Economy of Thailand

Economy of Thailand

Currency	Thai baht (THB)
Fiscal year	1 October – 30 September
Trade organisations	WTO, APEC, IOR-ARC, ASEAN
Statistics
Population	67.2 million (July 2014)[1]
GDP	US$1.108 trillion (PPP; 2016) US$404.824 billion (Nominal; 2016 est.)[2]
GDP rank	32nd (nominal) / 22nd (PPP) (IMF, 2015)
GDP growth	0.8% (2014), 2.8% (2015e), 2.5% (2016f), 2.6% (2017f)[3]:4
GDP per capita	US$15,319 (PPP; 2015) US$5,771 (Nominal.)[4]
GDP by sector	Agriculture (8.4%), Industry (39.2%), Services (52.4%) (2012)[5]
Inflation (CPI)	3.02% (Headline) (2012)[6] 2.09% (Core) (2012)[6]
Population below poverty line	13.15% (2011)[7]
Gini coefficient	0.484 (income) (2011)[7] 0.375 (expenditure) (2011)[7]
Labour force	39.41 million (2012)[8]
Unemployment	0.9% (2014)[9]
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[10]
External
Exports	US$214.37 billion (2015)[11]
Export goods	Textiles, footwear, fishery products, rice, rubber, jewelry, automobiles, computers and electrical appliances
Main export partners	China 11.7% Japan 10.2% US 9.9% Hong Kong 5.7% Malaysia 5.4% Indonesia 4.9% Singapore 4.7% Australia 4.3% (2012 est.)[12]
Imports	US$202.65 billion (2015)[13]
Import goods	Capital and intermediate goods, raw materials, consumer goods, fuels
Main import partners	Japan 20.0% China 14.9% United Arab Emirates 6.3% Malaysia 5.3% US 5.3% (2012 est.)[14]
FDI stock	US$208.3 billion (2014)[15]
Gross external debt	US$158.29 billion (Sep 2015)[16]
Public finances
Public debt	42.9% of GDP (Sep 2015)[16]
Revenues	THB2,157.6 billion (Fiscal Year 2013)[17]
Expenses	THB2,402.5 billion (Fiscal Year 2013)[17]
Economic aid	None
Credit rating	Standard & Poor's:[18] A- (Domestic) BBB+ (Foreign) A (T&C Assessment) Outlook: Stable[19] Moody's:[19] Baa1 Outlook: Stable Fitch:[20] A- (Local Currency IDR) BBB+ (Foreign Currency IDR) A- (Country Ceiling) Outlook: Stable
Foreign reserves	US$181.8 billion (12 Aug 2016)[21]
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

Thailand is a newly industrialized country. Its economy is heavily export-dependent, with exports accounting for more than two-thirds of its gross domestic product (GDP). In 2012, according to the Office of the National Economic and Social Development Board, Thailand had a GDP of 11.375 trillion baht (US$366 billion).^[22] The Thai economy grew by 6.5 percent,^[22] with a headline inflation rate of 3.02 percent^[6] and an account surplus of 0.7 percent of the country's GDP.^[17] In 2013, the Thai economy is expected to grow in the range of 3.8–4.3 percent.^[23] During the first half of 2013 (Q1-Q2/2013), the Thai economy grew by 4.1 percent (YoY).^[23] After seasonal adjustment, however, Thailand's GDP contracted by 1.7 percent and 0.3 percent in the first and the second quarters of 2013 respectively.

The industrial and service sectors are the main sectors in the Thai gross domestic product, with the former accounting for 39.2 percent of GDP. Thailand's agricultural sector produces 8.4 percent of GDP—lower than the trade and logistics and communication sectors, which account for 13.4 percent and 9.8 percent of GDP respectively. The construction and mining sector adds 4.3 percent to the country's gross domestic product. Other service sectors (including the financial, education, and hotel and restaurant sectors) account for 24.9 percent of the country's GDP.^[5] Telecommunications and trade in services are emerging as centers of industrial expansion and economic competitiveness.^[24][25]

Thailand is the second-largest economy in Southeast Asia, after Indonesia. Its per capita GDP (US$5,390) in 2012,^[22] however, ranks in the middle of Southeast Asian per capita GDP, after Singapore, Brunei, and Malaysia. On 19 July 2013 Thailand held US$171.2 billion in international reserves,^[21] the second-largest in Southeast Asia (after Singapore). Thailand ranks second in Southeast Asia in external trade volume, after Singapore.^[26]

The nation is recognized by the World Bank as "one of the great development success stories" in social and development indicators.^[27] Despite a low per capita gross national income (GNI) of US$5,210^[28] and ranking 89th in the Human Development Index (HDI), the percentage of people below the national poverty line decreased from 65.26 percent in 1988 to 13.15 percent in 2011, according to the NESDB's new poverty baseline.^[29]

Thailand's unemployment rate is low, reported as 0.9 percent for the first quarter of 2014. This is due to a large proportion of population working in subsistence agriculture or on other vulnerable employment (own-account work and unpaid family work).^[9]

Thai household debt in 4Q2015 amounted to 11 trillion baht, 81.5 percent of GDP.^[30]

History

Before 1945

Thailand, formerly known as Siam, opened to foreign contact in the pre-industrial era. Despite the scarcity of resources in Siam, coastal ports and cities and those at the river mouth were early economic centers which welcomed merchants from Persia, the Arab countries, India, and China. The rise of Ayutthaya during the 14th century was connected to renewed Chinese commercial activity, and the kingdom became one of the most prosperous trade centers in Asia.

When the capital of the kingdom moved to Bangkok during the 19th century, foreign trade (particularly with China) became the focus of the government. Chinese merchants came to trade; some settled in the country and received official positions. A number of Chinese merchants and migrants became high dignitaries in the court.

From the mid-19th century onward, European merchants were increasingly active. The Bowring Treaty, signed in 1855, guaranteed the privileges of British traders. The Harris Treaty of 1856, which updated the Roberts Treaty of 1833, extended the same guarantees to American traders.

