Economy of Thailand
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|Economy of Thailand|
|Rank||32nd (nominal) / 24th (PPP) (IMF, 2012)|
|Currency||Thai baht (THB)|
|Fiscal year||1 October – 30 September|
|Trade organisations||WTO, APEC, IOR-ARC, ASEAN|
|GDP||THB11.375 trillion (USD366 billion) (2012)|
|GDP growth||6.5% (2012)|
|GDP per capita||THB167,508 (USD5,390) (2012)|
|GDP by sector||Agriculture (8.4%), Industry (39.2%), Services (52.4%) (2012)|
|Inflation (CPI)||3.02% (Headline) (2012)
2.09% (Core) (2012)
below poverty line
|Gini coefficient||0.484 (income) (2011)
0.375 (expenditure) (2011)
|Labour force||39.41 million (2012)|
|Main industries||Automobiles and Automotive parts (11%), Financial Services (9%), Electric appliances and components (8%), Tourism (6%), cement, auto manufacturing, heavy and light industries, appliances, computers and parts, furniture, plastics, textiles and garments, agricultural processing, beverages, tobacco|
|Ease of Doing Business Rank||18th|
|Exports||USD226,155.8 million (2012)|
|Export goods||textiles and footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliances|
|Main export partners||China 12%, Japan 10.5%, U.S. 9.6%, Hong Kong 7.2%, Malaysia 5.4%, Singapore 5%, Indonesia 4.4% (2011 est.)|
|Imports||USD217,818.9 million (2012)|
|Import goods||capital goods, intermediate goods and raw materials, consumer goods, fuels|
|Main import partners||Japan 18.5%, China 13.4%, UAE 6.3%, U.S. 5.9%, Malaysia 5.4%, South Korea 4% (2011 est.)|
|FDI stock||USD150,517 million (2011)|
|Gross external debt||USD134,180 million (January 2013)|
|Public debt||43.3% of GDP (Q1/Fiscal Year 2013)|
|Revenues||THB1,977.5 billion (Fiscal Year 2012)|
|Expenses||THB2,148.4 billion (Fiscal Year 2012)|
|Foreign reserves||USD177.8 billion (29 March 2013)|
The Economy of Thailand is a newly industrialized economy. It is a heavily export-dependent economy, with exports accounting for more than two thirds of its gross domestic product (GDP). In the year 2012, according to the Office of the National Economic and Social Development Board, Thailand had a GDP at current market prices of THB11.375 trillion (USD366 billion). In 2012, the Thai economy grew by 6.5 percent, with the headline inflation rate of 3.02 percent and the current account surplus of 0.7 percent of the country's GDP. In 2013, the Thai economy is expected to grow in the range of 4.2-5.2 percent. In the first quarter of 2013 (Q1/2013), the Thai economy grew by 5.3 percent (YoY).
The industrial and the service sectors serve as the two main sectors in the Thai gross domestic product, with the former accounting for 39.2 percent thereof. Albeit often seen as an agricultural country, Thailand has an agricultural sector which shares only 8.4 percent of the GDP – lower than the trading sector and the logistics & communication sector which account for 13.4 percent and 9.8 percent of the GDP respectively. The construction & mining sector adds 4.3 percent to the country’s gross domestic product. In addition to this, other service sectors - which include the financial, the educational, the hotel & restaurant sectors etc. - account for 24.9 percent of the country's GDP. The telecommunications in Thailand as well as new types of Services trade are emerging as the center for the industrial expansions and economic competitiveness for the economy of Thailand.
Thailand is the second largest economy in Southeast Asia, after Indonesia. However, its per capita GDP in 2012 was relatively low at USD5,390. In Southeast Asia, Thailand ranks midway in terms of its per capita GDP, after Singapore, Brunei and Malaysia. As of 29 March 2013, Thailand holds USD177.8 billion in international reserves, the 2nd largest in Southeast Asia, after Singapore. With regard to the volume of external trade, Thailand also ranks 2nd in Southeast Asia, after Singapore.
With regards to social and development indicators, Thailand is recognized by the World Bank as “one of the great development success stories”. It is now an upper-middle income country, despite a low per capita gross national income (GNI) of USD4,451 and ranking 103rd in the Human Development Index (HDI). Within 22 years, the percentage of the population living below the national poverty line decreased dramatically from 65.26% in 1988 to 13.15% in 2011, according to the NESDB's new poverty baseline. As of the fourth quarter of the year 2012, its unemployment rate is 0.5 percent, making Thailand the country with the fourth lowest unemployment rate in the world after Cambodia, Monaco and Qatar. The headline inflation rate as of the first quarter of 2013 remains controllable at 3.09% with the policy interest rate of 2.75%.
Thailand was formerly known as Siam and became open to foreign contact in the pre-modern era. Despite the scarcity of resources in Siam, the coastal ports and cities, as well as those at the river mouth, were among the early economic centers. These centers welcomed foreign merchants from Persia, Arab countries, India and China.
The rise of Ayutthaya in the fourteenth century was connected to renewed Chinese commercial activity at the time and the kingdom became one of the most prosperous trade centers in Asia.
