Carbon pricing critical for achieving climate objectives
BANGKOK, December 14, 2023 – Thailand's economic growth is projected to pick up to 3.2% in 2024 from 2.5% this year, supported by a recovery in tourism and goods exports and sustained private consumption, the World Bank said in its semi-annual Thailand Economic Monitor, launched today.
Growth in 2023 was dampened by a contraction in goods exports as well as ongoing fiscal consolidation, according to the report. The economy is projected to expand at a more moderate 3.1% in 2025.
Headline inflation is projected to slow to 1.1% in 2024 due to low energy prices. However, food prices are expected to increase.
Thailand's planned digital wallet program, potentially amounting to 2.7 percent of GDP, could boost near-term growth further by 0.5 to 1 percentage point over the two-year period in 2024 and 2025 if implemented. As a result, the fiscal deficit may increase to 4% to 5% of GDP, while public debt may reach 65% to 66% of GDP.
Heightened geopolitical conflict and high oil prices, which could lead to another inflationary surge in Thailand due to its high dependency on energy imports, pose downside risks to the outlook. Moving to a lower-carbon growth path could help Thailand build energy security, reduce environmental degradation, and position Thailand as a regional leader in green and sustainable growth.
A special focus of the report finds that carbon pricing, whether through carbon taxes or an emissions trading scheme, is critical for achieving ambitious reductions in greenhouse gas emissions. Thailand could make greater use of carbon pricing to stabilize emission levels, but additional measures, or very high carbon prices, would be required to reduce emissions. Supplemental steps such as building electric vehicle infrastructure or providing training in solar panel installation, could accelerate low-carbon technology adoption.
“Thailand has set a clear goal of achieving net-zero emissions by 2065 and 30 percent reduction in emissions by 2030,” said Fabrizio Zarcone, World Bank Country Manager for Thailand. “As Thailand revises its Climate Change Act, which is expected to be launched in 2024, carbon pricing must be considered as a critical policy instrument if Thailand is to meet its ambitious carbon neutrality target.”
Air pollution is a major economic and public health issue in Thailand, and by reducing fossil fuel consumption, carbon pricing will also improve urban air quality, leading to reduced incidence of illness and disease. In 2019, health damages linked to exposure of PM2.5 fine particle pollution cost Thailand about 6 percent of its GDP.
Revenues generated from carbon pricing could be used to fund other climate policies or to support public expenditure. For example, carbon prices could ease the financial pressure on Thailand’s healthcare system, much of which is publicly funded.
Thailand has implemented a range of policies to reduce carbon emissions and has taken the first steps to implementing comprehensive carbon pricing. Voluntary emissions trading has been in place since 2015. These policies may constrain future emissions growth, but more policy ambition is needed to meet current targets.