The domestic market developed slowly, with serfdom a possible cause of domestic stagnation. Most of the male population in Siam was in the service of court officials, while their wives and daughters may have traded on a small scale in local markets. Those who were heavily indebted might sell themselves as slaves. King Rama V abolished serfdom and slavery in 1901 and 1905 respectively.

From the early 20th century to the end of World War II, Siam's economy gradually became globalized. Major entrepreneurs were ethnic Chinese who became Siamese nationals. Exports of agricultural products (especially rice) were very important and Thailand has been among the top rice exporters in the world. The Siamese economy suffered greatly from the Great Depression, a cause of the Siamese revolution of 1932.

Significant investment in education in the 1930s (and again in the 1950s) laid the basis for economic growth, as did a liberal approach to trade and investment.^[31]

After 1945

Life in Thailand
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1945–1955

Postwar domestic and international politics played significant roles in Thai economic development for most of the Cold War era. From 1945 to 1947 (when the Cold War had not yet begun), the Thai economy suffered because of the Second World War. During the war, the Thai government (led by Field Marshal Luang Phibulsongkram) allied with Japan and declared war against the Allies. After the war Thailand had to supply 1.5 million tons of rice to Western countries without charge, a burden on the country's economic recovery. The government tried to solve the problem by establishing a rice office to oversee the rice trade. During this period a multiple-exchange-rate system was introduced amid fiscal problems, and the kingdom experienced a shortage of consumer goods.^[32]

In November 1947, a brief democratic period was ended by a military coup and the Thai economy regained its momentum. In his dissertation, Somsak Nilnopkoon considers the period from 1947 to 1951 one of prosperity.^[32] By April 1948 the junta returned Field Marshal Luang Phibulsongkram, the wartime prime minister, to his previous office. He, however, was caught in a power struggle between his subordinates. To preserve his power, Luang Phibulsongkram began an anti-communist campaign to seek support from the United States.^[33] As a result, from 1950 onward Thailand received military and economic aid from the US. The Phibulsongkram government established many state enterprises, which were seen as economic nationalism. The state (and its bureaucrats) dominated capital allocation in the kingdom. Ammar Siamwalla, one of Thailand's most prominent economists, calls it the period of "bureaucratic capitalism".^[33]

1955–1985

In 1955, Thailand began to see a change in its economy fueled by domestic and international politics. The power struggle between the two main factions of the Phibul regime—led by Police General Phao Sriyanonda and General (later, Field Marshal) Srisdi Dhanarajat—increased, causing Sriyanonda to unsuccessfully seek support from the US for a coup against the Phibul regime. Luang Phibulsongkram attempted to democratize his regime, seeking popular support by developing the economy. He again turned to the US, asking for economic rather than military aid. The US responded with unprecedented economic aid to the kingdom from 1955 to 1959.^[33] The Phibulsongkram government also made important changes to the country's fiscal policies, including scrapping the multiple-exchange-rate system in favor of a fixed, unified system which was in use until 1984. The government also neutralized trade and conducted secret diplomacy with the People's Republic of China, displeasing the United States.

Despite his attempts to maintain power, Luang Phibulsongkram was deposed (with Field Marshal Phin Choonhavan and Police General Phao Sriyanonda) on 16 September 1957 in a coup led by Field Marshal Srisdi Dhanarajata. The Srisdi regime (in power from 1957 to 1973) maintained the course set by the Phibul regime with US support after severing all ties with the People's Republic of China and supporting US operations in Indochina. It developed the country's infrastructure and privatized state enterprises unrelated to that infrastructure. During this period a number of economic institutions were established, including the Bureau of Budget, the Office of the National Economic and Social Development Board (NESDB), and the Board of Investment of Thailand (BOI). The National Economic and Social Development Plan was implemented in 1961.^[34] During this period, the market-oriented Import-Substituting Industrialization (ISI) led to economic expansion in the kingdom during the 1960s.^[35] According to former President Richard M. Nixon's 1967 Foreign Affairs article, Thailand entered a period of rapid growth in 1958 (with an average growth rate of 7% a year).^[36]

From the 1970s to 1984, Thailand suffered from many economic problems: decreasing US investment, budget deficits, oil-price spikes, and inflation. Domestic politics were also unstable. With the Vietnamese occupation of Cambodia on 25 December 1978, Thailand became the front-line state in the struggle against communism, surrounded by three communist countries and a socialist Burma under General Ne Win. Successive governments tried to solve the economic problems by promoting exports and tourism, still important for the Thai economy.^[37]

One of the best-known measures to deal with the economic problems of that time was implemented under General Prem Tinsulanonda's government, in power from 1980 to 1988. Between 1981 and 1984 the government devalued the national currency, the Thai baht (THB), three times. On 12 May 1981 it was devalued by 1.07 percent, from THB20.775/US$ to THB21/US$. On 15 July 1981 it was again devalued, this time by 8.7 percent (from THB21/US$ to THB23/US$). The third devaluation, on 5 November 1984, was the most significant: 15 percent, from THB23/US$ to THB27/US$.^[38] The government also replaced the country's fixed exchange rate (where it was pegged to the US dollar) with a "multiple currency basket peg system" in which the US dollar bore 80 percent of the weight.^[39] Calculated from the IMF's World Economic Outlook Database, in the period 1980–1984 the Thai economy had an average GDP growth rate of 5.4 percent.^[40]

1985–1997

Concurrent with the third devaluation of the Thai baht, on 22 September 1985, Japan, the US, the United Kingdom, France, and West Germany signed the Plaza Accord to depreciate the US dollar in relation to the yen and the Deutsche Mark. Since the dollar accounted for 80 percent of the Thai currency basket, the baht was depreciated further, making Thailand's exports more competitive and the country more attractive to foreign direct investment (FDI) (especially from Japan, whose currency had appreciated since 1985). In 1988 Prem Tinsulanonda resigned and was succeeded by Chatichai Choonhavan, the first democratically elected prime minister of Thailand since 1976. The Cambodian-Vietnamese War was ending; Vietnam gradually retreated from Cambodia by 1989, enhancing Thai economic development.

