Thailand’s Economic Transformation Stalls as Reform Momentum Weakens

An IMF study finds that Thailand’s shift from low-productivity agriculture and informal services to higher-productivity industry and modern services has slowed in recent years, limiting growth potential. Reviving trade openness, education, financial access, and governance reforms is key to reigniting structural transformation and boosting long-term productivity.

Thailand’s economic success over the past four decades has been built on a powerful shift: millions of workers moved out of farms and into factories and service jobs, lifting productivity and incomes. This process, known as structural transformation, is a common path followed by countries as they develop. But new analysis by the International Monetary Fund suggests that Thailand’s transformation has slowed in recent years, raising concerns about future growth.

The IMF study, prepared by its Asia and Pacific Department using data from global research institutions such as the World Bank and UNU-Wider, takes a close look at how Thai workers are distributed across sectors and how efficiently labor is being used. The conclusion is clear: Thailand has made progress, but the job is far from complete.

Too Many Workers in Low-Productivity Jobs

In most growing economies, the share of workers in agriculture falls steadily as people move into more productive activities. Thailand has followed this pattern, but agriculture still employs about one-third of its workforce. That is unusually high for a country at Thailand’s income level.

The challenge does not end there. Even within the services sector, many Thai workers are concentrated in low-productivity activities such as small-scale retail trade and informal services. Meanwhile, high-productivity services like finance, technology, and business services generate strong output but employ relatively few workers. Industry and modern services produce a large share of Thailand’s economic value, yet they do not absorb enough labor.

This imbalance creates a wide productivity gap. Simply put, too many workers remain in sectors that generate relatively low output per person. That represents both a weakness and an opportunity. If more workers can move into higher-productivity sectors, overall growth could accelerate.

Why Structural Transformation Matters

Structural transformation is not just an economic buzzword. It is one of the main drivers of long-term growth. When workers shift from low-productivity jobs to higher-productivity ones, the entire economy becomes more efficient. This raises incomes, supports better living standards, and strengthens resilience.

The IMF measures this efficiency by comparing where workers are employed with how productive each sector is. Economies such as Korea and Malaysia have achieved strong results by ensuring that more workers are employed in high-productivity sectors. Vietnam and the Chinese mainland have also made rapid gains through export-led growth and reforms.

Thailand, by contrast, saw strong progress in the early 1990s but has experienced a slowdown since the mid-2010s. In recent years, the pace of improvement has stalled. Compared to several regional peers, Thailand appears to be moving more slowly in reallocating workers toward its most productive sectors.

What Is Slowing Thailand Down?

Several factors explain the slowdown. Trade openness, which once played a major role in Thailand’s development, has weakened in recent years. Private sector credit growth has slowed, limiting the ability of businesses to expand and invest. Gains in education continue, but not at a pace strong enough to drive major productivity jumps.

Governance challenges have also had an impact. Higher levels of perceived corruption and weaker institutional performance can discourage investment and reduce efficiency. Slower population growth has contributed to weaker overall labor dynamism.

There have been some positive developments. Informal employment has declined somewhat, helping improve labor quality. Favorable terms of trade and a more competitive exchange rate have also provided limited support. However, these gains have not been enough to offset the broader headwinds.

The Road Ahead for Thailand

The IMF’s message is not pessimistic. Thailand still has significant potential to boost productivity and growth. But doing so will require targeted reforms.

First, revitalizing trade policy and strengthening integration with regional and global markets could encourage sectoral upgrading. Second, investing more effectively in education, especially at the primary and secondary levels, would equip workers with the skills needed to enter higher-productivity jobs. Expanding vocational training could also help reduce skills mismatches.

Improving access to finance is equally important. Businesses need credit to grow, modernize, and hire more workers. At the same time, stronger governance, reduced corruption, and clearer regulations would create a more predictable and attractive business environment.

Thailand’s transformation is not over. The country has already achieved significant progress, but it must now complete the shift toward a more modern and productive economy. With the right mix of reforms in trade, education, finance, and governance, Thailand can unlock another wave of growth and secure a stronger economic future.