Thailand's economy is poised for growth as the Krungthai COMPASS research center predicts the country's GDP will expand by 2.7% in 2025, slightly up from 2.5% last year. This positive outlook is primarily backed by resurgent private sector investment, which is anticipated to rebound to 3% growth, recovering from -1.6% contraction observed during 2024. Experts indicate this investment turnaround heralds promising opportunities across various sectors.
According to Mr. Kanit Aumsakul, an analyst from Krungthai COMPASS, the expected expansion will significantly depend on increased foreign direct investment (FDI), particularly from China, which has seen its influence rise sharply over the past nine years. He notes, "Private investment is projected to play a key role, shifting to 3% growth after contracting," indicating the confidence in the recovery of the market.
Several key areas are poised to benefit from this influx. Sectors such as industrial estates, real estate, and construction are expected to be at the forefront. It is estimated Thailand will require around 0.85 to 1.05 trillion Thai Baht to facilitate new factory constructions annually. Mr. Aumsakul highlights, "There is significant potential for industrial estates due to demand for land and utilities.”
Looking at the details, the focus on real estate, particularly condominium development aimed at foreign buyers, also showcases the growth potential. Foreign purchasers tend to spend an average of 4.7 million Thai Baht per unit, significantly surpassing the average price expectations of local buyers by 114%. This trend indicates growing international interest, prompting more local developers to engage with foreign markets.
Dr. Supree Si Samran, another analyst at Krungthai COMPASS, elaborates on the factors making Thailand attractive to foreign investors. He states, "Thailand is seen as significant for Chinese investments, reflecting potential surpassing neighboring countries." The Milken Institute's rankings, which place Thailand second among Emerging and Developing Asian countries—only behind Malaysia—reflects the business environment's encouraging aspects, alongside stable economic fundamentals and favorable financial services availability.
Despite these positives, Dr. Si Samran urges sustained efforts to improve investor protections and align domestic regulations with international standards. He remarked, "We need to focus on improving investor rights and alignment with international regulations," to facilitate the continued growth of FDI and meet the expectations of potential foreign investors.
Thailand still faces challenges on its road to recovery and growth. Analysts note the need for rapid developments concerning infrastructure, skills training through upskilling and reskilling measures, and efforts to negotiate free trade agreements, which can all significantly influence FDI attraction. The complexity of global economic dynamics poses additional challenges, making it imperative for Thailand to act decisively.
Yet, the country must also navigate potential stumbling blocks to FDI growth. Analysis highlights five major risk factors: the impacts of trade wars, particularly between the US and China; geopolitical uncertainties; regulatory frameworks from partner countries; infrastructure development pace; and technology readiness. Given these elements, experts warn Thailand could struggle if proactive measures are not employed.
With estimates for Chinese FDI set to reach 1.75 trillion Thai Baht by 2024—significantly overshadowing investments from traditional leaders like Japan—Thailand must capitalize on this opportunity. The data shows Chinese investments outpacing Japanese contributions by three to four times. This shift indicates not only changing global investment landscapes but also the increasing role China is set to play.
Strategies are critically needed. Analysts at Krungthai COMPASS advocate focusing on enhanced infrastructure and educational reforms to equip the workforce with necessary skills. The importance of aligning Thailand's policies with the globalminimum tax goals becomes apparent, as this regulatory shift might affect the prevailing advantages previously enjoyed in terms of tax incentives for FDI. The ability for Thailand to maintain investor interest may hinge on responding strategically to such changes.
Thailand's growth prospects for 2025 rely heavily on overcoming domestic challenges and leveraging forthcoming investment opportunities. The country stands at a pivotal moment where its actions now will define its economic future. A well-structured response to these insights can potentially secure Thailand's status as not only a regional investment hub but also as an attractive destination for global FDI.