In the nineteenth century, when the capital of the Kingdom moved to Bangkok, foreign trade, particularly with China, became the focus of the government. Chinese merchants came to trade, and some settled down and received official positions. A number of Chinese merchants and migrants became high dignitaries in the court. From the mid-nineteenth century onward, European merchants became increasingly active. The Bowring Treaty, which was signed in 1855, guaranteed the privileges of the British traders. The Harris Treaty of 1856, which updated the Roberts Treaty of 1833, extended the same guarantees to American traders.
Meanwhile, the domestic market developed slowly. Some academics suggest that the control of serfs was the root of domestic stagnation. Most of the male population in Siam were in the service of court officials while their wives and daughters might have done some small-scale trade in local markets. Moreover, those who were heavily indebted might also sell themselves to be slaves. Eventually, Siam lacked labor and "national" entrepreneurs. King Rama V, thus, abolished serfdom and slavery in 1901 and 1905.
From the early twentieth century to the end of World War II, the economy of Siam gradually became part of the global system. Major entrepreneurs were ethnically Chinese who eventually became Siamese nationals. Exports of agricultural products, especially rice, were the most important. Thailand has been among the top rice exporters in the world. During this period, however, the Siamese economy suffered greatly from the Great Depression in the 1920s - 1930s, which was one of the causes leading to the Siamese revolution of 1932.
Life in Thailand
Postwar domestic as well as international politics played a highly significant role in the Thai economic development in most of the Cold War era. From 1945 to 1947, when the Cold War had not yet begun, the Thai economy continued to suffer greatly from the Second World War. During the War, the Thai Government - led by Field Marshal Luang Phibulsongkram - allied with Japan and declared war against the Alliance. After the war, as a result, Thailand had an obligation to supply 1.5 million tons of rice to the Western allied countries without charge, which was a burden to the country's economic recovery. The then Thai Government tried to solve this problem by establishing the Rice Office to oversee and control rice trading. In this period, the multiple exchange rate system was introduced amid the fiscal as well as monetary problems. Moreover, the Kingdom also confronted shortage of consumer goods.
In November 1947, a short democratic period of Thailand was ended by a 2490 military coup. Nonetheless, it was also in 1947 that the Thai economy regained its momentum. In his dissertation, Somsak Nilnopkoon considers the period of 1947-1951 to be the booming period. By April 1948, the coup group brought back Field Marshal Luang Phibulsongkram, the wartime Prime Minister, to prime ministership once again. No sooner had he been appointed than he found himself being hung on the power struggle between his juniors. Consequently, to preserve his own political power, Luang Phibulsongkram began an anti-communist campaign to seek support and aid from the United States. As a result, from 1950 onward, Thailand received both military and economic aid from the U.S.. With regard to his economic policy, the Phibulsongkram Government set up many state enterprises, which were seen as a culmination of economic nationalism in the country. In this period, the State (or, actually, the bureaucrats) dominated capital allocation in the Kingdom in the way that all of the country's large-scale investments were initiated and, in many cases, conducted by the State - which is why Dr.Ammar Siamwalla, one of Thailand's most prominent economists, calls it the period of bureaucrats capitalism.
However, in 1955, Thailand began to see a huge change in its economy. Domestic as well as international politics played a very important role in this. By 1955, the internal power struggle between the two (main) factions of the Phibul regime - led by Police General Phao Sriyanonda on the one hand, and General (later, Field Marshal) Srisdi Dhanarajata on the other - became fierce to the degree that Police General Phao Sriyanonda sought support of the U.S. for a coup against the Phibul regime (but was rejected). As a result, Field Marshal Luang Phibulsongkram decided to play a democratic game by trying to democratize his own regime, part of which was to seek popular support by developing the national economy. To achieve this, once again, he turned to the U.S., asking to emphasize on economic rather than military aid. The U.S. responded by giving an unprecedented degree of economic aid to the Kingdom from 1955 to 1959. In addition to this, the Phibulsongkram Government also made some important changes in the country's fiscal and monetary policies. One of these was the cancelation of the multiple exchange rate system and the introduction of the fixed & unified exchange rate system, the system which was in use in the Kingdom until 1984. In the late Phibul period, however, the Phibulsongkram Government decided to neutralize trade and conducted secret diplomacy with the People's Republic of China - dissatisfying the United States.
Albeit his several attempts to preserve his power, Field Marshal Luang Phibulsongkram could not protect his prime ministership. On 16 September 1957, Field Marshal Srisdi Dhanarajata successfully organized a 2500 military coup ousting Field Marshal Luang Phibulsongkram, Field Marshal Phin Choonhavan and Police General Phao Sriyanonda (the Phibul-Phin-Phao clique) from power. In terms of economic development, the Srisdi regime did not only continue what the Phibul regime had done since 1955, but it also significantly intensified this development with full support from the U.S. due to the regime's decision to cut all ties with the People's Republic of China and its full support for the U.S. operation in Indochina. The Srisdi regime, in power from 1957 to 1973, developed a great deal of the country's infrastructure and privatized state enterprises which were unrelated to the country's infrastructure. In this period, a number of key official economic institutions were established - such as the Bureau of Budget, the Office of the National Economic and Social Development Board (NESDB) and the Board of Investment of Thailand (BOI). The use of the National Economic and Social Development Plan was also initiated in 1961. Most important to the Thai economy in this period might be that the regime introduced the market-oriented Import-Substituting Industrialization (ISI) which led to steady and rapid economic expansion in the Kingdom in the 1960s. According to former President Richard M. Nixon's article, published in Foreign Affairs in 1967, Thailand had entered a period of rapid growth in 1958 with an averaged growth rate of 7 percent a year since then.