After the 1984 baht devaluation and the 1985 Plaza Accord, although the public sector struggled due to fiscal constraints, the private sector grew. The country's improved foreign trade and an influx of foreign direct investment (mainly from Japan) triggered an economic boom from 1987 to 1996. Although Thailand had previously promoted its exports, during this period the country shifted from import-substitution (ISI) to export-oriented industrialization (EOI). During this decade the Thai GDP (calculated from the IMF World Economic Outlook database) had an average growth rate of 9.5 percent per year, with a peak of 13.3 percent in 1988.^[40] In the same period, the volume of Thai exports of goods and services had an average growth rate of 14.8 percent, with a peak of 26.1 percent in 1988.^[40]

Economic problems persisted. From 1987 to 1996 Thailand experienced a current account deficit averaging -5.4 percent of GDP per year, and the deficit continued to increase. In 1996, the current account deficit accounted for -7.887 percent of GDP (US$14.351 billion).^[40] A shortage of capital was another problem. The first Chuan Leekpai government, in office from September 1992 to May 1995, tried to solve this problem by granting Bangkok International Banking Facility (BIBF) licenses to Thai banks in 1993. This allowed BIBF banks to benefit from Thailand's high interest rate by borrowing from foreign financial institutions at low interest and loaning to Thai businesses. By 1997 foreign debt had risen to US$109, 276 billion (65 5 of which was short-term debt), while Thailand had US$38,700  billion in international reserves.^[41] Many loans were backed by real estate, creating an economic bubble. By late-1996, there was a loss of confidence in the country's financial institutions; the government closed 18 trust companies and three commercial banks. The following year, 56 financial institutions were closed by the government.^[41]

Another problem was foreign speculation. Aware of Thailand's economic problems and its currency basket exchange rate, foreign speculators (including hedge funds) were certain that the government would again devalue the baht, under pressure on both the spot and forward markets. In the spot market, to force devaluation, speculators took out loans in baht and made loans in dollars. In the forward market, speculators (believing that the baht would soon be devalued) bet against the currency by contracting with dealers who would give dollars in return for an agreement to repay a specific amount of baht several months in the future.^[42]

In the government, there was a call from Virapong Ramangkul (one of Prime Minister Chavalit Yongchaiyudh's economic advisers) to devalue the baht, which was supported by former Prime Minister Prem Tinsulanonda.^[43] Yongchaiyudh ignored them, relying on the Bank of Thailand (led by Governor Rerngchai Marakanond, who spent as much as US$24,000 billion – about two-thirds of Thailand's international reserves) to protect the baht. On 2 July 1997 Thailand had US$2,850 billion remaining in international reserves,^[41] and could no longer protect the baht. That day Marakanond decided to float the baht, triggering the 1997 Asian Financial Crisis.

1997–2006

Year	GDP at constant prices (THB trillion)	GDP at constant prices growth rate (% change)	GDP at current prices (US$ billion)	Export volume of goods and services (% change)	Current account balance (% of GDP)
1995	2.941	9.2	168.019	15.4	-7.9
1996	3.115	5.9	181.948	-5.5	-7.9
1997	3.072	-1.4	150.891	7.2	-2.0
1998	2.749	-10.5	111.860	8.2	12.8
1999	2.871	4.4	122.630	9.0	10.2
2000	3.008	4.8	122.725	17.5	7.6
2001	3.073	2.2	115.536	-4.2	4.4
2002	3.237	5.3	126.877	12.0	3.7
2003	3.467	7.1	142.640	7.0	3.4
2004	3.686	6.3	161.340	9.6	1.7
2005	3.856	4.6	176.352	4.1	-4.3
2006	4.054	5.1	207.089	12.5	1.2
2007	4.259	5.0	246.977	13.0	6.3

Source: Adapted from the IMF's World Economic Outlook Database, April 2012.^[44]

The Thai economy collapsed as a result of the 1997 Asian financial crisis. Within a few months, the value of the baht floated from THB25/US$ (its lowest point) to THB56/US$. The Stock Exchange of Thailand (SET) dropped from a peak of 1,753.73 in 1994 to a low of 207.31 in 1998.^[45] The country's GDP dropped from THB3.115 trillion at the end of 1996 to THB2.749 trillion at the end of 1998. In dollar terms, it took Thailand as long as 10 years to regain its 1996 GDP. The unemployment rate went up nearly threefold: from 1.5 percent of the labor force in 1996 to 4.4 percent in 1998.^[44]

A sharp decrease in the value of the baht abruptly increased foreign debt, undermining financial institutions. Many were sold, in part, to foreign investors while others went bankrupt. Due to low international reserves from the Bank of Thailand's currency-protection measures, the government had to accept a loan from the International Monetary Fund (IMF). Overall, Thailand received US$17.2 billion in aid.^[46]

The crisis impacted Thai politics. One direct effect was that Prime Minister Chavalit Yongchaiyudh resigned under pressure on 6 November 1997, succeeded by opposition leader Chuan Leekpai. The second Leekpai government, in office from November 1997 to February 2001, tried to implement economic reforms based on IMF-guided neo-liberal capitalism. It pursued strict fiscal policies (keeping interest rates high and cutting government spending), enacting 11 laws it called "bitter medicine" and critics called "the 11 nation-selling laws". The Thai government and its supporters maintained that with these measures, the Thai economy improved.

