Thailand

major macro economic indicators

(e): Estimate (f): Forecast *Fiscal year 2023 from 1st October 2022 to 30th September 2023

RISK ASSESSMENT

Thai economic momentum to improve

After posting disappointing momentum in the previous year, Thailand’s economic growth is set to accelerate in 2024. Private consumption (55% of GDP) will constitute the main growth engine as households benefit from support policy measures. These include the three-year suspension of debt repayments for millions of farmers introduced in October 2023, the planned implementation of a minimum wage increase and the so-called digital wallet. The latter would provide a handout to 70% of the population with the requirement to spend it in stores within six months. The improvement in the job market, with the unemployment rate declining to 0.99% during the third quarter of 2023 from 1.23% a year earlier will also shore up consumer confidence. Continued recovery in tourism is also expected to help the unemployment rate remain low. In 2023, tourist arrivals reached 70% of the level seen during the same period in 2019. The return of Chinese travelers – China represented the primary source of tourism inflows before the pandemic – was slow. Chinese tourist arrivals represented only 32% of their 2019 level. Service sectors including hospitality and transport will benefit from the continued recovery in tourism. That being said, elevated household indebtedness – 90.6% of GDP in the first quarter of 2023 – will weigh on their spending. In addition, while inflation will remain within the Bank of Thailand’s (BOT) target range of 1-3% in 2024, there is a risk of elevated food prices linked to El Niño, which could damage crops in the country and neighbouring food-producing countries. An acceleration in inflation and the economy which is still recovering from the pandemic could prevent the BOT from significantly cutting its policy rate which stood at 2.5% in December 2023. Meanwhile, goods exports are likely to increase thanks to gradual improvement in global demand for electronics, sustained demand for food against a backdrop of increased protectionism (including on the part of India) and base effects as exports posted declines in the first seven months of 2023. However, their rebound was limited by the sluggish global economy. Despite the fact that the car industry benefits from manufacturers’ efforts to diversify their supply chains, the environment of global high interest rates is expected to weigh on exports of vehicles and auto parts, which together account for the third-largest export item and represent 11% of the total. The robustness of the electric vehicle segment will not be a game-changer, as EVs represent only a tiny share of the Thai automotive output. This developing market is, however, set to attract private investment and be supported by public incentives (subsidies, tax cuts) to boost domestic sales and production. After a contraction in 2023 amid political uncertainty, public investment is set to rise in 2024 and is likely to focus on infrastructure.

Current account to remain in surplus

While the budget for the fiscal year ending in September 2024 will only be approved by May following the delayed formation of a new government in August 2023, the public budget deficit is set to widen. The populist measures pledged during the election campaign by the Pheu Thai party would result in higher public spending. The digital wallet programme alone is expected to cost THB 500 billion, representing 2.8% of the estimated 2023 GDP. Consequently, the country’s public debt-to-GDP ratio will continue to increase. Risks surrounding rising public debt since the significant rise in the debt-to-GDP ratio during the pandemic is limited by the debt profile. It is mostly long-term and represented 89% of the total at the end of April 2023 and is denominated in local currency (98%).
The current account swung back into surplus in 2023. Despite the trade balance surplus remaining contained by high energy prices in 2024, it is likely to widen as exports show signs of improvement. The sustained recovery in tourism will narrow the service balance deficit, while sluggish GDP growth in 2023 would limit the expansion in profit repatriation to overseas and therefore the primary account deficit (almost 3% of GDP in 2023). The current account is therefore set to post a sizeable surplus in 2024. While international reserves remain large (accounting for 7.5-8 months of imports in October 2023), the surplus would help stabilise the baht after it depreciated against a strong dollar over the two preceding years.

