Thailand is now "the sick man of ASEAN"

According to the latest IMF report, Thailand has the lowest economic growth in Southeast Asia, with only 1.6% projected for 2026.

Falling behind its neighbors, the kingdom is seeing its debt increase, its banking system weaken, and its industrial competitiveness erode.

This situation has earned him the worrying nickname of "the sick man of ASEAN".

An article by Chartchai Parasuk, PhD, independent economist (subheadings have been added to make it easier to read).

This article is inspired by the "World Economic Outlook" (WEO) report published in October by the International Monetary Fund (IMF) .

As is its custom, the organization conducted a quarterly analysis of the global economy, including GDP growth forecasts for member countries.

The IMF warns of weak Thai growth

Headquarters of the International Monetary Fund (IMF) in Washington, DC, USA.

Some of these projections surprised me, as Thailand's projected GDP growth for 2026 is the lowest among the 10 member countries of the Association of Southeast Asian Nations (ASEAN) and the second lowest (1.6%) in Asia after Japan (0.6%).

We know that the situation is not brilliant in Thailand, but to suggest that GDP growth will be lower than that of Burma (3.0%), Laos (2.5%) and Cambodia (4.0%), especially with such a large gap, is not only probably inaccurate, but also insulting.

The IMF forecasts GDP growth of 2.0% for the kingdom this year.

If readers do not feel inconvenienced by this point, please refer to the attached table.

Appendix Table 1.1.2. Economies of Asia and the Pacific: Real GDP, Consumer Prices, Current Account and Unemployment (Annual percentage change unless otherwise indicated). Source: IMF World Economic Outlook (WEO) report, October 2025

The title of this article, "Thailand is now the 'sick man of ASEAN'", is actually very far from the truth.

Nevertheless, the situation is bad.

This article nevertheless underlines that the economy is in a comatose state and urgently needs recovery.

Political propaganda and small measures will not be enough.

Policymakers must stop dreaming that there are easy solutions.

The solutions will not only be difficult, but also painful.

To find a good example of painful solutions to revive the economy, we can look to Argentina.

This country was previously plagued by inflation of over 200% which crippled its economy.

The Argentine peso has even lost 45% of its value in one year.

Even the IMF has given up all hope of controlling the runaway inflation in this country.

The new president, Javier Milei, has accomplished a true miracle by bringing inflation back down to 30%.

Many believed that his hostile 30% budget cuts and massive market reforms would cost him his political future.

On the contrary, his party won a majority of seats in both houses during last week's midterm elections.

But despite the acute pain, Argentinians felt the benefits of low inflation after he came to power.

Of course, not everyone is satisfied, as some measures are indeed painful.

Retirees have been demonstrating in the streets for weeks.

What solutions are there to emerge from the economic coma?

Thailand's struggling economy. Photo: The Nation Thailand

As I said, to accomplish this task, no simplistic solution will do the job.

Originally, I intended to write three complete sections in this article.

The first would describe the crises that have led to the Thai economy being described as the "sick man of ASEAN".

The second part would deal with the consequences of these crises.

And the final part would propose some painful solutions to alleviate the crises.

However, due to space constraints, only the first part will be explained here.

However, I will strive to incorporate some of the consequences and proposed solutions.

GDP growth will lag until 2030

Passersby on a shopping street in Thailand.

The first crisis is that of weak GDP growth.

Thailand's GDP growth is ranked last in the region not just for this year or next.

Readers can take another look at the table.

I fear that Thailand will remain at the bottom of the rankings until at least 2030.

The IMF does not explicitly state this, but it can be inferred from the IMF's "World Economic Outlook" (WEO) report for October that, from 2025 to 2030, Thailand's average nominal GDP growth rate will be 2.8%.

The real GDP growth rate will probably be only 1.8%, the lowest among the major ASEAN economies.

According to this report, Thailand is expected to move from third to fifth place among ASEAN economies by 2030.

Out of simple curiosity, I wonder what the average long-term (nominal) GDP growth figures are for our ASEAN counterparts over this five-year period.

Let's see.

It is 8.5% for the Philippines, 7.3% for Indonesia, 6.3% for Vietnam, 6.0% for Malaysia and 4.3% for Singapore.

For the honor of our country, I repeat that the average (projected) growth of Thailand's nominal GDP is 2.8%.

Record debt and “zombie” banks: a vicious economic cycle

Passersby in front of ATMs. Photo: Thai PBS World

Thailand may have low GDP growth, but our debt is certainly high.

In fact, the high level of (unrecoverable) debt is the country's second economic crisis.

Thai household debt as a percentage of GDP ranks seventh globally (88.2%), ahead of Hong Kong (87.8%), Norway (87.4%) and Denmark (84.8%).

But guess what?

These countries have high levels of household debt because property prices are extremely high.

If we exclude mortgage loans, other consumer loans represent less than 5% of GDP.

Therefore, household debt never poses a threat to these economies.

In contrast, Thailand has 60% of its GDP devoted to non-mortgage debt, which is far too high for Thai debtors to repay.

I calculated the GDP growth, that is, the income growth, that Thailand needs to be able to cover the interest on its existing debt.

These are solely interest rate-related obligations, without repayment of the principal.

With an interest rate of 3% for loans, GDP growth of 4.8% is required.

If this rate rises to 4%, GDP growth of 6.4% would be necessary.

It goes without saying that Thailand could never achieve such GDP growth, meaning that the problem of non-performing loans (NPLs) is theoretically unsolvable.

Based on the above calculation, Thai borrowers should have defaulted "en masse", leading to the collapse of the national banking system.

That's what they did, but all parties involved, including the Bank of Thailand (BoT), helped to conceal the figures.

According to a BoT report, NPLs in the private sector represent only 2.83%.

Who are we kidding?

The actual rate of NPLs should be well above 20%.

Before loans are classified as NPL, banks restructure those that are becoming bad to turn them into good loans.

This deceptive practice hides the problem from the public, but cannot hide it from the banks.

Because there are fewer good customers, the Thai banking system has experienced negative loan growth for 15 consecutive months.

Banks are indeed zombies.

What happens when less and less money enters the economic system?

The answer lies in the table, and the vicious cycle of weak growth and bad debts begins.

So, if someone asks me if the economy will hit rock bottom in 2026, I would answer no, not until the problem of non-performing loans has been solved and the zombie banking system has been fixed.

To solve these problems, someone needs to improve the borrower's "payment capacity".

The fictitious restructuring of debt is counterproductive.

When customers start regularly repaying their debts, banks will "magically" emerge from their zombie state and become active players in the economy again.

An obsolete industrial model in the face of regional technological advancement

Workers in a factory. Photo: ASEAN Now.

The latest crisis concerns competitiveness.

The Thai industrial system does not generate enough revenue to stimulate growth and repay all debts.

If we want to have incomes equivalent to those of Malaysians, who enjoy a per capita income almost twice as high, we need high value-added products like theirs.

All of this indicates that we need to move to an industrial system based on STEM (science, technology, engineering and mathematics).

Is there a miracle formula for getting quick results?

No.

It would take 20 years to establish a knowledge base conducive to STEM, as Thailand would need to reform its entire education system.

See also:

Thailand's welfare economy exceeds 670 billion baht

Thailand's economy 'on the brink'

Thailand's new plan to revive tourism and the economy

Thailand Crisis: Can Anutin Revive the Economy in Four Months?

Thailand's economy experiences prolonged K-shaped growth

Source: Bangkok Post