In 1999 Thailand had a positive GDP growth rate for the first time since the crisis. Many critics, however, mistrusted the IMF and maintained that government-spending cuts harmed the recovery. Unlike economic problems in Latin America and Africa, they asserted, the Asian financial crisis was born in the private sector and the IMF measures were inappropriate. The positive growth rate in 1999 was because the country's GDP had gone down for two consecutive years, as much as -10.5 percent in 1998 alone. In terms of the baht, it was not until 2002 (in dollar terms, not until 2006) that Thailand would regain its 1996 GDP. An additional 1999 loan from the Miyazawa Plan made the question of whether (or to what extent) the Leekpai government helped the Thai economy controversial.

An indirect effect of the financial crisis on Thai politics was the rise of Thaksin Shinawatra. In reaction to the government's economic policies, Thaksin Shinawatra's Thai Rak Thai Party won a landslide victory over 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 the first year of his administration, the first Thaksin Shinawatra government performed well from 2002 to 2004 with growth rates of 5.3, 7.1 and 6.3 percent respectively. His policy was later called Thaksinomics. During Thaksin's first term, Thailand's economy regained momentum and the country paid its IMF debt by July 2003 (two years ahead of schedule). Despite criticism of Thaksinomics, Thaksin's party won another landslide victory over the Democrat Party in the 2005 general election. The official economic data related to Thanksinomics reveals that between 2001 and 2011, Isan's GDP per capita more than doubled to US$1,475, while, over the same period, GDP in the Bangkok area rose from US$7,900 to nearly US$13,000.^[47]

Thaksin's second term was less successful. On 26 December 2004, the Indian Ocean tsunami occurred. In addition to the human toll, it impacted the first-quarter Thai GDP in 2005. The Yellow Shirts, a coalition of protesters against Thaksin, also emerged in 2005. In 2006, Thaksin dissolved the parliament and called for a general election. The April 2006 general election was boycotted by the main opposition parties. Thaksin's party won again, but the election was declared invalid by the Constitutional Court. Another general election, scheduled for October, was cancelled. On 19 September a group of soldiers calling themselves the Council for Democratic Reform under the Constitutional Monarchy and led by Sonthi Boonyaratglin organized a coup, ousting Thaksin while he was in New York preparing for a speech at the United Nations General Assembly. During the last year of the second Thaksin government, the Thai GDP grew by 5.1 percent. Under his governments, Thailand's overall ranking in the IMD Global Competitiveness Scoreboard rose from 31st in 2002 to 25th in 2005 before falling to 29th in 2006.^[48]

2006 to 2011

After the coup, Thailand's economy again suffered. From the last quarter of 2006 through 2007 the country was ruled by a military junta led by General Surayud Chulanont, who was appointed prime minister in October 2006. The 2006 GDP growth rate slowed from 6.1, 5.1 and 4.8 percent year-over-year in the first three quarters to 4.4 percent (YoY) in Q4.^[49] Thailand's ranking on the IMD Global Competitiveness Scoreboard fell from 26th in 2005 to 29th in 2006 and 33rd in 2007.^[48] Thaksin's plan for massive infrastructure investments was unmentioned until 2011, when his younger sister Yingluck Shinawatra entered office. In 2007, the Thai economy grew by 5 percent. On 23 December 2007, the military government held a general election. The pro-Thaksin People's Power Party, led by Samak Sundaravej, won a landslide victory over Abhisit Vejjajiva's Democrat Party.

Under the People's Power Party-led government the country fell into political turmoil. This, combined with the US financial-institution crisis during the last two quarters of 2008, cut the 2008 Thai GDP growth rate to 2.5 percent.^[49] Before the People's Alliance for Democracy (PAD) and the Yellow Shirts reconvened in March 2008, the GDP grew by 6.5 percent (YoY) in the first quarter of the year.^[49] Thailand's ranking on the IMD World Competitiveness Scoreboard rose from 33rd in 2007 to 27th in 2008. The Yellow Shirts occupied the Government House of Thailand in August 2008, and on 9 September the Constitutional Court delivered a decision removing Samak Sundaravej from the prime ministership.

Somchai Wongsawat, Thaksin's brother-in-law, succeeded Samak Sundaravej as prime minister on 18 September. In the US the financial crisis reached its peak while the Yellow Shirts were still in Government House, impeding government operations. GDP growth dropped from 5.2 percent (YoY) in Q2 2008 to 3.1 percent (YoY) and -4.1 percent (YoY) in Q3 and Q4. From 25 November to 3 December 2008 the Yellow Shirts, protesting Somchai Wongsawat's prime ministership, seized the two Bangkok airports, (Suvarnabhumi and Don Mueang), and damaged Thailand's image and economy. On 2 December the Thai Constitutional Court issued a decision dissolving the People's Power Party, ousting Somchai Wongsawat as prime minister.

By the end of 2008, a coalition government led by Abhisit Vejjajiva's Democrat Party was formed: "[The] 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".^[50] The government was under pressure from the US financial crisis and the Red Shirts, who refused to acknowledge Abhisit Vejjajiva's prime ministry and called for new elections as soon as possible. However, Abhisit rejected the call until he dissolved the parliament for a new election in May 2011. In 2009, his first year in office, Thailand experienced a negative growth rate for the first time since the 1997 financial crisis: a GDP of -2.3 percent.^[49]

In 2010, the country's growth rate increased to 7.8 percent. However, with the instability surrounding the major 2010 protests, the GDP growth of Thailand settled at around 4–5 percent from highs of 5–7 percent under the previous civilian administration—political uncertainty was identified as the primary cause of a decline in investor and consumer confidence. The IMF predicted that the Thai economy would rebound strongly from the low 0.1 percent GDP growth in 2011, to 5.5 percent in 2012 and then 7.5 percent in 2013, due to the accommodating monetary policy of the Bank of Thailand, as well as a package of fiscal stimulus measures introduced by the incumbent Yingluck Shinawatra government.^[51]

