby easing the drag on private consumption. In that regard, the Bank of Thailand adopted a relatively slow pace of monetary tightening in 2022, introducing three 25-basis point hikes. The Thai central bank is likely to continue its rate hiking cycle in the first part of 2023. Any monetary tightening action could weigh on household spending, which is pinched by a high level of indebtedness (86.8% in the third quarter of 2022). Despite rising interest rates, private investment should remain robust  amid economic recovery.  Global headwinds may, however, weaken some export-oriented industries such as electronics. Meanwhile, public investment will be driven by public spending on infrastructure, notably in the high-speed railway project linking Bangkok and Nong Khai, on the border with Laos.

 

Current account set to swing back to surplus

The Thai fiscal deficit remained large in fiscal year 2022 (FY22) due to pandemic-related support measures and the introduction of new measures to alleviate the impact of rising commodity prices, notably energy. In 2023, the fiscal balance is expected to continue to improve slowly. The government announced higher public spending for FY23 at THB 3.2 trillion, i.e., 8.5% above the budget disbursement in FY22. Public investment will contribute to the rise as the country has planned a pipeline of 77 mega-infrastructure projects worth THB 1 trillion (USD 30 billion) between 2020 and 2027 to increase connectivity and support long-term economic development. Meanwhile, the focus of fiscal measures to help households and businesses cope with economic scarring from the pandemic and elevated inflation will be targeted more towards low-income households and vulnerable groups. On the revenue side, the forecast economic recovery is set to boost revenue collection. Nevertheless, tax cuts were introduced to support the economy (cuts in land and property taxes, and in the jet fuel tax). Public debt has exceeded 60% of GDP since FY22. It will increase slightly in 2023, although remain below the debt ceiling of 70%. Risks surrounding this significant rise during the pandemic have been limited by the debt profile. Debt is mostly long-term (85.5% of the total as of the end of FY22) and domestic (98.2%).

After registering a wider deficit in 2022 with the rise in global energy prices, the current account should return to surplus in 2023 thanks to a rebound in tourism. Meanwhile, the goods trade balance will remain in deficit, as energy prices are expected to remain high and a global economic slowdown would weaken export performance. The current account surplus would prevent a further depletion in foreign exchange reserves on back of capital outflows. Although foreign exchange reserves are adequate (8 months of imports in November 2022), they significantly decreased from US$ 222 billion in January to US$190 billion in November 2022. The surplus would also support the baht, which has weakened against the USD (- 4% on average in December 2022 vs. end-2021).

 

Uncertainties lie ahead of the 2023 general election

While protests calling for reforms to the monarchy and the resignation of Prime Minister Prayut Chan-ocha receded in 2022, the government has continued to face mounting public and political discontent. In July 2022, the PM and his government survived its fourth no-confidence vote since taking office in 2019. The next election is scheduled for May 2023. Not being a member of the ruling pro-junta Palang Pracharath Party, Prayut declared that he will join the recently-created Ruam Thai Sang Chart before the next election. He is likely to be designated as one of the  party’s candidates for PM (up to three candidates per party). It remains unclear whether the upper house, appointed by the military, will continue to back the general and PM Prayut, who led the 2014 coup d’état. The vote of the Senate is crucial to the appointment of the new PM. Even if re-elected, the constitution would force Prayut to step down mid-term as he would have reached the limit of his term of office.

While it voted in favour of the first resolutions condemning Russia, Thailand abstained from voting during the UN General Assemblies of October and November 2022. In September 2022, the two countries had agreed to expand bilateral trade to USD$10 billion in 2023, up from USD$2.7 billion in 2021. 

 

Last updated: April 2023

Payment

Credit transfer is the main form of payment used by large companies in Thailand. The majority of credit transfers are made electronically and the popularity of this payment method is growing as clearing systems have become more developed.

 

Cheques are still a popular form of cashless payment in terms of value. They are used by companies and consumers to make a wide range of payments. Post-dated cheques are a common mean of short-term credit.

 

Although cash remains the dominant payment method in Thailand, telegraphic transfer of money is increasing its popularity along with the cashless trend accelerated by COVID-19.

Debt collection

Amicable phase

According to the 2015 debt collection Act BE 2558 (AD 2015), the debtor is an individual person or personal guarantor. The Act was created to regulate collection activities carried out by creditors, or by collection agencies in cases of consumer debt. Commercial debt collection houses are also expected to follow the practices set out within the Act. For example, during the amicable phase, creditors can only communicate with the debtor or other persons as authorised by debtor. Creditors or collection agencies are also limited to identifying themselves with the details of debt to the debtor. 

 

Legal proceedings

Thailand’s Judicial Court System comprises three levels:

  • the Supreme Court: this is the highest court authority in the country. All of its decisions are final and must be executed. It hears appeals and contests against decisions made by the Courts of Appeal, Regional Courts of Appeals and Courts of First Instance;
  • Courts of Appeal: these are divided into Courts of Appeal and Regional Courts of Appeal. Both handle appeals against the decisions or orders made by the lower courts;
  • Courts of First Instance: these lower courts comprise the courts in Bangkok, courts in provinces, specialised courts and juvenile and family courts.

A preliminary stage of legal action can be conducted if there is failure to reach an amicable settlement with the debtor. This phase includes communications, negotiations, meetings with debtors, letters of demand and notifying the police in cases where there is a criminal penalty.

