World Bank Slashes Thai GDP Forecast Amid Digital Wallet Uncertainty

BANGKOK — World Bank cuts Thailand’s GDP Forecast for 2024 to 2.4% from 2.8% in April, even though there are positive factors such as the continued expansion of private consumption, alongside a rebound in tourism and exports.

In its latest economic outlook for Thailand, the World Bank indicates a modest recovery that increases from 1.9 percent in 2023 to 2.4 percent in 2024. It predicts further development, with the economy expanding by 2.8% in 2025.

The Digital Wallet is expected to boost GDP by 1 percentage point over the short term, at a fiscal cost of 2.7 percent of GDP. However the program is not incorporated into the baseline due to uncertainties surrounding the legality of the borrowing by the Bank for Agriculture and Agricultural Cooperatives (BAAC) and the details of the program.

This positive view is reinforced by an expanded fiscal year 2025 budget framework and expedited government budget disbursement after earlier delays. While private consumption will contribute to growth, tourism continues to be the backbone of this early-year improvement, underscoring its crucial role in Thailand’s economic landscape.


High Public Debt

Merchandise exports are predicted to increase as global trade circumstances improve, with tourism returning to pre-COVID-19 levels by mid-2025, despite China’s economic recession.

Furthermore, due to lower food and energy prices, headline inflation is expected to fall to 0.7 percent in 2024 from 1.3 in the previous year, the ASEAN region’s lowest level. This inflation rate is below the Bank of Thailand’s objective.

The World Bank predicts that Thailand’s state debt could reach 64.6% of GDP by 2025, thus impeding long-term economic growth. This increase is due to rising spending and ongoing economic stimulus aimed at increasing consumption.

The rising fiscal deficit, which is expected to reach 3.6% of GDP, reflects the return to normal budget disbursement and these stimulative measures. The report recommends prioritizing targeted social assistance and grants to support vulnerable populations, promoting a more effective approach to poverty alleviation.

Tourism is still the core

The World Bank report provides a bright picture of the tourism industry. Tourist arrivals are expected to reach 36.1 million in 2024, up from 28.2 million in 2023, and achieving pre-pandemic levels. This growth is forecast to continue until 2025, with visitor arrivals projected to reach 41.1 million, surpassing pre-pandemic levels.

The return of Chinese tourists is viewed as a crucial influence, driving both domestic and foreign demand. This tourism rebound is expected to make a major contribution to the 2.8% growth rate projected for 2025.

Smart City

Boosting Secondary Cities

The paper emphasizes the importance of secondary cities for Thailand’s long-term growth. The 2011 Bangkok floods demonstrated the economic risk of relying significantly on a single city. To avoid this danger, the research recommends a more equitable allocation of economic growth among urban areas.

Thailand is at a critical juncture, with concerns such as low productivity and a diminishing workforce owing to demographic shifts. Fabrizio Sarcone, World Bank Country Manager for Thailand, argues that harnessing the latent potential of Thailand’s secondary cities is critical to long-term growth.

“Increasing the capacity of Thailand’s secondary cities marks a fundamental paradigm shift. These cities require flexibility, financial resources, and the necessary infrastructure to attract investment and skilled workers,” stated Assoc. Prof. Dr. Poon Thiangburanatham, Deputy Director of the Corporate Planning and Strategy Department at the Local Development Capital Management Unit.

“Investing in infrastructure, human capital, and institutional capacity is critical. This also entails updating the partnership framework between government entities at both the national and local levels. Such initiatives will allow these cities to greatly increase Thai productivity, fuel economic growth, and boost Thailand’s worldwide competitiveness.”

Many secondary cities already serve as regional economic hubs, with different sectors. Investment in infrastructure, human capital, and institutional capacity in these cities has the potential to generate enormous economic advantages. According to data, secondary cities might attain GDP per capita growth rates approximately 15 times higher than Bangkok.

The paper suggests decentralizing investment decisions and boosting budgetary independence for these cities. This would allow them to attract investment and talent while also developing the necessary infrastructure. Secondary cities may notably contribute to Thailand’s total productivity and competitiveness by investing in human capital and strengthening institutional capacity, as well as improving coordination across government departments.

srettha digital2

Impact of Digital Wallet

Looking ahead to 2025, growth is expected to reach 2.8 percent, supported by both domestic and external demand. This outlook is further bolstered by the revised fiscal budget proposal for FY 2025 and the anticipated acceleration in budget execution following significant delays earlier this year.


The program is scheduled to be implemented in Q4 2024 and Q1 2025. The
fiscal cost, which will be financed through the fiscal budget for FY24 – FY25 and potentially quasi-fiscal means –borrowing by the BAAC, a state-owned bank, is expected to account for THB 500 billion, or USD 13.5 billion (2.7 percent of GDP).

However, World Bank stated that the program is not incorporated into the baseline due to uncertainties surrounding the legality of the borrowing by the BAAC and the details of the program. Once rolled out in Q4, private consumption is expected to benefit from the stimulus measure, with an estimated impact on GDP growth at 0.5 – 1.6 percentage points over the two-year period.

Inflation Remains the Lowest

This report also stated that inflation has turned positive but remained the lowest among emerging markets due to energy subsidies and a weak recovery.

After seven months in negative territory, headline inflation turned positive due to the partial withdrawal of energy subsidies and elevated food prices. In April, the government lifted the ceiling on retail diesel prices. However, subsidized electricity prices, including the reduced prices for low-income households, were kept unchanged.

Core inflation (which excludes energy and raw food) remained weak at 0.4 percent, below its pre-pandemic average of 0.7 percent over 2016-2019, due to lower-than-expected prepared food prices and the delayed closing of the output gap. More price pressures may emerge if electricity price subsidies are further reduced and global energy prices surge.

The central bank maintained its neutral policy rate, but risks of underlying price pressures obscured by price controls and the potential impact of the large Digital Wallet universal cash transfer on growth and inflation complicate monetary policy.