Thailand is losing attractiveness to foreign investment and facing increasing competition and challenges to tourism recovery.
Thailand’s declining attractiveness in attracting foreign direct investment (FDI), an uneven tourism recovery and the currency outlook are putting pressure on the country’s current account surplus, which is still below pre-pandemic levels, BMI, a Fitch Solutions company, said.
Once a magnet for foreign capital, Thailand now has to contend with intensifying regional competition. BMI said in the study that India and Vietnam have emerged as the primary recipients of investment.
However, Thailand is lagging behind and unable to keep pace with its competitors due to factors such as demographic challenges and an unstable political landscape.
The country’s ageing population needs to bode better for labour market dynamics, and the political climate is marred by instability, discouraging potential investors looking for a predictable and stable environment for their capital, the London-based research firm said in the study.
The implications of these obstacles are apparent from the data presented. The share of FDI inflows in GDP has fallen from 6.9 per cent in 2013 to just 2.8 per cent last year, BMI notes.
The number of foreign tourists and the revenues they bring in have deviated from the levels of recent years, with a decline in the number of Chinese tourists, who tend to spend lavishly when travelling, as China’s economic slowdown may have reduced their spending abroad, the research house notes.
The trend poses a major challenge for Thailand, as spending by Chinese tourists once accounted for a significant portion of the country’s tourism revenue.
‘We believe that tourism revenues may not meet expectations despite a potential increase in foreign arrivals,’ BMI said.
‘We do not think tourism revenue growth will return to trend anytime soon.’
The research house said the US economy will beat expectations, and the outlook for Southeast Asia is expected to improve this year. This will benefit Thai exports, as the US and Southeast Asia together account for about 40 percent of Thai shipments.
However, BMI said export growth will not be able to mitigate the lacklustre tourism recovery.
The company estimates Thailand’s account surplus will be 2.9 per cent of GDP in 2024, up from the previous forecast of 2.6 per cent.
‘This will be slightly lower than the pre-Covid period. It averaged 8 per cent of GDP between 2015 and 2019,’ BMI notes, adding that the main concern is the country’s debt, which has ballooned to unprecedented levels.
‘Prime Minister Seth Thavisin has emphasised attracting foreign investors to the country. If he succeeds, FDI inflows may increase in the coming years, which will support the currency. A recovery in tourism revenue will also boost the current account surplus,’ the research house said.
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