Thailand accelerates applied AI across core sectors

Thailand’s strategic shift toward applied artificial intelligence marks a clear departure from digital infrastructure promotion to sectoral integration aimed at boosting competitiveness. Nominal GDP is projected at approximately USD 538 billion for calendar 2025, with real growth near 2.2%. Headline inflation remains negative at –0.7% year on year as of September 2025, and the Bank of Thailand’s policy rate stands at 2.50%.

The baht (THB=X) trades around 35.2 per US dollar, with international reserves holding at about USD 210 billion—providing over six months of import cover. Fiscal and monetary policy remain broadly accommodative to offset weak private consumption and persistent household debt, now above 87% of GDP.

The policy mechanism focuses on three principal channels. First, manufacturing—accounting for 24% of GDP and over 60% of export receipts—is the primary target for AI-enabled productivity gains. Machine vision, predictive maintenance, and process automation in automotive and electronics supply chains are projected to lift labour productivity by 4–6% over a three-year horizon, compressing unit labour cost growth and stabilising margins. Second, logistics and service sector efficiency: AI-driven network optimisation and automated inventory management can reduce lead times and operating costs, with potential margin gains of 100–150 basis points for leading logistics and transport operators. Third, fiscal enhancement: AI-supported tax analytics and digital procurement aim to improve compliance and transparency, targeting an increase in tax-to-GDP by 0.5 percentage points by 2027. This is significant as Thailand’s general government gross debt remains near 62% of GDP, and fiscal space will depend increasingly on revenue-side efficiency given structural demographic pressures.

Regionally, Thailand’s strategy benchmarks against Singapore and Malaysia. Singapore commits 0.8% of GDP annually to AI-related R&D and remains the leader in deployment quality, while Malaysia is scaling industrial AI through targeted incentives and FDI attraction. Thailand, with a larger industrial base, pursues cross-sector AI adoption through both public incentives and private capital mobilisation. The SET Index (SET) is up 4.1% year to date as of late October 2025, with logistics and technology stocks outperforming. Delta Electronics Thailand (DELTA.BK) continues to invest in automation, while Advanced Info Service (ADVANC.BK) expands data centre and AI analytics offerings. Fund flows into Thailand-focused vehicles, including THD, reflect early investor rotation toward digital transformation themes.

Macro transmission channels are clear. Accelerated productivity in manufacturing and logistics supports export resilience, even as global demand cycles moderate. Improved efficiency compresses cost bases and supports profitability, which can anchor SET index performance against regional peers. Sustained AI investment is likely to support a medium-term rebound in total factor productivity, bolstering potential growth beyond the current 2–2.5% range. On the monetary side, continued efficiency gains could help contain inflation once global input prices normalise, creating room for gradual real policy rate reductions. A stronger baht, underpinned by current account stability and reserves, may tighten export margins but is offset by value-added gains from technology adoption.

Market participants are focused on quantifiable proof points. Investors will scrutinise corporate disclosures for AI-linked capex (target: at least THB 20 billion for 2025), margin improvement in quarterly results, and sectoral productivity metrics in manufacturing and logistics. The government’s credibility will be measured by incremental tax revenue, reduction in procurement leakage, and the pace of upskilling to support digital transition. On the policy front, credible delivery of AI-enhanced public administration and tax analytics is expected to compress risk premia on sovereign bonds and support external portfolio flows. Regional allocators will also watch for sustained SET outperformance relative to ASEAN tech and logistics indices.

Forward indicators are defined. By end-2026, success will be reflected in AI-related fixed investment growth exceeding 10% per year, manufacturing labour productivity up by at least 5% cumulatively, tax-to-GDP rising by 0.5 percentage points, and SET technology and logistics sub-indices outperforming regional benchmarks by at least 150 basis points. If the baht holds within a 34–37 range and reserves remain above six months of imports, Thailand will have achieved structural progress. Shortfalls on these markers would widen fiscal and credit risk premia, erode market confidence, and delay the transition to a higher-productivity equilibrium.