The Bank of Thailand indicates that Thai exports are growing concentrated in the AI ​​sector, and expresses concern that the loss of this trend could hinder the overall economy.

The Governor of the Bank of Thailand pointed out that the global economy is highly volatile, and Thailand's growth is still below its potential. He noted that Thai exports are growing strongly but are concentrated in the AI ​​and technology sectors, and worried that a loss of momentum could drag the economy down.

13 Jul 69 Mr. Vitai Ratanakorn, Governor of the Bank of Thailand (BOT) Opening remarks for the 2569 Southern Region Annual Seminar on the topic... "How are businesses in the South adapting in an uncertain world?" This provides an overview of the Thai economy amidst global economic uncertainty, stating that:

The world today is facing a high degree of uncertainty, which has become the new normal. Previously, economic crises or global shocks occurred on average every 6-10 years, but recently, there has been high volatility and shocks happening almost annually.

From the US-China trade war, the COVID-19 crisis, the Russo-Ukraine war, to conflicts in the Middle East, the global economic landscape has shifted from an era of globalization to an era of geopolitical and geoeconomic conflict with clearly defined power blocs.

Due to frequent shock factors and internal structural problems such as the aging society and very low levels of domestic investment over the past 20 years, Thailand's potential GDP growth has continuously declined. From highs of 5% and 3%, it has now fallen to only 2.7%.

"For the Thai economy this year, the Bank of Thailand estimates growth at 2.3%, which is better than the average forecast of 2% from other institutions. This reflects the resilience and better recovery of the Thai economy than initially feared. We recommend accelerating adaptation and increasing resilience to cope with volatility, but it remains below potential."

Overall, Thailand's exports this year are projected to grow by as much as 14%. However, a closer look reveals concerns because this growth is concentrated primarily in the electronics and technology industries, which are benefiting from the global popularity of artificial intelligence (AI).

The electronics and technology sector, embraced by the AI ​​trend, is expected to grow by as much as 43%, while other product categories are projected to grow by an average of only 2.5%. However, this high-growth technology export industry structure faces limitations in driving the local economy due to the significant foreign investment. Large manufacturers in this sector account for only 1% but control 85% of all electronics exports, with approximately 105 companies, 87 of which are foreign-owned.

Thailand's exports are highly reliant on imports (low local content). This industry focuses on importing components for assembly before re-exporting, resulting in an import content that has surged from 45% to 70% currently. This means Thailand benefits less from this value chain than it should. Even with a 14% export growth, imports remain high at 20%, potentially leading to negative trade and balance of payments for Thailand this year.

"What needs to be monitored and represents a risk in the next period is that if the global popularity or investment in AI technology begins to slow down, foreign direct investment (FDI), as well as the value of Thailand's exports that are tied to this trend, will inevitably decrease."

Mr. Witai also stated, "Thai businesses can no longer operate under the same old policies or business models. They need to urgently adapt and build resilience to cope with the constant economic and geopolitical fluctuations in the world."

While the Bank of Thailand has shifted its role from solely overseeing overall financial stability to issuing targeted policies to support the economy and accelerate the removal of structural obstacles—such as implementing measures to help SMEs access funding or tightening controls on the grey economy—the aim is to strengthen the Thai economy and ensure sustainable growth.

The "southern economy" is experiencing uneven growth.

Mr. Witai further stated that the economic structure and export sector of the South are another significant vulnerability reflecting the problem of uneven recovery, as evidenced by three issues:

• Major agricultural commodities are facing high volatility. While the country's overall exports are being driven by the technology and AI sectors, key export products from the South, such as rubber and processed wood, have not fully benefited from this trend. Furthermore, they face stricter trade measures from trading partners (such as Europe's EUDR regulations) and volatile weather conditions, directly impacting production volume and the income of southern farmers.
• The tourism sector is experiencing concentrated growth. Although the tourism sector in southern Thailand has recovered well, it is highly concentrated in major tourist areas such as Phuket and Surat Thani (Samui). Meanwhile, other smaller provinces in the south are recovering slowly, and the funds are not reaching local small businesses. The economic benefits may be concentrated in the hands of large corporations or foreign investors.
• Low-income purchasing power is vulnerable due to household debt. The regional economy in southern Thailand is also under pressure from high levels of household debt, a factor that significantly weakens domestic purchasing power. Even though overall tourism and export figures look good, people and SMEs in the southern region do not yet perceive an improvement in the economy.

"In this era, the central bank places great importance on regional economies. We've adjusted our position to be closer to the real sector because regional economies are crucial. A large portion of the population, a large portion of production, and a large number of SMEs are located in the regions."

Read news related to the economic situation across Thailand here.