Thailand's economy faces a critical turning point as GDP growth remains stuck at an average of just 2% annually. Meanwhile, data from the Organisation for Economic Co-operation and Development (OECD) show that Thailand's Total Factor Productivity (TFP) growth averaged 0% per year between 2015 and 2023, reflecting stagnant production capacity and innovation for over a decade.
Overcoming the middle-income trap to become a high-income country has been criticized as impossible through short-term stimulus policies alone; instead, the country must genuinely re-enter a new "Investment Cycle."
The Federation of Thai Capital Market Organizations (FETCO), represented by Paiboon Nalinthrangkool, emphasizes that sustainable investment injections require simultaneous progress in the "Saving Cycle"—a national savings strategy to build a long-term domestic capital base.
Historical statistics show Thailand's investment rate has fallen from over 40% of GDP in 1991 to around 23% today. FETCO therefore proposes raising the investment rate back to 30% of GDP to spark a new growth wave.
However, the key challenge is funding sources. Currently, gross domestic savings are about 25% of GDP. To push investment to 30%, domestic savings need to rise to 28% of GDP, allowing a 2-3% current account deficit to be offset by foreign savings. This level of deficit is a manageable risk, unlike the 1997 crisis when Thailand's deficit reached 7-8%, causing a liquidity crisis due to reliance on short-term hot money.
To address structural issues in both capital and productivity, FETCO has outlined four main strategies to drive the economy.
1. Enhance saving incentives through TISA (Thailand Individual Savings Account) by setting investment limits higher than the current tax deduction ceiling, encouraging net new savings rather than merely shifting existing savings between accounts.
2. Upgrade provident funds to a compulsory savings system to broaden retirement savings coverage, fully support an aging society, and convert public savings into long-term capital for national development investments.
3. Develop the Trust and Family Office ecosystem by revising trust laws for greater flexibility to manage assets for Thai and foreign families, creating an ecosystem that attracts family offices and high-net-worth individuals worldwide to manage funds in Thailand, propelling the country toward becoming a Regional Financial Hub.
4. Facilitate repatriation of overseas investments by offering a temporary two-year income tax exemption on foreign investments and repatriated profits, conditional on investing all funds in Thai capital markets and holding them for at least one year, thus converting foreign assets back into circulating capital within the Thai economy.
However, FETCO notes that increasing investment volume alone is insufficient for economic recovery. The new Investment Cycle must focus on "Productivity-led Investment," targeting investments that enhance production efficiency to address zero growth in TFP by allocating budget and long-term capital to future infrastructure.
This includes Technology & AI, Digital Infrastructure, Semiconductors, Automation, Human Capital development, and new S-Curve industries.
Leading Thailand's economy to high-income status depends not only on the question of "what to invest in" but is tied to the vision of "how to build savings and source long-term capital" to ensure new growth occurs on a solid and sustainable foundation.
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