In the first two quarters of 2011, when the political situation was relatively calm, the Thai GDP grew by 3.2 and 2.7 percent (YoY).^[49] Under Abhisit's administration, Thailand's ranking fell from 26 in 2009, to 27 in 2010 and 2011,^[48] and the country's infrastructure declined since 2009.^[48]

In the 2011 general election, the pro-Thaksin Pheu Thai Party again won a decisive victory over the Democrat Party, and Thaksin's youngest sister, Yingluck Shinawatra, succeeded Abhisit as prime minister. Elected in July, the Pheu Thai Party-led government began its administration in late-August, and when Yingluck entered office, the 2011 Thailand floods threatened the country—from 25 July 2011 to 16 January 2012, flood waters covered 65 of the country's 76 provinces. The World Bank assessed the total damage in December 2011 and reported a cost of THB1.425 trillion (about US$45.7 billion).^[52]

The 2011 GDP growth rate fell to 0.1 percent, with a contraction of 8.9 percent (YoY) in Q4 alone.^[53] The country's overall competitiveness ranking, according to the IMD World Competitiveness Scoreboard, fell from 27 in 2011 to 30 in 2012.^[54]

2012-2014

In 2012 Thailand was recovering from the previous year's severe flood. The Yingluck government planned to develop the country's infrastructure, ranging from a long-term water-management system to logistics. The Eurozone crisis reportedly harmed Thailand's economic growth in 2012, directly and indirectly affecting the country's exports. Thailand's GDP grew by 6.5 percent, with a headline inflation rate of 3.02 percent, and a current account surplus of 0.7 percent of the country's GDP.^[22]

On 23 December 2013, the Thai baht dropped to a three-year low due to the political unrest during the preceding months. According to Bloomberg, the Thai currency lost 4.6 percent over November and December, while the main stock index also dropped (9.1 percent).^[55]

Post-2014 coup

Following the Thai military coup in May 2014, Agence France Presse (AFP) published an article that claimed that the nation was on the "verge of recession". Published on 17 June 2014, the article's main subject is the departure of nearly 180,000 Cambodians from Thailand due to fears of an immigration "clampdown", but concluded with information on the Thai economy's contraction of 2.1 percent quarter-on-quarter, from January to the end of March 2014.^[56]

Since the cessation of the curfew that was enacted by the military in May 2014, the Federation of Thai Industries (FTI)'s chairman, Supant Mongkolsuthree, said that he projects growth of 2.5–3 percent for the Thai economy in 2014, as well as a revitalisation of the Thai tourist industry in the second half of 2014. Furthermore, Supant also cited the Board of Investment's future consideration of a backlog of investment projects, estimated at about 700 billion baht, as an economically beneficial process that would occur around October 2014.^[57]

Thailand's flagging economic performance led, at the end of 2015, to increased criticism of the National Council for Peace and Order's (NCPO) handling of the economy, both at home and in influential Western media.^[58][59]

Macroeconomic trends

Gross domestic product (GDP)

Below is a table showing the trend of Thai gross domestic product (GDP) from 1980 to 2012:

Year	GDP at constant prices (THB billion)	GDP growth rate (% change)	GDP at current prices (THB billion)	GDP at current prices (US$ billion)
1980	913.70	4.6	662.48	32.35
1985	1,191.25	4.6	1,056.50	38.90
1990	1,953.40	11.6	2,191.10	85.64
1995	2,941.74	9.2	4,186.21	168.02
2000	3,008.40	4.8	4,922.731	122.73
2005	3,856.53	4.6	7,092.89	176.35
2006	4,054.89	5.1	7,844.94	207.09
2007	4,259.81	5.0	8,525.20	246.98
2008	4,368.64	2.5 (2007-2012 global financial crisis)	9,080.47	272.58
2009	4,268.11	-2.3 (2007-2012 global financial crisis)	9,041.55	263.71
2010	4,596.12	7.8	10,104.82	318.91
2011	4,599.65	0.1 (2011 Thailand floods)	10,540.13	345.67
2012[60]	4,898.19	6.5	11,375.35	366

Source: With the exception of the 2012 data, all data above are from the IMF's World Economic Outlook Database (April 2013).^[61]

Over the past 32 years, the economy of Thailand has expanded. The GDP at current prices shows that from 1980 to 2012 the Thai economy has expanded nearly sixteen-fold when measured in baht, or nearly eleven-fold when measured in dollars. This makes Thailand the 32nd-biggest economy in the world, according to the IMF. With regard to GDP, Thailand has undergone five periods of economic growth. From 1980 to 1984, the economy has grown by an average of 5.4 percent per year. Regional businesses account for 70 percent of GDP, with Bangkok contributing 30 percent.^[62]

After the 1984 baht devaluation and the 1985 Plaza Accord, a significant amount of foreign direct investment (mainly from Japan) raised the average growth rate per year to 8.8 percent from 1985 to 1996 before slumping to -5.9 percent per year from 1997 to 1998. From 1999 to 2006, Thailand averaged a growth rate of 5.0 percent per year. Since 2007, the country has faced a number of challenges: a military coup in late 2006, political turmoil from 2008 to 2011, the US financial crisis reaching its peak from 2008 to 2009, floods in 2010 and 2011, and the 2012 Eurozone crisis. As a result, from 2007 to 2012 the average GDP growth rate was 3.25 percent per year.

Per capita GDP

The table below shows the Thai GDP per capita in comparison with other East and Southeast Asian economies. All data, unless otherwise stated, are in US dollars (US$).

