Thailand’s fiscal crossroads: Time to act before pressures mount

By Jens Arnold, Charles Dennery and Philip Hemmings, OECD Economics Department

Thailand’s public debt is set to climb past 65% of GDP in 2025—up more than 25 percentage points since the pandemic and uncomfortably close to the legal ceiling of 70% (Figure 1). Such debt levels would not look particularly high in the context of OECD countries, but they do for an emerging market economy like Thailand with its comparatively low fiscal revenues. Lower revenues mean a larger share of the budget goes to servicing debt, and markets tend to be less forgiving when governments have limited fiscal room.  

At the same time, spending needs will rise over the medium term as social safety nets remain patchy amid a rapidly ageing population and climate-related challenges will require additional public resources. Therefore, putting public debt on a downward path needs to be achieved in tandem with accommodating spending pressures. The recent OECD Economic Survey of Thailand sets out how this can be done. 

Figure 1. Fiscal consolidation is needed to contain the public debt 

One way to reduce the public debt burden is through public-sector efficiency gains that lower costs while maintaining or even improving the quality of public services. Thailand’s National Economic and Social Development Plan ​(NESDC, 2022)​ rightly recognises shortfalls in the efficiency of government. Overlapping functions and limited collaboration within the public sector are one example, but there is also further scope for expanding digital platforms and e-government.

Raising spending efficiency alone will not suffice. Thailand will need a durable expansion of public revenues to meet rising social and development needs. Growth-enhancing public investment—in education, infrastructure and innovation—will depend on greater revenues, as will better healthcare and social protection for an ageing population. 

Expanding value-added tax (VAT) is one of the most promising ways of raising revenue capacity, as evidence suggests that this tax is relatively growth-friendly ​(Johansson, 2016)​ and currently underutilised by Thailand. Thailand introduced a VAT rate of 10% in 1992 but since the Asian financial crisis in the late 1990s a rate of 7% has remained in place. This rate is low compared to regional peers and to the OECD average of 19.2% (Figure 2). Setting the rate to 10% would be a reasonable first step towards additional revenue mobilisation, as suggested in Thailand’s latest Medium Term Fiscal Framework ​(State Fiscal Policy Committee, 2025)​. VAT revenue is also compromised by an extensive list of exemptions whose costs and benefits would warrant a careful examination.

Figure 2. Thailand’s standard VAT rate is relatively low 

Value added tax (VAT) rates in percent, 2024 

There is also scope for increasing revenues from social-security contributions and personal-income taxes. Social contributions are capped at an income level of THB 15 000 (USD 450), which is 87% of the average monthly wage in the private sector. This ceiling is considerably lower than equivalent ceilings in other Southeast Asian countries and could be increased ​(OECD, 2025)​. This would imply higher contributions from those with better incomes bringing more revenues to fund social security. Similarly, personal income tax kicks in only at roughly 1.5 times the average wage, a threshold far above those in most OECD and emerging-market countries (Figure 3). Lowering this threshold —carefully— could broaden the tax base without harming low-income households.

Figure 3. The tax threshold is relatively high 

Income threshold where single taxpayers start paying income tax  

Mobilising additional revenue sources can also be part of a shift away from informal, low-productivity activity towards greater formalisation. Strategies to achieve this shift include strengthening educational outcomes, improving the incentives generated by social protection schemes and streamlining business regulations, as covered in depth in the thematic chapter of the Economic Survey. 

Finally, stronger growth, and especially stronger productivity, would also help to make debt more sustainable. For this, the Economic Survey suggests removing restrictions to FDI, including foreign ownership restrictions in services, and creating a more level playing field between state-owned enterprises and private firms.  

With the right reforms, Thailand can maintain a strong pace of progress even amid global uncertainty. But acting now—before fiscal pressures harden—is vital to ensure that Thailand can spend on those policies that yield the highest dividend.  

For more information, please visit the OECD’s Economic Snapshot of Thailand webpage.

References

Johansson, A. (2016), “Public Finance, Economic Growth and Inequality: A Survey of the evidence”, OECD Economics Department Working Papers No. 1344, https://doi.org/10.1787/094bdaa5-en.

​NESDC (2022), The Thirteenth National Economic and Social Development Plan (2023-27), https://www.nesdc.go.th/article_attach/article_file_20230615134223.pdf. 

OECD (2025), Financing Social Protection through General Tax Revenues, Social Security Contributions and Formalisation in Thailand, OECD Publishing, Paris, https://doi.org/10.1787/b5cc1a43-en.

OECD (2022), Consumption Tax Trends 2022: VAT/GST and Excise, Core Design Features and Trends, OECD Publishing, Paris, https://doi.org/10.1787/6525a942-en.

​State Fiscal Policy Committee (2025), Medium Term Fiscal Framework Budget 2027-2030.