BoT sounds alarm on fragile labour market

The Bank of Thailand has issued a warning about the fragile state of Thailand's labor market, citing rising unemployment rates that may hinder domestic consumption. At a recent press briefing, Don Nakornthab, secretary of the Monetary Policy Committee (MPC), reported that Thailand's unemployment rate increased to 1.1% from a historic low of 0.8%.

The surge in unemployment, driven by job losses and registration for unemployment benefits, highlights the fragility of the labor market. Although the latest data show a slight decline in job losses, the trend remains concerning. The Bank of Thailand's estimate for the GDP contribution from the government's "Thais Help Thais Plus" co-payment scheme was revised downward, from 0.5 to 0.4 percentage points, reflecting the ongoing challenges in the labor market.

The regulator further lowered its forecast for private consumption growth in 2026 from 2.6% to 2.3% once the stimulus measures are removed. The combination of weak consumption and growing employment uncertainty could complicate Thailand's economic recovery, potentially exacerbating financial burdens on households and their capacity to repay debts.

Tris Rating's Boondhiva Cheewatragoongit emphasized that while the co-payment stimulus provides short-term support, a sustained improvement in household purchasing power is essential for long-term growth. The cumulative spending under the stimulus program reached approximately 162 billion baht, with the first phase providing a temporary boost to GDP growth.

However, the central bank warns that the stimulus should not replace the need for sustainable improvements in household spending capacity while maintaining fiscal flexibility. Thailand's high household debt, despite lower interest rates, remains a significant constraint on private consumption, as it lags behind regional counterparts.