From the 1970s to 1984, however, Thailand suffered from many economic problems - ranging from decreasing American investment, current account deficit, a sudden rise in oil price, and inflation. Even worse, domestic politics was unstable. In addition to this, international politics rendered an unfriendly environment to the Kingdom. With the Vietnamese Occupation of Democratic Kampuchea (Cambodia) on 25 December 1978, Thailand at once became the "real" front line state in fighting against communism, as the Kingdom was surrounded by three unfriendly, communist Indochinese countries and a socialist Burma under General Ne Win. The succeeding Governments tried to solve the economic problems by implementing several measures, some of which (e.g. promoting export and tourism ) have become crucially important for the Thai economy until today.
One of the most significant (and the most remembered) measures to deal with the confronting economic problems at that time came under General Prem Tinsulanonda's Government(s) - in power from 1980 to 1988. Between 1981 and 1984, the Thai Governments decided to devalue the national currency, the Thai Baht (THB), three times. First, on 12 May 1981, the Government devalued the Baht by 1.07 percent, from THB20.775/USD to THB21/USD. Second, on 15 July 1981, it devalued the Baht again by 8.7 percent, from THB21/USD to THB23/USD. However, most significant is the third devaluation. On 2 November 1987, the Thai Government decided to devalue the Baht by 15 percent, from THB23/USD to THB27/USD. In addition to this, the Government decided to replace the country's fixed exchange rate (with the U.S. Dollar) system with the so-called "multiple currency basket peg system" (in which the U.S. Dollar shared 80 percent of the overall weight, anyway). Calculated from the IMF's World Economic Outlook Database, in the period of 1980-1984, the Thai economy had an averaged GDP growth rate of 5.4 percent.
In addition to the third devaluation of the Thai Baht, on 22 September 1985, Japan, the United States, the United Kingdom, France and West Germany agreed to sign the Plaza Accord to depreciate the U.S. Dollar in relation to the Japanese Yen and the German Deutsche Mark. This meant that as the U.S. Dollar accounted for 80 percent in the Thai basket of currencies, the Thai Baht was also depreciated further - making Thailand's export even more competitive and making the country more attractive to Foreign Direct Investment (FDI), especially from Japan, whose national currency appreciated considerably since 1985. In 1988, Thailand became more democratic after General Prem Tinsulanonda decided to step down and was succeeded by Major General (later, General) Chatichai Choonhavan, the first democratically elected Prime Minister of Thailand since 1976. Moreover, the Third Indochina War was also petering out, with Vietnam gradually retreating from Cambodia by 1989. All of these enhanced the Thai economic development.
After the Baht devaluation in 1984 and the Plaza Accord in 1985, although the Government sector continued to be in trouble in the first stage due to several fiscal constraints, the Thai private sector began to soar. The outcome of the country's improved foreign trade situations and an influx of foreign direct investment, mainly from Japan, was the booming decade of the Thai economy from 1987 to 1996. Even though Thailand began to promote exports before, it was not until this period that the country fully shifted from Import-Substituting Industrialization (ISI) toward Export-Oriented Industrialization (EOI). In these ten years, the Thai GDP - calculated from the IMF's World Economic Outlook Database - had an averaged growth rate of 9.5 percent per year, with the peak at 13.3 percent in 1988. In the same decade, the volume of the Thai export of goods and services had an averaged growth rate of 14.8 percent, with the peak at 26.1 percent in 1988.
However, in the same decade, many economic problems persisted. From 1987 to 1996, Thailand also saw a huge current account deficit with an average of -5.4 percent of the GDP per year, and the deficit continued to increase. In 1996, the current account deficit accounted for -7.887 percent of the country's GDP (or USD14.351 billion). Capital shortage in the country was another problem. The 1st Chuan Leekpai Government, in power from September 1992 to May 1995, tried to solve this problem by granting the so-called Bangkok International Banking Facilities (BIBFs) to the Thai banks in 1993. The unexpected outcome of this solution was that it led to even more severe economic problems. This solution allowed the banks with the BIBF licenses to take advantages from the high interest rate of Thailand by taking out a low interest loan from foreign financial institutions and then loaning it to Thai businesses with a higher interest rate (but still lower than the interest rate of the internal financial institutions). As a result, by 1997, external debt soared uncontrollably to USD109,276 billion, 65 percent of which was short-term debts, while Thailand only had USD38,700 billion as international reserves. Even worse, many of these loans were used in the real estate business - causing a rapid expansion of bubble economy. In addition to this, by late 1996, there was a great loss of confidence in the country's financial institutions. In 1996, the Thai Government closed 18 trust companies and 3 commercial banks. In 1997, 56 financial institutions were closed by the Government.
