Thailand’s economy, once a regional powerhouse, is now gasping for air. Yet the next wave of growth is within reach. With the right fuel and new engines, we can regain momentum. But first, we must understand what went wrong.

Economies rarely collapse overnight. They fade when they cannot recover from shocks or adapt to new realities. That is Thailand’s story. 

Repeated crises — from the 1997 Tom Yam Kung crash and the 2008 financial crisis to the Covid-19 pandemic — pushed growth from 7% to 5%, then below 4%, and now just around 2%. During the Covid years, growth per person was only 0.1%.

Meanwhile, global trade has flipped. The era of globalisation is giving way to geopolitical rivalry and protectionism. With outdated engines, Thailand has slipped to the bottom of Asia; only Japan grows more slowly. Stay on this path, and Vietnam’s per-capita income will overtake ours within 20 years. The middle-income trap will tighten. High-income status will drift out of reach.

Systems crack

When growth stalls, households feel it first. Inequality ensures that. Household debt now exceeds 80% of GDP. Banks avoid SME lending. Governments turn to subsidies, pushing public debt even higher. This cannot hold.

The problem is not unemployment. It’s low wages. Workers cannot survive without overtime. Labour’s share of GDP keeps shrinking, deepening inequality and social strain.

Corruption rises when an economy is stuck: police acting like crime syndicates; clergy scandals; judicial lapses, even sports associations accused of cheating athletes. Slow growth cracks the system far beyond economics.

With people trapped in insecure jobs and neighbouring countries hosting scam hubs, Thailand is now entangled in transnational scamming and money-laundering networks. The lack of a serious crackdown raises doubts about the government itself.

If growth keeps sinking, Thailand risks sliding into a “grey economy.” Add marijuana, casinos, and call-centre scams, and quality investors and tourists will stay away. Reviving the economy requires real growth engines.

The heart of a new development model is simple: build enough “good” jobs. Jobs with middle-class incomes, stability, benefits, and skills. Good jobs stabilises society and make politics less volatile. They give people something to build on. 

This is what political parties should compete to deliver.

Limits of stimulus

Why are we growing so slowly? If we assume Thailand is still a high-potential economy, every downturn looks cyclical, and stimulus seems like the answer. That has been the playbook for decades. 

But if Thailand is actually low-potential, stimulus is not enough. We must reform production and restructure the economy.

Picture Thailand as an airplane. One wing carries four “spending engines”: consumption, private investment, public spending, and exports. All are stalling. Household debt limits consumption. Tight lending limits private investment. High public debt limits state spending. Exports suffer from global slowdown and protectionism.

The other wing holds four “production engines”: agriculture, industry, services, and public services. They are underpowered. To fly again, the captain must strengthen production, not spending.

Structural fault lines

Where are the bottlenecks?

Agriculture relies too much on commodities, rising and falling with global prices. Rubber exports remain below their level 10 years ago.

Industry is squeezed by global technological shifts, especially in autos. Competition is fierce, but our productivity is stuck because we cannot keep pace.

Tourism, once the crown jewel, has not regained pre-Covid revenue. Safety concerns drag it down.

Across sectors, three problems stand out: a shrinking labour force, weak investment, and low productivity.

Labour has been falling for decades due to low fertility. Preventable deaths from road accidents and pollution remain shockingly high. Many workers leave the labour force by age 55. Military conscription removes 70,000 productive workers each year. As education quality plunges, it can no longer offset a shrinking workforce.

Investment is weak. Public investment is limited by tight budgets and low tax revenue, much of which goes to fixed expenses such as salaries. Extending retirement age will strain budgets further. 

Thailand has foreign direct investment, but much does not links to local supply chains. Some firms register here only to access tax incentives. On top of that, rigid regulations deter genuine investors.

Meanwhile. productivity suffers from misallocated resources, underinvestment in R&D, and failure to turn research into products.

Lean development

Globalisation’s retreat makes everything harder: US tariffs at 90-year highs, Europe’s green rules, China’s oversupply pushing prices down, and cheap imports flooding Thailand destroying local businesses. With a weakened WTO, countries now rely on bilateral deals.

It’s clear. Thailand must build new growth engines. We cannot rely on massive industrial expansion as before. A better starting point is “lean development”: use the people we have more efficiently, remove waste, and make every baht count. Then modernise agriculture, industry, and services step by step. 

This is urgent. Most listed companies are struggling. One-third of manufacturing firms and more than a quarter of consumer companies are loss-making. Real estate and construction face the same fate.

New growth hopes

So how do we build a new growth engine?

First, modernise agriculture. Today, subsidies trap 30% of workers in low-earning farming. We need smaller, higher-value production like Japan’s melons, uni, and Kobe wagyu. Thai bamboo, biochar, sea crabs, and bananas show similar promise: they use fewer workers but generate more income.

Thai food offers even bigger potential. We have one restaurant per hundred people — street food not included. Yet Singapore has more eateries on the Michelin Bib Gourmand list. 

The difference is state support: investing in quality, preserving heritage recipes, using technology, and promoting restaurants abroad. With a small domestic market, we must also look outward and expand online.

Film production is another bright spot. In the first nine months of this year, 450 foreign shoots brought in about seven billion baht. Jurassic Park, White Lotus, and Alien Earth were filmed here. Most spending stays in Thailand, creating high-income jobs and distributing earnings widely. With more state support, also for Thai producers, film could become a major growth engine.

Industry must modernise too : competing on quality, not price; expanding into ASEAN markets; shifting to green products; and building stronger Thai brands. Combustion engines will remain in demand in developing countries for at least a decade, while new opportunities emerge in green steel, pet food, and other eco-products. 

Call to action

To recover, Thailand must act on three fronts: labour, investment, and productivity.

We must cut preventable deaths, reduce PM2.5, expand childcare and senior care to raise female participation, reform conscription, attract skilled workers, and improve education quality.

We must stop losing revenue through unnecessary tax privileges. Thailand has capital, but wastes it propping up outdated subsidies instead of modernising agriculture. Link foreign investors to local supply chains, clear regulatory bottlenecks and investment will follow.

Finally, productivity must rise. Freer trade helps, as many current rules hold us back. R&D must turn ideas into products.

If we succeed on these fronts, Thailand’s growth potential could rise from 2–2.3% to about 4.7% — enough to escape the middle-income trap by 2041.

Within 15 years, our economy will shift toward modern services. Workers will move from low-value jobs. Domestic spending will strengthen. Exports will matter less in a world of rising barriers.

Thailand cannot stay on the old path. Our task now is to build new engines — ones that create “good” jobs. That means new skills, new innovation, and less red tape.

If we act, those engines are within reach. They are ours to build — piece by piece, sector by sector, job by job. The only question is whether we are ready to begin.

Note: Somkiat Tangkitvanich, PhD, is president of the Thailand Development Research Institute (TDRI). This article is an edited version of his keynote speech at TDRI’s Annual Conference on Reimagining Thailand’s Development Model, held on November 17. TDRI’s policy analyses appear in the Bangkok Post on alternate Wednesdays.