Tag: Bangkok

Several significant trends are set to shape the nation’s economic, technological and cultural landscape this year. These developments will unfold alongside significant challenges, including slow economic growth, rising household debt, political instability, climate change, environmental pressures, an ageing population leading to labour shortages, and cybersecurity threats.The emerging trends cover areas such as economic initiatives and policies, technological advancements, tourism and hospitality, as well as infrastructure and real estate. 

Together they highlight Thailand’s dynamic trajectory towards sustained economic growth, technological innovation, cultural inclusivity, and an enhanced global presence.The Bangkok Post has identified leading trends expected to define Thailand this year concerning tax reform initiatives, free trade agreements, the cost of electricity, the gradual emergence of virtual banks and Phuket’s luxury property market boom.

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Tax reform in the limelight

By Wichit Chantanusornsiri

In 2025, a key government policy to monitor is tax reform initiatives recently floated by Finance Minister Pichai Chunhavajira.

Mr Pichai said Thailand should follow the example of many countries that have reformed their tax systems by reducing personal and corporate income taxes while increasing consumption taxes, such as value-added tax (VAT).

The Fiscal Policy Office (FPO) has promoted tax reforms for more than a decade, but has not achieved much because of what are described as political challenges.

Following the pandemic in 2020-21 and the global economic slowdown, the government’s public debt level surged compared with the pre-Covid period.

In September 2019, the government’s public debt totalled 41.1% of GDP. This figure rose during the pandemic, prompting the government to raise the public debt ceiling from a maximum of 60% to 70%.

As of October 2024, public debt tallied 64%, causing fiscal pressure and reducing fiscal space, according to the FPO.

Government revenue has not increased significantly relative to GDP. Over the past decade, state revenue as a percentage of GDP was the highest in 2016, at 16.4%.

Following the pandemic and its impact on the global economy, government revenue as a percentage of GDP in 2022 was at its lowest point in 10 years, at 14.6%.

In fiscal 2023, the figure increased slightly to 14.9%.

Moreover, revenue from categories that are difficult for the government to cut, such as civil servant salaries, civil servant benefits, public welfare and contributions to various funds that mandate government contributions, such as Social Security and the Government Pension Fund, as well as expenditures for principal and interest payments on government debt, have increased.

In fiscal 2023, these expenditures accounted for 67.2% of the government’s total expenditure budget, up from 65.8% in fiscal 2022.

The FPO considers tax system reforms, based on the approach proposed by the Finance Minister, to be essential.

Studies conducted in Organisation for Economic Co-operation and Development countries found having high personal income tax and corporate income tax rates can lead people to feel discouraged from working.

In other words, once they reach a certain income level, they may decide to quit their jobs and instead rely on government welfare, a phenomenon particularly noticeable in Scandinavian countries.

However, Thailand cannot adopt a Scandinavian-style welfare state because of insufficient government revenue.

The approach should be to encourage people to work and earn income, with a reduced personal income tax rate to motivate people to work more, according to authorities.

As the government seeks to bolster revenue to pay for rising expenses, raising the VAT would be appropriate, said Mr Pichai.

Increasing VAT by 1% is expected to generate around 70-80 billion baht in state revenue. Although many essential goods for people’s livelihoods are exempt from VAT, a VAT hike is expected to affect low-income groups and vulnerable segments in society.

Therefore, any VAT increase should be accompanied by measures to assist these groups in order to offset the impact, said the minister.

Danucha Pichayanan, secretary-general of the National Economic and Social Development Council, previously suggested that if VAT is hiked, the additional revenue should be used to care for the country’s steadily growing ageing population.

Thailand became a “complete aged society” in 2024, with individuals aged 60 and older accounting for 20% of the total population.

He said the idea of increasing VAT should be considered by the government as one option to support the elderly population.

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Sector gets set for onset of virtual banks

By Somruedi Banchongduang

Thailand is on the verge of a major transformation of its banking sector thanks to the introduction of virtual banks.