All of these problems led to another problem, i.e. currency attack. Having known all of the economic problems confronting the Kingdom and that Thailand had used the multiple currency basket peg exchange rate, the foreign speculators (including the Hedge Funds) were certain that the Thai Government would soon have to devalue the Baht. At that time, the Baht was under pressure from both the spot market and the forward market. In the spot market, in order to force devaluation, the speculators took out a loan in Baht and sold it for U.S. Dollars. In the forward market, the speculators - strongly believing that the Baht would soon be devalued - bet against the currency by entering into contracts with dealers who would give U.S. Dollars in return for an agreement to repay a specific amount of Baht some months in the future. Within the Government at that time, there was also a serious call from Dr.Virapong Ramangkul, one of Prime Minister Chavalit Yongchaiyudh's economic advisors, to devalue the Baht. The situation of the Baht was so severe that General Prem Tinsulanonda, the highly respected former Prime Minister, asked General Chavalit Yongchaiyudh to take Dr.Virapong Ramangkul's warning seriously. General Chavalit Yongchaiyudh, however, ignored his voice and, instead, relied on the Bank of Thailand - led by the then Governor Rerngchai Marakanond - who finally spent as much as USD24,000 billion (around two-thirds of the Kingdom's international reserves) to protect the Baht value. As a result, on 2 July 1997, Thailand had only USD2,850 billion left as international reserves and, hence, could no longer fight against currency attack to protect the pegged value of the Thai baht. In the same day, Mr.Rerngchai Marakanond declared to float the national currency. This is usually marked as the beginning point of the 1997 Asian Financial Crisis.
|Year||GDP at constant prices (THB Trillions)||GDP at constant prices growth rate (percent change)||GDP at current prices (USD Billions)||Volume of Export of Goods and Services (percent change)||Current Account Balance (percent of GDP)|
Source: Adapted from the IMF's World Economic Outlook Database, April 2012.
Shortly speaking, the entire economy of Thailand collapsed from the 1997 Asian Financial Crisis - which itself started from Bangkok. Within a few months, the value of the Thai Baht floated from THB25/USD to the lowest point at THB56/USD. The Stock Exchange of Thailand (SET) dropped dramatically from the peak at 1,753.73 points in 1994 to the lowest point at 207.31 points in 1998. In terms of the national currency, the country's GDP dropped from THB3.115 trillion at the end of 1996 to THB2.749 trillion at the end of 1998. In terms of the U.S. Dollar, it took Thailand as long as 10 years to regain the same amount of the GDP it had in 1996. The unemployment rate went up nearly threefold, from 1.5 percent of total labor force in 1996 to 4.4 percent in 1998. A sharp and sudden decrease in the Baht value also meant that the value of external debts increased sharply and suddenly - making gigantic financial institutions crumble. Many of them were partly sold to foreign investors while some of them became bankrupt. Finally, because as of 2 July 1997, Thailand had only USD2,850 billion international reserves left from the Bank of Thailand's national currency protection measures, the Thai Government had to take a loan from the International Monetary Fund (IMF). Overall, Thailand received USD17.2 billion of bilateral and multilateral assistance.
The crisis also had both direct and indirect impact upon Thai politics. The direct impact was that General Chavalit Yongchaiyudh, the then Prime Minister of the Kingdom, resigned on 6 November 1997, after he had encountered a great deal of pressure, and was succeeded by the then leader of the Opposition - Mr.Chuan Leekpai. The 2nd Chuan Leekpai Government, in power from November 1997 to February 2001, tried to conduct a great deal of economic reform based upon the IMF-guided philosophy of neoliberal capitalism. His Government pursued very strict fiscal and financial policies, e.g. keeping a high interest rate while cutting government spending. In addition to this, the 2nd Chuan Leekpai Government issued 11 laws which the Government referred to as "bitter medicines", while the critics called them "the 11 nation-selling laws". The Government and its supporters often pointed out that by these measures, the Thai economy at least got better. In 1999, Thailand had a positive GDP growth rate for the first time since the crisis. However, it appears that there are more critics than supporters of the 2nd Chuan Leekpai Government's economic measures. A lot of critics said that the Government should not have believed the IMF, who was wrong from the first place, and should find other sources of loans. A cut in government spending actually harmed economic recovery. Unlike economic problems in Latin America and Africa, the Asian Financial Crisis was born out of the private sector. The same set of IMF measures should never have been applied to solve a different kind of problem. The positive growth rate the country saw in 1999 was rather because the country's GDP had gone down for two consecutive years already - especially, as much as -10.5 percent in 1998 alone. In fact, in terms of the Thai Baht, it was not until 2002 (and, in terms of the U.S. Dollar, not until 2006) that Thailand could have the same amount of GDP it had in 1996. Additionally, there was a loan from the Miyazawa Plan coming in to urge the economy in 1999. The issues of "whether or not" and "to what extent" the 2nd Chuan Leekpai Government did really "help" recover the Thai economy, therefore, remains controversial.
The most important indirect impact of the financial crisis upon Thai politics was the Rise of Thaksin. Largely due to the (alleged) failure of the 2nd Chuan Leekpai Government in recovering the country's economy, Police Lieutenant Colonel Thaksin Shinawatra's Thai Rak Thai Party won a landslide victory over Mr.Chuan Leekpai's Democrat Party in the 2001 general election, and took office in February 2001. Although weak export demand held the GDP growth rate to 2.2 percent in his first year of administration, the 1st Thaksin Shinawatra Government did very well in 2002 to 2004 - with the growth rates of 5.3 percent, 7.1 percent and 6.3 percent, respectively. His set of policies was later called Thaksinomics. Under his first term of administration, Thailand could regain momentum over the economy and could pay off all of the IMF's debts by July 2003 - two years ahead of the schedule. Despite these, an issue "to what extent" Thaksinomics was successful and good for Thailand also emerges from critics and remains controversial. Nevertheless, the (alleged) success of his economic policies was one of the reasons why his party won another landslide victory over the Democrat Party in the 2005 general election.
