2020 OECD ECONOMIC ASSESSMENT OF THAILAND Re-boosting growth Paris, October, 5th 2020
oe.cd/thailand @OECDeconomy @OECD
Key findings Re-boosting growth rapidly after the COVID-19 crisis is essential to avoid the scarring effect of joblessness and widespread corporate bankruptcies. Monetary and fiscal support should continue until the recovery becomes sustainable. Investing more in human capital to facilitate labour force allocation triggered by the pandemic will help avoid persistent joblessness. Providing more up- and re-skilling opportunities throughout people’s lives and strengthening the quality of education are crucial. Strengthening services sectors to move up the ladder of global value chains would help to stimulate innovation and to transform the services sectors into a new growth engine in the post-pandemic world. Opening up services markets and achieving a friendlier business climate through regulatory reforms are essential.
RE-BOOSTING GROWTH AFTER THE PANDEMIC
The economy was performing well until the COVID-19 crisis GDP per capita relative to the OECD average, computed at 2017 USD PPP
Source: World Bank, World Development Indicators Database.
Progress was suddenly interrupted by the pandemic, and the recovery will be slow Real GDP growth Year-on-year percentage change
Source: NESDC; and OECD calculations.
Tourism has been hit hard International tourist and visitor arrivals Year-on-year percentage change
Note: The five airports are Suvarnabhumi, Don Mueang, Phuket, Chiang Mai, Hat Yai. Source: CEIC.
Thailand has managed the health crisis well, rapidly flattening the infection curve Cumulative number of COVID-19 cases
Source: https://ourworldindata.org/coronavirus-source-data.
Lockdowns hit economic activity severely Percentage change from period 3 January - 6 February 2020
Source: Google LLC, "Google COVID-19 Community Mobility Reports", https://www.google.com/covid19/mobility/ accessed on 3 September 2020; OECD calculations.
There is ample fiscal space to stimulate the economy Fiscal deficit
Note: Data from 2019 are targets set under the Medium-Term Fiscal Framework before the pandemic. Source: Ministry of Finance; Bank of Thailand; and OECD calculations.
Monetary policy has reacted promptly Bank of Thailand policy rate
Source: Bank of Thailand.
Business investment is weak Monthly investment index
Source: Bank of Thailand.
Unemployment has spiked Unemployment rate
Source: Bank of Thailand and Refinitiv.
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Rapid ageing calls for re-boosting productivity Labour force projection
Source: ILO.
Competitiveness of manufacturing exports needs to be restored Annualised growth of US imports, 2017 – 2019, selected manufacturing goods
Source: United States International Trade Commission.
Digitalisation must be accelerated Internet users, in %, 2018 or latest year available
Source: ITU.
The recovery could be greener Energy intensity and renewable energy share
Source: OECD, Environment Statistics database (Green Growth Indicators).
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The pandemic has hit the most vulnerable Workforce by type of employment
Source: National Statistical Office, Informal Employment Survey.
Key recommendations to mitigate the outbreak’s impacts and re-boot growth • Extend the emergency support measures to vulnerable households and SMEs, if the situation worsens. • Strengthen the capacity of public health system including testing. • In the short run, maintain employment and stimulate demand. • As the recovery becomes steady, boost the productive capacity of the economy by gradually shifting from income and employment supports to structural measures including the up- and re-skilling of workers. • In case further spending is required, use the available fiscal space within the fiscal constraints, and ensure cost-effectiveness and transparency. • Keep monetary policy very accommodative, and if downside risks materialise, reduce the policy rate further. • Consider additional monetary policy tools, if additional interest rate cuts further narrow policy space.
Key recommendations to achieve greener and more inclusive growth after the crisis • To attain a sustainable high growth path, invest in green infrastructure, particularly strengthen the capacity of renewable energy production. • Encourage further digitalisation of the tourism industry, especially in rural areas and the reduction of its environmental footprint. • Involve wider local communities to retain broader environmental resources, including the management of water and waste. • Lower the costs of formalisation by reviewing the stringent employment protection policies and preparing customised policy measures to the targeted people with enhanced awareness among vulnerable people. • Reach out to female informal workers and make formalisation measures more in line with their needs. • Consider developing a single dedicated law to protect whistle-blowers.
GETTING THE RIGHT SKILLS FOR FUTURE PROSPERITY
Thailand has invested in education more than some regional peers Public expenditure on education, 2018 or latest year available
Source: World Bank, World Development Indicators Database.
PISA scores are relatively low PISA mean scores
Source: OECD (2019), PISA 2018 Results (Volume I): What Students Know and Can Do, Table I.B1.11.
Enrolment in higher education has increased Higher education enrolment rate
Source: World Bank, World Development Indicators Database.
Substantial skills imbalances remain Skills shortage (+) and surplus (-) intensity, by occupation, 2018 or latest
Source: OECD, Skills for Jobs Database using Thai Labour Force Survey data (2011-2018).
In Thailand, relatively few firms train workers Percentage of manufacturing firms offering formal training
Source: World Bank, Enterprise Surveys, http://www.enterprisesurveys.org.
Adults face multiple barriers to participating in training Reasons for not desiring to participate in job-related adult learning, 2019
Source: Thai National Statistical Office, Skills Development Survey (2019).
Key recommendations to get the right skills for future prosperity • Develop robust tools to regularly assess skill needs at the national, regional and sectoral level. • Consolidate the implementation of school curricula and improve education infrastructure in rural areas. • Pair skills policies with policies that stimulate the demand for highlevel skills in the labour market by lowering barriers to entry for firms, intensifying efforts to boost technology adoption levels and actively promoting entrepreneurship through professional and educational channels. • Sufficiently use labour market information to develop relevant policies and promote adult learning programmes. • Promote targeted support (e.g. career guidance and trainings on skills in high demand) for workers in jobs with high risk of significant changes.
MAKING THE MOST OF INTERNATIONAL TRADE IN SERVICES TO ACHIEVE FUTURE ECONOMIC PROSPERITY
The services sector is growing, but is still smaller than in OECD countries GDP share by sector
Source: CEIC; NSO; NESDC.
Productivity in consumer services is low Value added per worker and employment share, 2017
Source: Asian Productivity Organisation, APO Productivity Database 2019.
Tourism exports were strong, but services exports need to be more diversified Tourism receipts, 2018
Source: World Bank, World Development Indicators Database.
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Thailand’s business-to-business services join GVCs less intensively Share of domestic high-end business services embodied in manufacturing exports
Note: High-end business services are IT and other information services, and other business services. Source: Trade in Value Added (TiVA) Database.
Services markets are still too restrictive OECD Services Trade Restrictiveness Index: index score from 0 (open) to 1 (closed)
Source: OECD, Services Trade Restrictiveness Index Regulatory Database.
Opening up services markets would improve the competitiveness of services exports
Comparison of STRI score gap and Revealed Comparative Advantage by sector
Note: An industry with an RCA > 1 has a comparative advantage. STRI score gap is the difference between the minimum country score and the score of the corresponding sector in Thailand. Source: OECD, Trade in Value Added (TiVA) Database and Services Trade Restrictiveness Index (STRI) Regulatory Database.
Key recommendations to enhance Thailand’s services trade integration • Remove barriers in restricted sectors, particularly regarding the international mobility of skilled workers by expanding the coverage of Smart Visa. • Remove obstacles to FDI by relaxing the rules of capital thresholds and narrowing listed sectors. • Pursue PTAs that contain ambitious regulatory reforms beyond the current commitments under the General Agreement on Trade in Services (GATS).
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