Thailand’s Economy Faces Uncertainty Amidst US Protectionist Measures and Labor Market Challenges

Thailand’s economic landscape is facing significant challenges due to U.S. President Donald Trump’s protectionist trade measures, which could potentially increase unemployment in Thailand. Concerns over these measures were recently highlighted by Danucha Pichayanan, the secretary-general of the National Economic and Social Development Council (NESDC), who spoke at a briefing on the country’s social conditions in the fourth quarter of 2024. He noted that employment in Thailand in 2024 amounted to 1 percent of the total workforce, or 402,200 individuals, an increase from 0.98 percent or 395,200 in 2023. The total workforce last year totaled 40.35 million, a slight decrease of 0.2 percent from 40.44 million in 2023.

The total number of employed individuals stood at 39.8 million in 2024, registering a 0.3 percent decrease from 39.9 million in 2023. Mr. Danucha pointed out that the introduction of both tariff and non-tariff U.S. trade measures to Thailand could have a profound impact on exports and employment within the country.

The fourth quarter of 2024 saw a decrease in the total number of employed individuals, dropping to 40.1 million, a 0.4 percent dip year-on-year. This downturn was primarily driven by a significant contraction in agricultural employment, which fell by 3.6 percent. However, non-agricultural sectors grew by 1.1 percent, with notable expansions in the hotel and restaurant sector, which saw a 9.4 percent increase, as well as the transport and warehouse sectors, bolstered by improving export performance.

“The US has not yet introduced measures specifically targeting Thailand,” he said. “Many of Thailand’s exports to the US include computers and electronics, so we must wait to see whether specific measures are imposed. The government needs to prepare appropriate responses, including negotiations with the US, to mitigate any potential impacts.”

Additionally, Thailand continues to grapple with concerns over human trafficking, ranking Tier 2 in the U.S. Trafficking in Persons report since 2022. Danucha Pichayanan expressed that these issues could further affect Thailand’s economic stability, necessitating a multipronged approach to address both external trade pressures and domestic labor challenges.

The Thai government also emphasized the need for wage adjustments to coincide with improvements in worker skills. The government has pledged to raise the daily minimum wage to 400 baht, a move that highlights the economic disparity and high cost of living in the country. However, the effective implementation of this policy is contingent on the development of Rammadha skills gap.

Regarding household debt, the latest data from the third quarter of 2024 showed an amount of 16.3 trillion baht, representing 89 percent of GDP. However, the decline in the debt-to-GDP ratio below 90 percent does not necessarily indicate an improvement in household debt problems. Instead, it reflects a slower pace of household debt growth relative to GDP expansion. The NESDC noted that Thailand’s household debt-to-GDP ratio peaked at 94.6 percent in 2021 and decreased to 91.4 percent in 2023.

“If both household debt and GDP continue to grow at low rates, it could hinder the recovery of household income and weaken household debt repayment capacity in the future,” Danucha said.

The National Credit Bureau’s data for the third quarter indicated that non-performing personal loans amounted to 1.16 trillion baht, accounting for 8.46 percent of total loans, an increase from 8.01 percent in the previous quarter. These statistics underscore the financial strain on Thai households, echoing similar debt concerns seen in the U.S. after the 2008 financial crisis.

Thailand faces a critical juncture in balancing the need for economic growth with addressing potential trade disruptions from the U.S. The situation calls for innovative policy measures targeting skill development and debt management. Parallel efforts must also target combating human trafficking and unfair labor practices. Key areas for further investigation include the evolving trade policies, the potential impacts of automation on labor markets, and effective policy reforms.