However, Thaksin's second term of administration was not so smooth and not so successful as his first term. On 26 December 2004, the Indian Ocean Tsunami took place, and had an impact over the first quarter of the Thai GDP in 2005 (Q1/ 2005). The Yellow Shirts phenomenon, a coalition of protesters against Thaksin, also began to emerge in 2005. In 2006, the political situations in Thailand became so strained that Thaksin finally dissolved the parliament and called for a general election amidst fierce criticism. The 2006 general election was organized in April, but was boycotted by the main opposition parties. Thaksin's party won again; however, the election was declared invalid by the Constitutional Court. The new 2006 general election was scheduled for October 2006, but was canceled because on 19 September 2006, a group of soldiers calling themselves the Council for Democratic Reform under the Constitutional Monarchy - led by General Sonthi Boonyaratglin - organized a coup ousting Thaksin while he was in New York, preparing for a speech at the General Assembly of the United Nations. However, in the last year of the 2nd Thaksin Government, the Thai GDP grew by 5.1 percent. On the whole, under the Thaksin Governments, Thailand's overall ranking in the IMD Global Competitiveness Scoreboard rose significantly from the 31st in 2002 to the 25th in 2005, before falling to the 29th in 2006.
After the coup, once again, the economy of Thailand suffered from its politics. From the last quarter of the year 2006 (Q4/ 2006) through the year 2007, Thailand was under the military junta regime - led by General Surayud Chulanont, who was appointed as the Prime Minister in October 2006. The GDP growth rate slowed down from 6.1 percent (YoY), 5.1 percent (YoY) and 4.8 percent (YoY) in the first three quarters to 4.4 percent (YoY) in Q4/ 2006. Moreover, Thailand's ranking in the IMD Global Competitiveness Scoreboard significantly fell from the 26th in 2005 to the 29th in 2006, and then to the 33rd in 2007. Thaksin's plan for massive infrastructure investments was never mentioned again until 2011 when his younger sister, Yingluck Shinawatra, came into office. In 2007, however, the Thai economy grew by 5 percent. On 23 December 2007, the military Government held the 2007 general election. The pro-Thaksin People's Power Party, led by Mr.Samak Sundaravej, won a landslide victory over Mr.Abhisit Vejjajiva's Democrat Party - which is usually recognized as Thaksin's 3rd landslide victory in the country's general election.
However, under the People's Power Party-led Government, the country fell into political turmoil. When this was combined with an impact from the U.S. financial institution crisis in the last two quarters of year (Q3-Q4/ 2008), the Thai GDP growth rate in 2008 slumped to 2.5 percent. Before the People's Alliance for Democracy (PAD) or the Yellow Shirts reconvened in March 2008, however, the Thai GDP grew by 6.5 percent (YoY) in the first quarter of the year (Q1/ 2008). In addition, Thailand's overall ranking in the IMD World Competitiveness Scoreboard rose substantially from the 33rd in 2007 to the 27th in 2008. Things began to get worse when the Yellow Shirts occupied the Government House of Thailand in August 2008. On 9 September 2008 the Constitutional Court delivered a decision disqualifying Samak Sundaravej from his prime ministership. Mr.Somchai Wongsawat, Thaksin's brother-in-law, succeeded Samak Sundaravej as the Prime Minister of the Kingdom on 18 September 2008. Around this time, in the U.S., the financial institution crisis hit its peak while the Yellow Shirts were still in the Government House - impeding the Government to work on a regular basis. As a result, the GDP growth rate dropped from 5.2 percent (YoY) in Q2/ 2008 to 3.1 percent (YoY) and -4.1 percent (YoY) in Q3-Q4/ 2008. Even worse, from 25 November, to 3 December 2008, the Yellow Shirts - protesting against Mr.Somchai Wongsawat's prime ministership - seized the two Bangkok airports (both Suvarnabhumi and Don Muang), which severely hurt Thailand's image and economy. On 2 December 2008, the Thai Constitutional Court delivered a decision dissolving the People's Power Party, which also meant ousting Mr.Somchai Wongsawat from his prime ministership.
By the end of 2008, the coalition government - led by Mr. Abhisit Vejjajiva's Democrat Party - was formed. "Legitimacy of the Abhisit government has been questioned since the first day that the Democrat party took the office in 2008 as it was allegedly formed by the military in a military camp". As a result, the Government came under pressure from not only a negative impact from the U.S. financial institution crisis but also the Red Shirts - who denied Mr. Abhisit Vejjajiva's prime ministership and called for a fresh election to be held as soon as possible. However, Mr. Abhisit Vejjajiva rejected the call until he decided to dissolve the parliament for a fresh election in May 2011. In his first year of administration (i.e. in 2009), Thailand saw a negative growth rate for the first time since the 1997 financial crisis. In 2009, the Thai GDP grew by -2.3 percent - reflecting a huge impact from the U.S. financial institution crisis on the Kingdom. In 2010, however, the country saw a sharp rebound with the growth rate of 7.8 percent. In the first half of 2011, when the political situations in the country were relatively calm, the Thai GDP grew by 3.2 percent (YoY) and 2.7 percent (YoY) in Q1-Q2/ 2011, respectively. Under his administration, albeit with a sharp rebound in 2010, Thailand's ranking fell from the 26th in 2009 to the 27th in 2010 and 2011. In addition to this, with regard to infrastructure, the country's competitiveness has become worse and worse since 2009.
