The GDP growth target remains elusive.

The government led by Prime Minister Sretta Thavisin has set an ambitious target of raising annual GDP growth to 5%. Last week, the Prime Minister presented his policy statement to the heads of government agencies who met to discuss the 2024 budget. Last week, the World Bank also lowered its growth forecast for Thailand to 3.4 percent this year from 3.6 percent and cut its 2024 forecast to 3.5 percent from 3.7 percent.

Despite the challenges of delayed budget allocations, stagnant exports and the latest blow to tourism after the shooting at the Siam Paragon shopping center, growth of 5% may seem like a dream, some industry leaders said. Aat Pisanvanich, director of the Center for International Trade, said the economy could expand by 5% during Mr. Srett's administration, as the economy has not grown more than 4% in the past decade. He said Thailand's economy had been expanding at an average annual rate of 3% for nearly a decade, while potential GDP growth was 5%. Whether such growth can be achieved depends on the government's economic policy management, Mr. Aat said.

Planned stimulus measures include a 10,000 baht digital wallet scheme for those over 16, which requires an estimated budget of 560 billion baht; raising the minimum wage to 600 baht a day; and increasing the minimum wage for university graduates with a bachelor's degree to 25,000 baht a month. The measures are expected to raise costs for businesses and subsequent inflationary pressures, reducing domestic spending and production capacity as costs rise, he said.

While the government is trying to stimulate the economy, achieving 5% growth will be difficult unless Thailand can boost exports, which account for about 70% of GDP, Mr. Aat said. The government's revised medium-term fiscal policy for 2024-2027, in effect since September, projects GDP growth of 3.2% in 2024, 3.6% in 2025 and 3.4% in 2026-2027, with a budget deficit of about 3% of GDP. Public debt is expected to reach 64-65% of GDP in 2024-2027. The medium-term policy objective is to pursue expansionary fiscal policy through budget deficits to support economic growth, according to a government statement.

The administration also said it wants to build resilience and financial credibility to ensure stability in the future. Mr. Aat said the problems in the export sector were due to a number of factors. The first is Thailand's structural problems in terms of production costs in both the agricultural and industrial sectors, which are higher than competitors in the region, especially fuel and electricity prices. Second, Thai firms are less innovative than their competitors from other countries, especially Vietnam, where multinationals from Asia and Europe are moving their production to for export, he said. Vietnam is one of Thailand's main competitors in attracting business and trade, and it is actively pursuing a bio-, cyclical and green economic model that is in line with current global trends as the country aims for a green economy by 2050, Mr. Aat said. Thailand also faces a shortage of skilled labor compared to Singapore, Vietnam and Malaysia.

Vietnam manages its economy based on transparent standards through strict regulatory compliance, which boosts investor confidence, and also uses technology to fight corruption, he said. Marisa Sukosol Nunbhakdi, chairwoman of the Thai Hotels Association, said the ambitious economic target could prompt government agencies to speed up their work as the budget allocation has been delayed for months. However, the 5% target may not be practical if key economic sectors are still facing headwinds, Ms. Marisa said.

She said it is difficult for tourism, which accounted for 18% of GDP before the pandemic, to generate the same level of revenue now as international tourism has become a highly competitive industry. Ms. Marisa said many hurdles are beyond the industry's control.

Despite these GDP growth challenges, Thailand can expect expansion in the long term, thanks to increased investment, said Jariporn Jarukornsakul, group chief executive officer of WHA Corporation Plc, the largest developer of logistics facilities for customized rentals. The 5% growth target is not new as the previous government set a similar target based on foreign investors expanding their business in Thailand, especially in the Eastern Economic Corridor (EEC), she said. The VEC, which covers parts of Chonburi, Rayong and Chachoengsao, is set to become a high-tech industrial hub hosting 12 targeted industries on the S-curve of development, including next-generation automobile manufacturing and smart electronics. New investors continue to look for opportunities in Thailand, especially from China and Taiwan, Ms. Yariporn said. U.S. technology companies are expected to follow in the next order of business after the prime minister met with companies during his trip to the 78th session of the United Nations General Assembly in New York last month. "The business sector always supports the government's overseas tours to attract investors and continues to develop infrastructure in industrial zones to cater for investors," she said. "Combined with Thailand's privileged location in Southeast Asia, these factors will help potential foreign investors decide to invest in Thailand." Ms. Yariporn acknowledged that the country struggles with high levels of household debt and its foreign direct investment is lower than neighboring countries, but she said she believes Thailand can overcome these problems. One indicator that the country can expect rapid growth is an increase in industrial land sales, she said. The Industrial Parks Agency of Thailand (IEAT) has recorded strong growth in industrial land sales, which soared 182% year-on-year to 5,693 rai in fiscal 2023. These numbers exceeded IEAT's goal of 2,500 rai for the fiscal year from October 1, 2022 to September 30 this year. Investment in electric vehicles and battery production, especially from China, continues to grow after the government adopted policies to encourage the electric vehicle industry, Ms. Yariporn said.

G Mr. Aat said the Thai export sector faces several hurdles in the near term. KKP, the research arm of Kiatnakin Phatra Bank, predicts that the government's cumulative stimulus measures will require a budget of up to 3.6% of GDP, but they will only stimulate economic growth by 1%. "Distributing money through giveaways may stimulate spending, but the impact of this digital wallet project on economic expansion may be less than the cost of the government's budget based on multiple factors, including that people will spend money on goods with high levels of imported content," KKP said in a research note. In addition, growing fiscal deficits and rising interest rates could cause public debt to reach the 70% ceiling sooner than expected, in less than 10 years, the research agency said. High public debt is a major economic risk," KKP said. The digital gift can have a negative indirect impact on the economy and financial markets in many aspects, and this effect is already visible in the stock market, notes the research unit. "Investor concern is displayed in the decline in the baht rate. The growing budget deficit has seriously worried them about the government's fiscal discipline, which increases the risk of