The Bank’s 2016 economic forecast for Thailand was raised from the 2.2-per-cent growth estimated six months ago to 2.5 per cent. This is the slowest in Southeast Asia, whose gross domestic product is predicted to grow by an average of 6.3 per cent.

Thailand’s leisurely GDP expansion, below 3 per cent per year, is anticipated to run until 2018.

The Finance Ministry forecasts 3.3-per-cent growth this year, against the Bank of Thailand’s 3.1 per cent.

The future growth path looks rocky, with strong headwinds and the fact that Thailand’s working population will decline by 11 per cent from now until 2040, from 49 million to 40 million, the World Bank says.

This is the sharpest shrinkage among developing economies and compares with just 4 per cent in Vietnam.

Ulrich Zachau, the World Bank’s country director for Southeast Asia, stressed the need for three critical reforms – education for higher labour productivity, further liberalisation in the service sector to maintain economic openness, and fiscal arrangements to cope with the rising ageing-associated costs.

“Thailand has potential but it is not growing at its potential. Thailand will grow faster and Thailand can rise over time in the long run” if all these issues are addressed, he said at a press conference yesterday.

He encouraged the Kingdom first to focus on students at the primary and secondary levels, as they will enter the workforce in 10-15 years.

“It’s not a catastrophe if this doesn’t happen today. But it means a lost opportunity for Thailand. It will take Thailand more years and more waiting.”

Asean ‘champion’

More openness in the service sector is also highlighted as a way to make Thailand play the “champion role in Asean”, as this will complement its leading role in trade and investment.

Medical claims must be factored into fiscal planning, before society gets old and things get out of hand, the Bank said.

Vice Finance Minister Kiatchai Sophastienphong said the social-security system was being improved to help the very poor, while measures were being introduced to increase the number of female workers and increase productivity.

Labour policies are being geared to cope with migration to address the labour shortage in the country, he said.

Zachau said the mobility of people would only increase across the world, as people seek jobs and income opportunities elsewhere. An appropriate policy would help Thailand take advantage of this trend and concurrently address the ageing issue.

Kiatchai acknowledged the short- and long-term ramifications on the Thai economy of British voters’ decision last week to exit from the European Union.

While Zachau said the World Bank was about to release studies on the impacts of “Brexit”, Kiatchai said Thailand’s Finance Ministry and the Bank of Thailand were also completing an analysis of the repercussions.

“There are strong headwinds for Asean,” Kiatchai said. “But given Thailand’s very low debt to GDP, at 44 per cent, fiscal deficit at 3 per cent to GDP, and foreign reserves worth 10 months of imports, Thailand should be able to weather the turbulence.”

To support long-term economic prospects, he highlighted several reforms that were implemented in the past year to address short-term issues and also support long-term prospects.

They include the restructuring of personal income taxes and passage of the land and property tax, policies to boost entrepreneurship and strengthen smalle and medium-sized enterprises, innovation centres in five focus areas, mega-project investment, and improvement in the investment climate with the aim to achieve a higher rung in the World Bank’s “Doing Business Index”.