In the 2011 general election, the pro-Thaksin Pheu Thai Party won a landslide victory over the Democrat Party once again. Thaksin's youngest sister Ms.Yingluck Shinawatra succeeded Mr. Abhisit Vejjajiva as the Prime Minister of the Kingdom. Elected in July, the Government - led by the Pheu Thai Party - began its administration in late August. No sooner had Yingluck come into office than she found that some parts of the country had already been flooded; furthermore, many of the rest were soon going to be inundated. From 25 July 2011 to 16 January 2012, Thailand confronted historic flood covering 65 out of the Kingdom's 77 provinces. As of December 2011, according to the World Bank, the total damages and loss were reported to stand at THB1.425 trillion (USD45.7 billion approx.). As a result, the GDP growth rate of 2011 fell sharply to 0.1 percent - with a contraction of 8.9 percent (YoY) in the last quarter (Q4/ 2011) alone. Even worse, the country's overall ranking of competitiveness, according to the IMD World Competitiveness Scoreboard 2012, fell from the 27th in 2011 to the 30th in 2012.
In 2012, Thailand was in a recovery period from the previous year's historic flood. The Yingluck Government has planned to develop the entire infrastructure of the Kingdom - ranging from the long-term water management system to logistics. The Eurozone Crisis was reported to harm the Thai economic growth in 2012 as it has badly affected the country's export both directly and indirectly. However, the Thai GDP eventually went up by 6.4 percent - with the headline inflation rate of 3.02 percent and the current account surplus of 0.7 percent of the country's GDP.
Gross Domestic Product (GDP)
Below is the table showing the trend of the Thai gross domestic product (GDP) from 1980 to 2012.
|Year||GDP at constant prices (THB Billions)||GDP growth rate (percent change)||GDP at current prices (THB Billions)||GDP at current prices (USD Billions)|
|2008||4,368.64||2.5 (The U.S. Financial Institutions Crisis)||9,080.47||272.58|
|2009||4,268.11||-2.3 (The U.S. Financial Institutions Crisis)||9,041.55||263.71|
|2011||4,599.65||0.1 (Severe flooding)||10,540.13||345.67|
Source: Adapted from the IMF's World Economic Outlook Database, April 2013
In the past 32 years, the economy of Thailand has expanded quite considerably. The GDP at current prices shows that from 1980 to 2012, the size of the Thai economy has expanded nearly sixteen-fold when measured in the Thai Baht, or nearly eleven-fold when measured in the U.S. Dollar. This makes Thailand the 32nd biggest economy in the world, according to the IMF. With regard to the GDP at constant prices, it can be said that Thailand has gone through 5 different periods of economic growth. During 1980-1984, the Thai economy has grown by 5.4 percent per year on average. After the Baht devaluation in 1984 and the Plaza Accord in 1985, a significant amount of foreign direct investment, mainly from Japan, came in and shifted the averaged growth rate per year to 8.8 percent in the period of 1985-1996, before slumping to the averaged growth rate of -5.9 percent per year during 1997-1998. In the period of 1999-2006, Thailand came back again with the averaged growth rate of 5.0 percent per year. Since 2007, however, the Kingdom has confronted a number of challenges - ranging from a military coup in late 2006, political turmoil from 2008 to 2011, the U.S. financial institution crisis reaching its peak from 2008 to 2009, floods in 2010 and 2011 to the Eurozone Crisis in 2012. As a result, during 2007-2012, the averaged GDP growth rate of the country has slumped once again to 3.25 percent per year.
Per Capita Gross Domestic Product (GDP per capita)
The table below shows the Thai GDP per capita in comparison with some East and Southeast Asian economies. All data, unless otherwise stated, are in U.S. Dollar (USD).
|Economy||1980||Gap from Thailand
as of 1980 (times)
|1985||1990||1995||2000||2005||2010||2012||Gap from Thailand
as of 2012 (times)
|GDP as of 2012
after the Purchasing Power Parity (PPP) calculations
|GDP per capita
as of 2012 (PPP)
Note: According to the NESDB, the Thai nominal GDP per capita stands at THB167,508 (USD5,390). The data shown in the above table, including the Thai nominal GDP per capita of USD5,678, are drawn from the IMF.
Source: Adapted from the IMF's World Economic Outlook Database, April 2013
When compared with some neighboring countries in terms of GDP per capita, however, Thailand has performed not so well. In 2011, China's nominal GDP per capita has already surpassed that of Thailand - making the Kingdom the country of lowest nominal GDP per capita among its peers. According to the IMF, in 2012, Thailand is ranked 93rd in the world for its nominal GDP per capita.