 

The Civil Mediation before Litigation

Recent amendments to Thailand’s Civil Procedure Code in 2020 and already applied since November 2020 will allow parties to submit a matter for court-supervised mediation prior to the actual filing of the case. Encouraging mediation prior to filing a complaint is intended to save time and resources that would otherwise be expended on a trial. The meditation processes introduced by the new act are not subject to any court fees, exempting the postal fee in delivering the letter to the debtor.

 

Prior to filing a complaint, one of the parties in a dispute may petition the appropriate court to appoint a mediator to resolve the dispute. If the petition is accepted, and the opposing party consents to the mediation, the court will bring the parties together (with or without their lawyers) and appoint the mediator. If the mediation yields a successful settlement, the court will consider to:

  • Arrange a compromise agreement and assuming it is fair, made in good faith, and in accordance with both the law and the parties. In case if any parties breached the agreement, they are still able to bring the case to ordinary lawsuit process.
  • Or, the parties may agree and request the court to issue a judgment in accordance with the compromise agreement with mutually agreed by the parties. If the court agrees that it is necessary, it will issue the judgment accordingly. The judgment would be enforced if the debtor has failed to do so, leading to the execution process at the end.

The court’s judgment is considered final and can only be appealed if there is an allegation of fraud against any party to the case, or if the judgment is alleged to go against either the agreement or a provision of law involving public order.

 

If, on the other hand, the mediation is unsuccessful, any limitation period that was either barred after the submission of the petition or will be barred soon will be extended for 60 days from the end of the mediation. After that, the creditor still has a right to file the case into the lawsuit as an ordinary proceeding.

 

Ordinary proceedings

If the debtor fails to comply with demand notices, the creditor can file a claim with the Court, depending on the value of the debt:

  • if the debt does not exceed THB 300,000 (Thai baht), the complaint must be lodged at the District or Provincial Court;
  • if the debt exceeds THB 300,000, the complaint must be filed at the Civil or Provincial Court.

Court policy is to screen unnecessary cases from court trial. Most Civil Courts have mediation centres for parties to negotiate and compromise on an arrangement. Once a case has been decided amicably, a compromise agreement is prepared and the court passes judgment in accordance. Each of the parties is responsible for documenting evidence and the burden of proof associated with their case. A judgement is made once the court has considered and weighed the evidence presented by both parties.

 

The time frame for proceedings with the Court of First Instance can take between one to three years.

Enforcement of a Legal Decision

If the debtor fails to comply with a domestic judgment, the creditor is entitled to apply for the execution of the judgment. This can involve the issuance of an execution decree, delivery of an execution decree to the debtor, issuance of a writ of execution and the seizure and sale of property belonging to the debtor.

 

Thailand has no reciprocal recognition and enforcement agreements with other countries. Enforcing foreign judgments requires new legal proceedings, where the evidence will be considered and legal defence made available to both parties.

 

One exception is that Thailand is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1985). International arbitration awards by member countries of the Convention can be enforced if they are already final.

Insolvency Proceedings

Thailand has legislation on bankruptcy and reorganisation proceedings (Bankruptcy Act BE 2483). (Latest amendment in 2018, B.E. 2561)

 

Reorganisation Proceedings
Limited Companies, Public Limited Companies and Financial Institutions (Large Enterprises)

A petition can be filed against an insolvent corporate debtor who owes one or more creditors a known sum of THB 10 million (USD 333,000) or more. Once the court has accepted the petition for further proceedings, it appoints a planner to prepare and submit a reorganisation plan to the official receiver within three months. The court may extend this period up to a maximum of two times, for one month from the publication date of the court order appointing the planner. Secured and unsecured creditors must then apply for payment of debts within one month from the date of publication of the order for appointment of the planner. Once the official receiver is in possession of the reorganisation plan, he will convene a meeting with the creditors to consider the proposal. If it is accepted, the court needs to approve it and confirm the appointment of the plan’s administrator. The latter is then responsible for the debtor company’s reorganisation, as set out within the plan. 

 

SMEs registered with the Office of SME Promotions or other government agencies for conducting business

Petition can be filed against:

  • insolvent individuals who owe one or more creditors a known sum of THB 1 million or more;
  • insolvent limited partnerships, registered partnerships, non-registered partnerships, groups of persons or other juristic entities who owe one or more creditors a known sum of THB 3 million or more;
  • insolvent private limited companies owing one or more creditors a known sum of between THB 3 million and 10 million.

In cases such as these, the petitioner should file a petition, along with a proposed plan of not more than three years in length in execution.

 

Bankruptcy proceedings

A creditor can file a bankruptcy petition against a debtor if the latter is insolvent and owes one or more creditors a definitive sum of over THB 1 million (if the debtor is an individual), or owes more than THB 2 million (if the debtor is a legal entity).

 

Once a petition for bankruptcy has been filed, the proceedings normally include hearing the witnesses, temporary receivership of the debtor’s property, the appointment of an official receiver, filing of claims for debt payments by creditors within two months from the publication date of the permanent receivership order, a bankruptcy order against the debtor (if no agreement can be reached with the creditors, issuance of a permanent receivership order, seizure of property, sale of property by public auction and pro rata distribution of the sale proceeds to creditors.

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