First steps for a coalition of historic rivals
Thailand, at the time headed by former army officer Prayut Chan-o-cha, held general elections in May 2023 which resulted in a fragmented House of Representatives with opposition parties winning most seats. The pro-junta Palang Pracharat party, which backed Prayut, lost a large number of seats (-76). Meanwhile, the social-democratic and progressive Move Forward Party (MFP) that succeeded the dissolved Future Forward Party in 2020 came first, winning 152 seats out of 500, followed by the Pheu Thai Party (PTP) with 141 seats. Despite MFP reaching an agreement with seven other parties, its leader Pita Limjaroenrat failed to be appointed Prime Minister. To be able to do so, he needed the support of the majority in Parliament, which includes the House of Representatives (500 seats) and also the Senate (250). This military-appointed upper house, traditionally pro-monarchy, refused to support the MFP leader amid the party’s proposed reform of a law banning criticism of the monarchy. After a three-month stalemate, Srettha Thavisin of the PTP was finally appointed as Prime Minister after securing 482 of the 700 Parliament votes, as his party was able to form an 11-party alliance including pro-military parties. While the inclusion of some pro-junta parties lowers the risk of another coup d’état (12 coups in the past 90 years), uncertaintystill remains. While delays and legal hurdles for the implementation of Srettha’s main campaign measure – the digital wallet – may weaken his prime ministership, other elements add to the political uncertainty. These include the return of the still-influent funder of the PTP Paetongtarn Shinawatra after years in exile, the dissolution of the MFP in February, as well as the overhaul of the 250-member Senate in May marking the end of the senators’ power to vote in a prime ministerial election.
In a bid to turn Thailand into an investment hub and further develop its tourism industry, the new government’s foreign policy is expected to remain neutral in a complex global geopolitical environment.

Last updated: April 2023

Payment

Credit transfer is the main form of payment used by large companies in Thailand. The majority of credit transfers are made electronically and the popularity of this payment method is growing as clearing systems have become more developed.

Cheques are still a popular form of cashless payment in terms of value. They are used by companies and consumers to make a wide range of payments. Post-dated cheques are a common mean of short-term credit.

Although cash remains the dominant payment method in Thailand, telegraphic transfer of money is increasing its popularity along with the cashless trend accelerated by COVID-19.

Debt collection

Amicable phase

According to the 2015 debt collection Act BE 2558 (AD 2015), the debtor is an individual person or personal guarantor. The Act was created to regulate collection activities carried out by creditors, or by collection agencies in cases of consumer debt. Commercial debt collection houses are also expected to follow the practices set out within the Act. For example, during the amicable phase, creditors can only communicate with the debtor or other persons as authorised by debtor. Creditors or collection agencies are also limited to identifying themselves with the details of debt to the debtor. 

Legal proceedings

Thailand’s Judicial Court System comprises three levels:

• the Supreme Court: this is the highest court authority in the country. All of its decisions are final and must be executed. It hears appeals and contests against decisions made by the Courts of Appeal, Regional Courts of Appeals and Courts of First Instance;
• Courts of Appeal: these are divided into Courts of Appeal and Regional Courts of Appeal. Both handle appeals against the decisions or orders made by the lower courts;
• Courts of First Instance: these lower courts comprise the courts in Bangkok, courts in provinces, specialised courts and juvenile and family courts.

A preliminary stage of legal action can be conducted if there is failure to reach an amicable settlement with the debtor. This phase includes communications, negotiations, meetings with debtors, letters of demand and notifying the police in cases where there is a criminal penalty.

The Civil Mediation before Litigation

Recent amendments to Thailand’s Civil Procedure Code in 2020 and already applied since November 2020 will allow parties to submit a matter for court-supervised mediation prior to the actual filing of the case. Encouraging mediation prior to filing a complaint is intended to save time and resources that would otherwise be expended on a trial. The meditation processes introduced by the new act are not subject to any court fees, exempting the postal fee in delivering the letter to the debtor.

Prior to filing a complaint, one of the parties in a dispute may petition the appropriate court to appoint a mediator to resolve the dispute. If the petition is accepted, and the opposing party consents to the mediation, the court will bring the parties together (with or without their lawyers) and appoint the mediator. If the mediation yields a successful settlement, the court will consider to:

• Arrange a compromise agreement and assuming it is fair, made in good faith, and in accordance with both the law and the parties. In case if any parties breached the agreement, they are still able to bring the case to ordinary lawsuit process.
• Or, the parties may agree and request the court to issue a judgment in accordance with the compromise agreement with mutually agreed by the parties. If the court agrees that it is necessary, it will issue the judgment accordingly. The judgment would be enforced if the debtor has failed to do so, leading to the execution process at the end.