Agriculture, forestry, and fishing
Developments in agriculture since the 1960s have supported Thailand's transition to an industrialised economy. As recently as 1980, agriculture represented 70% of employment. In 2008 agriculture, forestry, and fishing contributed only 8.4% percent to GDP and even in rural areas, farm jobs represent only half of employment. Thailand is the world's leading exporter of rice and a major exporter of shrimp. Other crops include coconuts, corn, rubber, soybeans, sugarcane and tapioca.
In 1985 Thailand officially designated 25 percent of the nation's land area for protected forests and 15 percent for timber production. Protected forests have been set aside for conservation and recreation, while production forests are available to the forestry industry. Between 1992 and 2001, exports of logs and sawn timber increased from 50,000 cubic meters to 2 million cubic meters per year.
The regional avian flu outbreak led to a contraction of Thailand's agricultural sector during 2004, and the tsunami disaster of 26 December 2004 devastated the west coast fisheries industry. In 2005 and 2006 agricultural GDP was stated to have contracted by 10 percent.
Thailand is the world's second largest exporter of gypsum after Canada, even though government policy limits gypsum exports to prevent price cuts. In 2003 Thailand produced more than 40 types of minerals with an annual value of about US$740 million. However, more than 80 percent of these minerals were consumed domestically.
In September 2003, in order to encourage foreign investment in the mining industry, the government relaxed severe restrictions on mining by foreign companies and reduced mineral royalties payable to the state.
Industry and manufacturing
In 2007, industry contributed 43.9% of gross domestic product (GDP), but employed only 14% of the workforce. This proportion is the opposite of the one applying to agriculture. Industry expanded at an average annual rate of 3.4 percent during the 1995–2005 period. The most important subsector of industry is manufacturing, which accounted for 34.5 percent of GDP in 2004.
Thailand is becoming a center for automobile manufacturing for the Association of Southeast Asian Nations (ASEAN) market. By 2004, automobile production had reached 930,000 units, more than twice as much as in 2001. Two automakers active in Thailand are Toyota and Ford. The expansion of the automotive industry has led to a boom in domestic steel production.
Thailand's electronics industry faces competition from Malaysia and Singapore, while its textile industry faces competition from China and Vietnam. But now, according to the World Journal, the Thai Textile Association president Chung SHA has said that although the global economic downturn, but the emerging markets leading role and the Thai-Japanese free trade agreement (FTA) signed, with Thai exports of textiles and garments for good.
In 2004 Thailand's total energy consumption was estimated at 3.4 quadrillion British thermal units, representing about 0.7 percent of total world energy consumption. Thailand is a net importer of oil and natural gas, but the government is promoting the use of ethanol to reduce imports of petroleum and the gasoline additive methyl tertiary butyl ether.
In 2005 daily oil consumption of 838,000 barrels per day (133,200 m3/d) exceeded domestic production of 306,000 barrels per day (48,700 m3/d). Thailand's four oil refineries have a combined capacity of 703,100 barrels per day (111,780 m3/d). Thailand's government is considering establishing a regional oil processing and transportation hub, serving the needs of south-central China. In 2004 natural gas consumption of 1,055 billion cubic feet (2.99×1010 m3) exceeded domestic production of 790 billion cubic feet (2.2×1010 m3).
Also in 2004, estimated coal consumption of 30.4 million short tons exceeded coal production of 22.1 million short tons. As of January 2007, proven oil reserves totaled 290 million barrels (46,000,000 m3), and proven natural gas reserves were 14.8 trillion cubic feet (420 km3). In 2003 recoverable coal reserves totaled 1,492.5 million short tons.
In 2005 Thailand consumed about 117.7 billion kilowatt-hours of electricity. Electricity consumption rose by 4.7 percent in 2006 to 133 billion kilowatt-hours. According to the state electricity utility, the Electricity Generating Authority of Thailand, power consumption by residential consumers has been increasing because of more favorable rates given to residential customers over the industry and business sectors. Thailand's state-controlled electric utility and petroleum monopolies are undergoing restructuring.
In 2007 the services sector, which ranges from tourism to banking and finance, contributed 44.7% of gross domestic product and employed 37 percent of the workforce. Thailand's service industry is prominent and competitive, which contributes to its export growth.
Tourism makes a larger contribution to Thailand's economy (typically about 6 percent of gross domestic product) than that of any other Asian nation. Most tourists come to Thailand for various reasons—mostly for the beaches and relaxation, although with the ongoing insurgency in the deep South, Bangkok has seen a large increase in tourism over the past years.
Also, a sharp increase in tourism from other Asian countries has contributed largely to Thailand's economy even though the Baht has gained strength compared to most other currencies in the past two years. In 2007, some 14 million tourists visited Thailand. The Thai tourism industry includes a thriving sex industry. Successive Thai governments, however, continue to neglect sex workers rights under labor laws that persist in the criminalization of sex workers, allowing corrupt authorities and employers to exploit sex-workers' labor.
The easing of the monetary crisis, the renewed vigorous growth of the Chinese economy, the relatively stable internal political situation following the 2008–2009 Thai political crisis, and the 2009 flu pandemic having less of an impact as initially feared, have changed the tourism outlook for 2010. Thailand experienced a decrease of international visitors of 16% over the first six months of 2009, but the last four months of 2009 have seen a return of foreign tourists to Thailand with a marked increase in the months of November and December. The provisional numbers for 2009 have now been revised upwards to close to 14 million international visitors, which is a decrease of only 4% compared to 2008.
