Previous Quarterly Editions
TREND ▲
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: LowFood/fuel policy protests: Medium
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
As in most South-east Asian countries, Thailand’s economic recovery from the COVID-19 pandemic has slowed because of continued volatility in fuel and food prices, spurred by the continuing Russian/Ukraine crisis since February 2022, volatility in the oil market, global inflation, and the prospect for a global recession in 2023. The IMF has warned up to one-third of the world’s economies could fall into recession this year.
Expropriation Risk: 53 52 54 54 ►Political Violence Risk:60 59 58 57 ►Terrorism Risk:55 55 53 55 ▼Exchange Transfer and Trade Sanction Risk: 55 45 45 54 ▲Sovereign Default Risk:47 47 47 47 ►
Although Thailand’s economic growth rate in 2022 (2.6%) was nearly twice that of 2021 (1.5%), it dropped in the final quarter of 2022, its first such decline in nearly five quarters due to weakened export demand from main trading partners of China, the U.S. and European Union. Thailand’s exports will be also challenged in 2023, particularly if, as the IMF predicts, Europe falls into recession. The government projects a range for economic growth in 2023 at 2.7%-3.7%; the Q4 drop caused a revision down from 4%-5%.
But Thailand is forecast to avoid recession (defined as a decline in growth rate in two successive quarters) because of the Chinese government’s decision on January 8 to reopen China from COVID-induced socioeconomic lockdowns. In 2022, Thai tourism showed signs of recovery from the pandemic, with 11 million foreign tourists, but the Chinese re-opening should accelerate that momentum significantly. However, Bangkok is wary a significant boost in Chinese tourism could bring a new wave of COVID-19 to Thailand.
Moreover, the continuing Russia/Ukraine crisis will help to keep energy prices high. According to the Commerce Ministry, the inflation rate for 2022 was 6.08%, the highest in 14 years. The Ministry of Finance and Bank of Thailand have set the 2023 inflation target at 1%-3%, which is likely optimistic. However, the
government’s fiscal response to the pandemic has tempered household prices, and general elections in May will help domestic consumption, as will greater tourism. Nevertheless, the toll of the pandemic and the energy crisis helped raise the poverty rate from 6.3% in 2021 to 6.6% in 2022.
The government plans to borrow USD21.6 billion in fiscal year 2023, which began in October 2022, to boost economic growth and expand infrastructure development. The energy crisis will also constrict fiscal space. Government subsidies have pushed the Oil Fuel Fund to a deficit of USD3.5 billion, calling into question its continued viability. Apart from fluctuations in global energy prices, Thailand could also be affected by U.S. sanctions on the military-backed Myanmar Oil and Gas Enterprise imposed in February, since the country relies on importing natural gas from Myanmar for part of its electricity supply.
In response to these worsening conditions, the government has raised the price of electricity for the business sector; this increase will likely be passed along to product prices and thus to consumer costs. Not surprisingly, the business community has been vocal in its opposition to the increase, and the administration of Prime Minister Prayut Chan-o-cha may decide to lower it in the spring election campaign. Higher electricity prices could also harm Thai exports since Vietnam’s electricity costs are significantly lower.
TREND ►
The expropriation risk for Thailand remains low, although it could rise slightly if infrastructure development picks up. However, Bangkok is likely to take pains to avoid this possibility as it revives trade talks with the European Union after a nine-year hiatus and continues to negotiate all four pillars in the U.S.-driven Indo-Pacific Economic Framework, which is scheduled to conclude at the end of 2023.
The risk of political violence in Thailand is heightened in 2023 as the country prepares for general elections on May 14. Prime Minister Prayut will run for re-election, although he will only be able to serve two years of a second term if he wins one. He has moved his affiliation to the Ruam Thai Sang Chart (United Thai Nation) Party, splitting from Palang Pracharath Party and his co-leader in the 2014 coup, Deputy Prime Minister Prawit Wongsuwan. This will pit one military backed party against another for the first time in Thai politics. If this threatens to dilute the military’s hold on Thai politics, it could increase the chances of a coup from the active armed forces.
Another potential source of political violence will be the role of the Pheu Thai Party, the political vehicle for the Shinawatra family. Pheu Thai is likely to win a plurality of the popular vote but will not necessarily lead a government coalition, given the constitutional weight of the military-dominated Senate in the selection of a Prime Minister. Former Prime Minister Thaksin Shinawatra’s daughter Paethongtarn will run as the Pheu Thai candidate. Her family connections and her youth will make her a popular candidate. If she wins a large percentage of the vote and is out-maneuvered by the military for the prime ministership, the immediate post-election period could see large anti-government demonstrations on the streets.
Return to contents Next Chapter
TREND ▼
Thailand continues to pose a middling terrorist threat with continued low-level separatist insurgency in the country’s Muslim south. However, this threat may increase slightly with a modest increase of momentum in the U.S.-Thailand alliance in recent months, concurrent with the worsening of U.S. relations with Iran. Thailand is episodically targeted with attempted attacks by Hezbollah, and a higher profile for U.S.-Thailand relations will revive the terrorist group’s interest.
The Thai baht is expected to strengthen in 2023, reaching 33-35 to the U.S. dollar by the end of the year. Economists believe the U.S. Federal Reserve will lift rates for a final time in May, and the U.S. dollar could reverse and depreciate in the second half of the year. Moreover, increased tourism is expected to buoy the baht.
However, this will further disadvantage the Thai export sector, including agricultural exports, and exchange management will be a challenge throughout the year. Thailand may also face a new currency challenge in mainland South-east Asia as China launches a new attempt to push use of the renminbi in its client states – Myanmar, Cambodia and Laos – in the region. This could affect Thailand in its trade with all three countries, but most significantly with its importing energy from Myanmar and Laos. Supporting such de facto ‘RNB zones’ would displease Washington at a time when Bangkok is attempting to improve U.S.-Thailand trade.
Like most South-east Asian countries, Thailand is sanctions-averse and will continue to resist joining the West in sanctions against Russia over the Ukraine conflict, or Myanmar over that country’s 2021 military coup. However, as Western sanctions against military backed enterprises in Myanmar expand, Thailand could become subject to secondary sanctions for its trade with its neighbor to the west.
In 2022, Thailand’s debt-to-GDP level rose to 61.4%, up from 59.61% in 2021. The rise was attributed primarily to borrowing for the Oil Fuel Fund. However, public debt remains below the established ceiling of 70%, and the Ministry of Finance forecasts the public debt-to-GDP ratio for fiscal year 2023 at 60.4%. That said, Thailand’s economy will be vulnerable to several factors beyond the country’s control, from the prospect of a new wave of COVID-19 to volatility in the global and regional energy markets.
