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Thailand is the second largest economy in the ASEAN (Association of Southeast Asian Nations) and has upper middle-income status. Thailand managed to maintain its relative fiscal strength and low external vulnerability, despite the sharp contraction of economic activity experienced in 2020. The economy’s strong resilience to shocks was proven once again.

Real GDP growth will be supported by manufacturing, good exports (although less than other ASEAN countries, as electronics exports represent only less than 15% of total exports in Thailand) and fiscal policy. Yet, internal demand is expected to remain weak in the two coming years. The tourism sector (while deeply affected in the short term) is highly competitive, the manufacturing sector should return to its pre-covid trends, and the banking sector is sound and well capitalized, which will continue to support funding to the economy.

Yet Thailand’s biggest threat to economic growth, and its main structural weakness, remains political risk. Thailand’s chronic political instability hampers the implementation of the structural reforms needed to adapt to an ageing population, the lack of infrastructure, and the growing risk that the country will remain mired in a middle income trap.