Banking and finances
Dangerous levels of nonperforming assets at Thai banks helped trigger the attack on the Thai baht by currency speculators that led to the Asian financial crisis in 1997–1998. By 2003 nonperforming assets had been cut in half to about 30 percent.
Despite a return to profitability, however, Thailand's banks continue to struggle with the legacy of the financial crisis in the form of unrealized losses and inadequate capital. Therefore, the government is considering various reforms, including establishing an integrated financial regulatory agency that would free up the Bank of Thailand to focus on monetary policy.
In addition, the Thai government is attempting to strengthen the financial sector through the consolidation of commercial, state-owned, and foreign-owned institutions. Specifically, the government's Financial Sector Reform Master Plan, which was first introduced in early 2004, provides tax breaks to financial institutions that engage in mergers and acquisitions.
The reform program has been deemed successful by outside experts. In 2007, there were three state-owned commercial banks and five state-owned specialized banks, 15 Thai commercial banks, and 17 foreign banks in Thailand.
The Bank of Thailand sought to stem the flow of foreign funds into the country in December 2006. This led within one day to the largest drop in stock prices on the Stock Exchange of Thailand since the 1997 Asian Financial Crisis. The massive selling by foreign investors amounted more than US$708 million.
Thailand's labor force was estimated at 36.9 million in 2007. About 49% were employed in agriculture, 37% in services, and 14% in industry. In 2005 women constituted 48 percent of the labor force and held an increasing share of professional jobs. Less than 4% of the workforce is unionized, but 11% of industrial workers and 50% of state enterprise employees are unionized.
Although laws applying to private-sector workers' rights to form and join trade unions were unaffected by 19 September 2006 military coup and its aftermath, workers who participate in union activities continue to have inadequate legal protection. According to the U.S. Department of State, union workers are inadequately protected. Thailand's unemployment rate lies at 1.5% percent of the labor force.
The United States is Thailand's largest export market and second-largest supplier after Japan. While Thailand's traditional major markets have been North America, Japan, and Europe, economic recovery among Thailand's regional trading partners has helped Thai export growth.
Recovery from the financial crisis depended heavily on increased exports to the rest of Asia and the United States. Since 2005, the rapid ramp-up in export of automobiles of Japanese makes (esp. Toyota, Nissan, Isuzu) has helped to dramatically improve the trade balance, with over 1 million cars produced annually since then. As such, Thailand has joined the ranks of the world's top ten automobile exporting nations.
Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil, fuels, iron, and steel are among Thailand's principal imports. The recent increase in import levels reflects the need to fuel the production of high-technology items and vehicles.
Thailand is a member of the World Trade Organization (WTO) and the Cairns Group of agricultural exporters. Thailand is part of the ASEAN Free Trade Area (AFTA). Thailand has actively pursued free trade agreements. A China-Thailand Free Trade Agreement (FTA) commenced in October 2003. This agreement was limited to agricultural products, with a more comprehensive FTA to be agreed upon by 2010. Thailand also has a limited Free Trade Agreement with India, which commenced in 2003; and a comprehensive Australia-Thailand Free Trade Agreement which started 1 January 2005.
Thailand started free trade negotiations with Japan in February 2004, and an in-principle agreement was agreed in September 2005. Negotiations for a US-Thailand Free Trade Agreement are underway, with the fifth round of meetings held in November 2005.
Tourism contributes significantly to the Thai economy, and the industry has benefited from the Thai baht's depreciation and Thailand's stability. Tourist arrivals in 2002 (10.9 million) reflected a 7.3% increase from the previous year (10.1 million in 2001).
Bangkok is one of the most prosperous parts of Thailand, and heavily dominates the national economy, with the infertile northeast being the poorest. An overriding concern of successive Thai Governments, and a particularly strong focus of the recently ousted Thaksin government, has been to reduce these regional disparities, which have been exacerbated by rapid economic growth in Bangkok and the financial crisis.
Although little economic investment reaches other parts of the country except for tourist zones, the government has been successful in stimulating provincial economic growth in the Eastern Seaboard of Thailand, and the Chiang Mai area. Despite much talk of other regional developments, these 3 regions and other tourist zones still dominate the national economy.
Although some U.S. rights holders report good cooperation with Thai enforcement authorities, including the Royal Thai Police and Royal Thai Customs, Thailand remains on the Priority Watch List in 2012. The United States is encouraged that Thailand’s new government has affirmed its commitment to improving IPR protection and enforcement. But still more needs to be done to see Thailand removed from the list.
Although the economy has demonstrated moderate positive growth since 1999, future performance depends on continued reform of the financial sector, corporate debt restructuring, attracting foreign investment, and increasing exports. Telecommunications, roadways, electricity generation, and ports showed increasing strain during the period of sustained economic growth and may pose a future challenge. Thailand's growing shortage of engineers and skilled technical personnel may limit its future technological creativity and productivity.
Mergers & Acquisitions
Between 1997 and 2010, 4,306 mergers and acquisitions involving Thai businesses were announced; the announcements consisted of a total known value of USD$81 billion. The year 2010 was a new record in terms of value with 12 bil. USD of transactions. The largest transaction with involvement of Thai companies has been: PTT Chemical PCL merged with PTT Aromatics and Refining PCL valued at 3.8 bil. USD in 2011.
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