The Bank of Thailand launched a licensing process designed to promote financial inclusion and deliver innovative banking solutions, primarily through digital channels.

The regulator’s application window closed on Sept 19 and five business groups, namely Gulf Energy Development, SCB X Group, Ascend Money Group, Sea Group and Lighthub Asset, submitted their proposals for virtual bank licences.

The central bank intends to grant only three licences in the initial phase.

The majority of the applicants are large, well-established companies with extensive national reach, and many have formed strategic partnerships with both local and international firms.

For example, the Gulf consortium includes Gulf Energy Development, PTT Group and Krungthai Bank.

The SCB X consortium is made up of SCB X, the holding company of Siam Commercial Bank (SCB); KakaoBank, South Korea’s largest digital bank; and WeBank, a global digital bank renowned for its advanced technology.

The Ascend Money consortium is a financial technology firm backed by the Charoen Pokphand Group.

Meanwhile, the Shopee consortium is led by Sea Ltd, the parent company of Shopee, along with partners such as Bangkok Bank, VGI (an advertising and financial services arm of BTS Group), Saha Group and Thailand Post.

A consortium comprising Lighthub Asset and WeLab has also submitted an application for a virtual banking licence.

According to Chayawadee Chai-anant, the regulator’s assistant governor for corporate relations, the central bank is issuing three virtual bank licences in order to maintain the stability of the domestic financial market and protect depositors from risks associated with new business ventures.

The central bank expects virtual banks to begin operations by the middle of 2026, aiming to foster innovation in financial services, particularly for unbanked and underbanked populations, in order to promote financial inclusion.

Kris Chantanotoke, chief executive of SCB, Thailand’s oldest bricks-and-mortar bank founded 117 years ago, said while the introduction of virtual banks would intensify competition in Thailand’s banking sector, SCB is not overly concerned.

The bank already started transitioning to digital banking via AI adoption through its “Digital Bank with Human Touch” strategy.

Despite this, Mr Kris said the high level of household debt remains a significant hurdle for both traditional and virtual banks in the retail sector.

The regulator’s requirement for virtual banks to serve unbanked and underbanked populations is a key condition for obtaining a licence, posing a significant challenge for the new entrants, he said.

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Electricity prices in line for reduction this year following power tariff cut

By Yuthana Praiwan

Whether electricity prices rise or fall after April 2025 needs to be closely watched, following the state decision to trim the power tariff to 4.15 baht per kilowatt-hour (unit), down from 4.18 baht per unit in 2024.

The new power tariff, which is used to calculate power bills, is applicable from January to April 2025.

Energy Minister Pirapan Salirathavibhaga said he was informed of the slight cut after talks between the Energy Regulatory Commission (ERC) and state agencies.

The ERC announced in December 2024 that it would ask businesses and households in an online survey to decide whether they want the power tariff to remain unchanged at 4.18 baht per unit or increase during the first four months of 2025.

The commission eventually decided to put a cap on the 4.15-baht rate, reasoning that authorities agreed with a proposal to reduce people’s financial burden.

According to the ERC, key factors that determine electricity prices include gas prices as well as a need to allocate part of power bills to reimburse the Electricity Generating Authority of Thailand (Egat) and PTT Plc, the national oil and gas conglomerate.

Egat needs money to keep its financial status healthy after posting huge losses from past electricity price subsidy schemes.

Another portion of electricity bills is to be given to Egat and PTT for their sales of natural gas at below-market prices to help cap power costs.

Gas, from domestic sources and liquefied natural gas (LNG) imports, makes up 60% of the fuels used to generate power in Thailand.

The limited domestic gas supply has led Thailand to import LNG, but because of the fluctuation of global gas prices the country may need to buy expensive LNG, which will increase electricity generation costs.

Though LNG prices in the spot market may fall in certain periods, this does not mean the power tariff will decline because the ERC is still required to pay back money to Egat and PTT.