The court’s judgment is considered final and can only be appealed if there is an allegation of fraud against any party to the case, or if the judgment is alleged to go against either the agreement or a provision of law involving public order.

If, on the other hand, the mediation is unsuccessful, any limitation period that was either barred after the submission of the petition or will be barred soon will be extended for 60 days from the end of the mediation. After that, the creditor still has a right to file the case into the lawsuit as an ordinary proceeding.

Ordinary proceedings

If the debtor fails to comply with demand notices, the creditor can file a claim with the Court, depending on the value of the debt:

• if the debt does not exceed THB 300,000 (Thai baht), the complaint must be lodged at the District or Provincial Court;
• if the debt exceeds THB 300,000, the complaint must be filed at the Civil or Provincial Court.

Court policy is to screen unnecessary cases from court trial. Most Civil Courts have mediation centres for parties to negotiate and compromise on an arrangement. Once a case has been decided amicably, a compromise agreement is prepared and the court passes judgment in accordance. Each of the parties is responsible for documenting evidence and the burden of proof associated with their case. A judgement is made once the court has considered and weighed the evidence presented by both parties.

The time frame for proceedings with the Court of First Instance can take between one to three years.

Enforcement of a Legal Decision

If the debtor fails to comply with a domestic judgment, the creditor is entitled to apply for the execution of the judgment. This can involve the issuance of an execution decree, delivery of an execution decree to the debtor, issuance of a writ of execution and the seizure and sale of property belonging to the debtor.

Thailand has no reciprocal recognition and enforcement agreements with other countries. Enforcing foreign judgments requires new legal proceedings, where the evidence will be considered and legal defence made available to both parties.

One exception is that Thailand is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1985). International arbitration awards by member countries of the Convention can be enforced if they are already final.

Insolvency Proceedings

Thailand has legislation on bankruptcy and reorganisation proceedings (Bankruptcy Act BE 2483). (Latest amendment in 2018, B.E. 2561)

Reorganisation Proceedings

Limited Companies, Public Limited Companies and Financial Institutions (Large Enterprises)

A petition can be filed against an insolvent corporate debtor who owes one or more creditors a known sum of THB 10 million (USD 333,000) or more. Once the court has accepted the petition for further proceedings, it appoints a planner to prepare and submit a reorganisation plan to the official receiver within three months. The court may extend this period up to a maximum of two times, for one month from the publication date of the court order appointing the planner. Secured and unsecured creditors must then apply for payment of debts within one month from the date of publication of the order for appointment of the planner. Once the official receiver is in possession of the reorganisation plan, he will convene a meeting with the creditors to consider the proposal. If it is accepted, the court needs to approve it and confirm the appointment of the plan’s administrator. The latter is then responsible for the debtor company’s reorganisation, as set out within the plan. 

SMEs registered with the Office of SME Promotions or other government agencies for conducting business

Petition can be filed against:

• insolvent individuals who owe one or more creditors a known sum of THB 1 million or more;
• insolvent limited partnerships, registered partnerships, non-registered partnerships, groups of persons or other juristic entities who owe one or more creditors a known sum of THB 3 million or more;
• insolvent private limited companies owing one or more creditors a known sum of between THB 3 million and 10 million.

In cases such as these, the petitioner should file a petition, along with a proposed plan of not more than three years in length in execution.

Bankruptcy proceedings

A creditor can file a bankruptcy petition against a debtor if the latter is insolvent and owes one or more creditors a definitive sum of over THB 1 million (if the debtor is an individual), or owes more than THB 2 million (if the debtor is a legal entity).

Once a petition for bankruptcy has been filed, the proceedings normally include hearing the witnesses, temporary receivership of the debtor’s property, the appointment of an official receiver, filing of claims for debt payments by creditors within two months from the publication date of the permanent receivership order, a bankruptcy order against the debtor (if no agreement can be reached with the creditors, issuance of a permanent receivership order, seizure of property, sale of property by public auction and pro rata distribution of the sale proceeds to creditors.