The World Bank has increased its forecast for Thai economic growth this year to 3.1% from 2.9%, according to its "East Asia and Pacific October 2022 Economic Update" released on Monday.
The bank also downgraded its growth forecast for Thailand in 2023 to 4.1% from a previous forecast of 4.3%.
Growth in most of developing East Asia and the Pacific rebounded from the effects of Covid-19 in 2022, while China has lost momentum because of the continuation of measures to contain the virus, the report said.
The recovery of most of the countries in the region during much of 2022 took place as private consumption revived following the distress caused by the Delta variant in 2021. Global demand for the region's exports was sustained and any tightening of fiscal or monetary policy was limited.
Looking ahead, economic performance across the region could be compromised by slowing global demand, rising debt and a reliance on short-term economic fixes to cushion against food and fuel price increases.
Growth in developing East Asia and the Pacific outside of China is forecast to accelerate to 5.3% in 2022 from 2.6% in 2021, according to the report.
China, which previously led the recovery in the region, is projected to grow by 2.8% in 2022, a sharp deceleration from 8.1% in 2021. For the region as a whole, growth is projected to slow to 3.2% this year from 7.2% in 2021, before accelerating to 4.6% next year, the report found.
"Economic recovery is underway in most countries of East Asia and the Pacific," said World Bank East Asia and Pacific vice-president Manuela V. Ferro. "As they prepare for slowing global growth, countries should address domestic policy distortions that are an impediment to longer term development."
According to the report, growth in much of East Asia and the Pacific has been driven by a recovery in domestic demand, enabled by a relaxation of Covid-related restrictions and growth in exports.
China, which constitutes 86% of the region's output, uses targeted public health measures to contain outbreaks of the virus, inhibiting economic activity.
The global economic slowdown is beginning to dampen demand for the region's exports of commodities and manufactured goods. Rising inflation abroad has provoked interest rate increases, which in turn have caused capital outflows and currency depreciation in some East Asia and Pacific countries. These developments have increased the burden of servicing debt and shrunk fiscal space, hurting countries that entered the pandemic with a high debt burden.
As countries in the region seek to shield households and firms from higher food and energy prices, current policy measures provide much-needed relief, but add to existing policy distortions.
Controls on food prices and energy subsidies benefit the wealthy and draw government spending away from infrastructure, health and education. Lingering regulatory forbearance, aimed at easing lending through the pandemic, can trap resources in failing firms and divert capital from the most dynamic sectors or businesses, according to the report.
"Policymakers face a tough trade-off between tackling inflation and supporting economic recovery," said Aaditya Mattoo, chief economist of East Asia and Pacific at the World Bank. "Controls and subsidies muddy price signals and hurt productivity. Better policies for food, fuel and finance would spur growth and insure against inflation."