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 purchasing power parity (PPP) calculations (US$ billion)	GDP per capita as of 2012 (PPP)
China	205	0.29	290	341	601	945	1,726	4,422	6,076	1.07	12,405.67	9,162
Hong Kong	5,679	8.16	6,442	13,330	22,939	25,128	25,748	32,429	36,667	6.46	369.38	51,494
Japan	9,309	13.38	11,461	25,144	42,523	37,303	35,787	42,916	46,735	8.23	4,627.89	36,265
Korea	1,689	2.43	2,414	6,308	11,779	11,347	17,551	20,540	23,113	4.07	1,613.92	32,272
Malaysia	1,812	2.60	2,026	2,432	4,358	4,030	5,211	8,633	10,304	1.81	498.48	16,922
Singapore	4,756	6.83	6,754	12,387	23,718	22,791	28,498	44,697	51,162	9.01	326.51	60,410
Taiwan	2,363	3.40	3,271	8,086	12,865	14,641	16,023	18,488	20,328	3.58	903.47	38,749
Thailand	696	1.00	751	1,521	2,826	1,983	2,825	4,992	5,678	1.00	651.86	10,126

Note: According to the NESDB, the Thai nominal GDP per capita stands at 167,508 baht (US$5,390).^[22] The data shown in the above table (including the Thai nominal GDP per capita of US$5,678) are taken from the IMF.

Source: Adapted from the IMF's World Economic Outlook Database (April 2013).^[63]

Thailand suffers by comparison with neighboring countries in terms of GDP per capita. In 2011, China's nominal GDP per capita surpassed Thailand's, giving the latter the lowest nominal GDP per capita of its peers. According to the IMF, in 2012 Thailand ranked 92nd in the world in its nominal GDP per capita.

Industries

Agriculture, forestry and fishing

Developments in agriculture since the 1960s have supported Thailand's transition to an industrialised economy.^[64] As recently as 1980, agriculture supplied 70 percent of employment.^[64] In 2008, agriculture, forestry and fishing contributed 8.4 percent to GDP; in rural areas, farm jobs supply half of employment.^[64] Rice is the most important crop in the country and Thailand had long been the world's number one exporter of rice, until recently falling behind both India and Vietnam.^[65] It is a major exporter of shrimp. Other crops include coconuts, corn, rubber, soybeans, sugarcane and tapioca.^[66]

Thailand is the world's third-largest seafood exporter. Overall fish exports were worth around US$3 billion in 2014, according to the Thai Frozen Foods Association. Thailand's fishing industry employs more than 300,000 persons.^[67]

In 1985, Thailand designated 25 percent of its land area for forest protection and 15 percent for timber production. Forests have been set aside for conservation and recreation, and timber forests are available for the forestry industry. Between 1992 and 2001, exports of logs and sawn timber increased from 50,000 to 2,000,000 cubic meters per year.

The regional avian-flu outbreak contracted Thailand's agricultural sector in 2004, and the tsunami of 26 December devastated the Andaman Sea fishing industry. In 2005 and 2006, agricultural GDP was reported to have contracted by 10 percent.^[68]

Thailand is the world's second-largest exporter of gypsum (after Canada), although government policy limits gypsum exports to support prices. In 2003 Thailand produced more than 40 different minerals, with an annual value of about US$740 million. In September 2003, to encourage foreign investment in mining the government relaxed its restrictions on mining by foreign companies and reduced mineral royalties owed to the state.^[68]

Industry and manufacturing

In 2007 industry contributed 43.9 percent of GDP, employing 14 percent of the workforce. Industry expanded at an average annual rate of 3.4 percent from 1995 to 2005. The most important sub-sector of industry is manufacturing, which accounted for 34.5 percent of GDP in 2004.

Electronics

Electronics is Thailand's largest export sector, about 15 percent of total exports. In 2009 exports of electronics totalled US$33 billion. The country is the world's second-biggest maker of hard disk drives (HDDs) after China, with Western Digital and Seagate Technology among the biggest producers.^[69] But problems loom for Thailand's high-tech golden goose. In January 2015, the country's manufacturing index fell for the 22nd consecutive month, with production of goods like televisions and radios down 38 percent year-on-year. Manufacturers are relocating to nations where labour is cheaper than Thailand. In April 2015, production will cease at an LG Electronics factory in Ranong Province.^[70] Production is being moved to Vietnam, where labour costs per hour are US$6.35 versus US$9.14 in Thailand. Samsung Electronics Co. Ltd. will site two large smartphone factories in Vietnam. It made around US$11 billion worth of investment pledges to the Vietnamese economy in 2014. As technologies evolve, e.g., as HDDs are replaced by solid-state drives (SSDs), manufacturers are reexamining where best to produce these latest technologies.^[69]

Vehicles

Cars, motorbikes, parts and components export of Thailand

Year	Value (THB billion)	as % of GDP
2011	566.355	5.24%
2012	751.132	6.65%
2013	812.085	6.58%
2014	832.750	6.45%
2015	892.623	6.80%

Car production in Thailand

Year	Units	Production for		Export value (THB billion)	Export value as % of GDP
		Domestic	Export
2005	1,125,316	690,409	434,907	203.025	2.67%
2006	1,188,044	646,838	541,206	240.764	2.87%
2007	1,287,379	598,287	689,092	306.595	3.38%
2008	1,394,029	610,317	783,712	351.326	3.62%
2009	999,378	447,318	552,060	251.342	2.60%
2010	1,645,304	750,614	894,690	404.659	3.75%
2011	1,457,795	723,845	733,950	343.383	3.04%
2012	2,453,717	1,432,052	1,021,665	490.134	3.97%
2013	2,457,086	1,335,783	1,121,303	512.186	3.97%
2014	1,880,007	757,853	1,122,154	527.423	4.02%
2015	1,913,002	712,028	1,200,974	592.550	4.41%

Source: Federation of Thai Industries

Thailand is becoming a center for automobile manufacturing for the Association of Southeast Asian Nations (ASEAN) market. By 2004 automobile production reached 930,000 units, more than twice as much as in 2001. Toyota and Ford are active in Thailand, and the expansion of the automotive industry has increased domestic steel production.

Energy

Thailand's 2004 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; however, the government is promoting ethanol to reduce imports of petroleum and the gasoline additive methyl tertiary butyl ether.

