Is Bangkok Becoming Unable to Sustain the Economy? World Bank Highlights Unlocking Secondary Cities to Propel Thailand to High-Income Status

Over the past 35 years, Thailand was one of Southeast Asia’s fastest-growing economies. Between 1991 and 1996, the Thai economy expanded at an average annual rate of 8.0%, creating millions of jobs in the industrial and service sectors.

However, over time, Thailand’s economic momentum steadily slowed after the global financial crisis, with growth rates dropping to an average of 3.6% per year during 2010–2019, and slowing further to just 2.2% annually after the COVID-19 pandemic (2021–2024).

If economic growth continues at the baseline potential of roughly 2.2%–2.9% per year, Thailand’s goal of becoming a high-income country may be delayed until 2056. To meet the national strategy goal by 2037, Thailand must accelerate per capita GDP growth to an average of 5.4% annually.

The key question is: where will Thailand find new growth engines when its traditional economic drivers are faltering? The main answer, according to the World Bank report, “Thailand Cities of the Future: Urban Foundations for a High-Income Economy”, / “Thailand’s Cities of the Future: Urban Foundations for a High-Income Economy”, clearly points to unlocking and restructuring the urban system.

Alejandro Alcala-Gerez, World Bank Country Manager for Thailand and Myanmar, said, “This is a critical moment for Thailand as it moves toward high-income status. Future growth will depend heavily on higher productivity, investment, innovation, and the creation of better jobs.”

“This report offers a perspective focused on ‘cities’ and ‘spatial’ factors, showing how Thailand can create conditions to build strong industries, boost productivity, and generate better employment opportunities.” Alejandro Alcala-Gerez /

Structural Crisis: Why Is the Traditional Urban Model Hitting a Ceiling for Thailand?

The main reasons Thailand’s growth has stalled relate to three major spatial and economic constraints:

• An aging society: “Getting old before getting rich”: Thailand’s working-age population peaked at 51 million in 2019 and is projected to decline to 44 million by 2040, while the population aged 65 and over is rapidly increasing, pushing Thailand into a super-aged society by 2031. This contrasts with other high-income countries that get rich before aging.
  
  
• Extreme concentration in Bangkok: Bangkok’s population is 27 times larger than Chiang Mai, the country’s second-largest city. This concentration leads to diminishing returns and severe traffic congestion that causes economic losses estimated at 7%–10% of Bangkok’s Gross Regional Product annually. Additionally, land prices, rents, and natural disaster risks like flooding and erosion limit growth. As a result, per capita GDP growth in Bangkok was only 0.2% annually between 2010 and 2020.
  
  
• Secondary cities are overlooked and lack decentralization: Although population density in secondary cities has doubled, this has not translated into productivity gains because most workers remain in low-value service sectors. Moreover, over 60% of public budgets remain concentrated in Bangkok, while local governments lack fiscal authority and tax management power to develop their own infrastructure.

Why are “cities” the key to Thailand’s high-income goal by 2037?

The latest World Bank report highlights cities as a major engine of economic growth for several key reasons:

• Cities concentrate growth and labor: Since 2010, about 89% of Thailand’s GDP growth has occurred in urban areas, which are home to over 75% of the country’s working-age population.
  
  
• Cities are investment tipping points: World Bank modeling shows that investing roughly $20 billion annually (about 2.1% of GDP) in urban infrastructure could create an economic turning point. Continued investment focused solely on Bangkok yields diminishing returns due to congestion, but spreading investment to secondary cities can unlock hidden potential, leading to significantly higher long-term economic and productivity gains.

Dr. Steven Rubinyi, lead report author and senior disaster risk management specialist at the World Bank, explained this critical investment turning point:

“Every dollar invested in Bangkok now faces diminishing returns, but Thailand has secondary cities with untapped potential. If the country targets high-growth strategies by investing in these urban systems, it will be a pivotal moment, accelerating the growth of secondary cities and unlocking a connected urban network.”

Therefore, pouring all budget into Bangkok alone can no longer generate the same economic returns. Diversifying investment to secondary cities is key for Thailand to overcome the middle-income trap.

Creating a “decentralized urban network”: A strategy to solve overconcentration

The solution for Thailand’s economic issues is not choosing between Bangkok or secondary cities but building a supportive urban network centered on Bangkok, based on five essential components or “5 Urban Ingredients”:

• Complementary specialization: Leveraging each city’s unique strengths, such as Chiang Mai, Phuket, the EEC, or Khon Kaen, to support future industries.
  
  
• Transforming density into productivity: Upgrading employment in secondary cities from low-value services to advanced industries and services.
  
  
• Stronger connectivity: Developing rail and air transport systems between secondary cities without routing everything through Bangkok, reducing travel and transport costs.
  
  
• Resilient infrastructure: Investing in flood defenses, cool city designs, and clean energy now, which is more cost-effective than later remediation.
  
  
• Strong institutions and fiscal decentralization: Reforming laws to grant local governments authority over property taxes, fees, and the ability to issue municipal development bonds.

Three-pronged implementation plan

The report also proposes a reform plan to elevate Thai cities and help Thailand achieve high-income status on schedule. This plan involves three concurrent tracks:

• Track 1: Elevate Bangkok as a highly efficient global hub Address traffic congestion by expanding mass transit, increasing pedestrian areas and green spaces, enhancing resilience to climate change and flooding, and facilitating the digital transition.
  
  
• Track 2: Lay the foundation for livable cities nationwide Through local fiscal reforms, designing age-ready cities to accommodate the elderly, and adapting urban systems to support sustainable, quality-focused tourism.
  
  
• Track 3: Prepare and unlock secondary cities Promote specialized industries in each secondary city, support innovation and startups, improve interregional transport networks, and boost productive density.

Ultimately, driving Thailand to high-income status by 2037 through its cities, according to the World Bank, is not just about building infrastructure but about restructuring the economy, distributing opportunities, and increasing productivity. Transitioning from a single-city model where Bangkok bears all burdens to a connected, supportive urban network will be the vital foundation for sustainably overcoming the middle-income trap.

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