In 2005 Thailand's daily oil consumption of 838,000 barrels per day (133,200 m³/d) exceeded its 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). The government is considering a regional oil-processing and transportation hub serving south-central China. In 2004, Thailand's natural-gas consumption of 1,055 billion cubic feet (2.99×10¹⁰ m³) exceeded its production of 790 billion cubic feet (2.2×10¹⁰ m³).

Thailand's 2004 estimated coal consumption of 30.4 million short tons exceeded its production of 22.1 million. 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 totalled 1,492.5 million short tons.^[68]

In 2005, Thailand used about 117.7 billion kilowatt hours of electricity. Consumption rose by 4.7 percent in 2006, to 133 billion kWh. According to the Electricity Generating Authority of Thailand (the national electricity utility), power consumption by residential users is increasing due to more favorable rates for residential customers than for the industry and business sectors. Thailand's electric utility and petroleum companies (also state-controlled) are being restructured.

Services

In 2007 the service sector (which includes tourism, banking and finance), contributed 44.7 percent of GDP and employed 37 percent of the workforce.^[68] Thailand's service industry is competitive, contributing to its export growth.^[25]

Tourism

Tourism contributes significantly to the Thai economy, and the industry has benefited from the baht's depreciation and Thailand's stability. Tourist arrivals in 2002 (10.9 million) reflected a 7.3 percent increase from the previous year (10.1 million in 2001).

Tourism makes a larger contribution to Thailand's economy (about 8.5 percent of GDP^[71]) than that of any other Asian nation. Tourists come to Thailand for a variety of reasons, primarily for recreation on its beaches. With ongoing insurgency in the deep south, Bangkok has seen a large increase in tourism in recent years.

An increase in tourism from other Asian countries has contributed to the country's economy, although the baht has recently strengthened relative to other currencies. In 2007, about 14 million tourists visited Thailand. The tourism sector includes a sex industry, although prostitution is illegal in Thailand.

The easing of the monetary crisis, the renewed 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 than initially feared changed the tourism outlook. Thailand experienced a 16 percent decrease in international visitors during the first six months of 2009, but the remainder of the year saw a return of foreign tourists (with a marked increase in November and December). The number of tourists in 2009 was estimated at nearly 14 million, a decrease of 4 percent from 2008.^[72]

Banking and finance

Dangerous levels of non-performing assets at Thai banks helped trigger an attack on the baht by currency speculators which 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, Thailand's banks continue to struggle with unrealized losses and inadequate capital. The government is considering reforms, including an integrated financial regulatory agency which would enable the Bank of Thailand to focus on monetary policy. In addition, the government is attempting to strengthen the financial sector through the consolidation of commercial, state- and foreign-owned institutions. The 2004 Financial Sector Reform Master Plan provides tax breaks to financial institutions engaging in mergers and acquisitions. The reform program has been deemed successful by outside experts. In 2007 there were three state-owned commercial banks, five state-owned specialized banks, fifteen Thai commercial banks, and seventeen foreign banks in Thailand.^[68]

The Bank of Thailand sought to stem the flow of foreign funds into the country in December 2006, leading to the largest one-day drop in stock prices on the Stock Exchange of Thailand since the 1997 Asian financial crisis. The sell-off by foreign investors amounted to more than US$708 million.^[68]

Labor

Thailand's labor force has been estimated at from 36.8 million employed (of 55.6 million adults of working age)^[73] to 38.3 million (1Q2016).^[74] About 49 percent were employed in agriculture, 37 percent in the service sector and 14 percent in industry. In 2005 women constituted 48 percent of the labor force, and held an increased share of professional jobs. Thailand's unemployment rate was 0.9 percent as of 2014, down from two percent in 2004.^[9] A World Bank survey showed that 83.5 percent of the Thai workforce is unskilled.^[73]

About 12 million Thais may lose their jobs to automation over the next 20 years, wiping out one-third of the positions in the workforce, according to a joint study by the Quality Learning Foundation (QLF), Dhurakij Pundit University (DPU), and the World Bank.^[73] The World Bank estimates that Thai workers are two times and five times less productive than Malaysian and Singaporean workers respectively. The report assesses the average output of Thai workers at US$25,000 (879,200 baht) in 2014 compared to Malaysia's US$50,000 and US$122,000 for Singapore.^[73]

In fiscal year 2015, 71,000 Thais worked abroad in foreign countries. Taiwan employed the most Thai employees overall with 59,220 persons, followed by South Korea at 24,228, Israel at 23,479, Singapore at 20,000, and the UAE at 14,000. Most employees work in metal production, agriculture, textile manufacturing, and electronic part manufacturing fields.^[75]

The number of migrant workers in Thailand is unknown. The official number—1,339,834 registered migrant workers from Cambodia, Laos, and Myanmar—reported by the Office of Foreign Workers Administration under the Ministry of Labour, represents only legal migrant workers. Many more are presumed to be non-registered or illegal migrants. The Thailand Development Research Institute (TDRI) estimates that there may yet be more illegal migrant workers than legal ones in Thailand.^[76]

Foreign trade

China has replaced the United States as Thailand's largest export market while the latter still holds its position as its second-largest supplier (after Japan). While Thailand's traditional major markets have been North America, Japan, and Europe, economic recovery in Thailand's regional trading partners has helped Thai export growth.

Recovery from financial crisis depended heavily on increased exports to the rest of Asia and the United States. Since 2005 the increase in export of automobiles from Japanese manufacturers (particularly Toyota, Nissan and Isuzu) has helped improve the trade balance, with over one million cars produced annually since then. Thailand has joined the ranks of the world's top ten automobile-exporting nations.^[77]

Machinery and parts, vehicles, integrated circuits, chemicals, crude oil, fuels, iron and steel are among Thailand's principal imports. The increase in imports reflects a need to fuel production of high-tech items and vehicles.

Thailand is a member of the World Trade Organization (WTO), the Cairns Group of agricultural exporters and the ASEAN Free Trade Area (AFTA), and has pursued free-trade agreements. A China-Thailand Free Trade Agreement (FTA) began in October 2003. This agreement was limited to agricultural products, with a more comprehensive FTA planned to be signed by 2010. Thailand also has a limited free-trade agreement with India (since 2003) and a comprehensive Australia-Thailand Free Trade Agreement, which began on 1 January 2005.

Thailand began free trade negotiations with Japan in February 2004, and an in-principle agreement was agreed to in September 2005. Negotiations for a US-Thailand free trade agreement have been underway, with a fifth round of meetings held in November 2005.

Several industries are restricted to foreign investment by the 1999 Foreign Business Act. These industries include media, agriculture, distribution of land, professional services, tourism, hotels, and construction. Share ownership of companies engaged in these activities must be limited to a 49 percent minority stake. The 1966 US-Thailand Treaty of Amity and Economic Relations provides exemption of these restrictions for shareholders with United States citizenship.^[78]

The Bangkok area is one of the most prosperous parts of Thailand and heavily dominates the national economy, with the infertile northeast being the poorest. A concern of successive Thai governments, and a focus of the recently ousted Thaksin government, has been to reduce the regional disparities which have been exacerbated by rapid economic growth in Bangkok and financial crisis.

Although little economic investment reaches other parts of the country except for tourist zones, the government has stimulated provincial economic growth in the eastern seaboard and the Chiang Mai area. Despite talk of other regional development, these three regions and other tourist zones still dominate the national economy.

Although some US rights holders report good cooperation with Thai enforcement authorities (including the Royal Thai Police and Royal Thai Customs), Thailand remained on the priority watch list in 2012. The United States is encouraged that Thailand’s government has affirmed its commitment to improving IPR protection and enforcement, but more must be done for Thailand to be removed from the list.^[79]

Although the economy has grown moderately since 1999, future performance depends on continued reform of the financial sector, corporate-debt restructuring, attracting foreign investment and increasing exports. Telecommunications, roads, electricity generation and ports showed increasing strain during the period of sustained economic growth. Thailand is experiencing a growing shortage of engineers and skilled technical personnel.

Regional economies

Isan

The economy of Isan is dominated by agriculture, although output is poor and this sector is decreasing in importance at the expense of trade and the service sector. Most of the population is poor and badly educated. Many labourers have been driven by poverty to seek work in other parts of Thailand or abroad.

Although Isan accounts for around a third of Thailand's population and a third of its area, it produces only 8.9 percent of GDP. Its economy grew at 6.2 percent per annum during the 1990s.

In 1995, 28 percent of the population was classed as below the poverty line, compared to just 7 percent in central Thailand. In 2000, per capita income was 26,317 baht, compared to 208,434 in Bangkok. Even within Isan, there is a rural/urban divide. In 1995, all of Thailand's ten poorest provinces were in Isan, the poorest being Sisaket. However, most wealth and investment is concentrated in the four major cities of Khorat, Ubon, Udon, and Khon Kaen. These four provinces account for 40 percent of the region's population.

Special Economic Zones (SEZ)

In his televised national address on 23 January 2015 in the program "Return Happiness to the People", Prime Minister Prayut Chan-o-cha addressed the government's policy on the establishment of special economic zones.^[80]

He said that the policy would promote connectivity and regional economic development on a sustainable basis. There are currently 10 SEZs in Thailand, with trade and investment valued at almost 800 billion baht a year.

In 2014, the government launched a pilot project to set up six special economic zones in five provinces: Tak, Mukdahan, Sa Kaeo, Songkhla, and Trat. In the second phase, which is expected to begin in 2016, seven special economic zones will be established in another five provinces: Chiang Rai, Kanchanaburi, Nong Khai, Nakhon Phanom, and Narathiwat.^[80]

In early-2015, the government approved an infrastructure development plan in special economic zones. In 2015, the plan includes 45 projects, budgeted at 2.6 billion baht. Another 79 projects, worth 7.9 billion baht, will be carried out in 2016. Relying on a mix of government revenue, bond sales, and other funding, Prayut plans to spend US$83 billion over seven years on new railways, roads, and customs posts to establish cross-border trade routes. The idea is to link some 2.4 billion consumers in China and India with Asia’s newest economic grouping, the ASEAN Economic Community, of which Thailand is a member.^[81]

Shadow economy

"Thailand's shadow economy ranks globally among the highest," according to Friedrich Schneider, an economist at Johannes Kepler University of Linz in Austria, author of Hiding in the Shadows: The Growth of the Underground Economy.^[82] He estimates Thailand's shadow economy was 40.9 percent of real GDP in 2014, including gambling and small weapons, but largely excluding drugs.^[83] Schneider defines the "shadow economy" as including all market-based legal production of goods and services that are deliberately concealed from public authorities for the following reasons: (1) to avoid payment of income, value added or other taxes, (2) to avoid payment of social security contributions, (3) to avoid having to meet certain legal labor market standards, such as minimum wages, maximum working hours, or safety standards, and (4) to avoid complying with certain administrative procedures, such as completing statistical questionnaires or other administrative forms. It does not deal with typical underground, economic (classical crime) activities, which are all illegal actions that fits the characteristics of classical crimes like burglary, robbery, or drug dealing.^[84]

See also

• Stock Exchange of Thailand
• Foreign aid to Thailand
• List of Thai provinces by GPP

Additional reading

• The economic history of Siam from the 16th to the 19th century, together with factors affecting the economic outlook for the twentieth, are presented in Wright, Arnold; et al. (2008) [1908]. Wright, Arnold; Breakspear, Oliver T, eds. Twentieth century impressions of Siam (PDF). London: Lloyds Greater Britain Publishing Company. Retrieved 7 October 2011. 

References

External links

• Bank of Thailand
• Thai Ministry of Finance
• Thai Ministry of Commerce
• Thailand business news
• World Bank Summary Trade Statistics Thailand
• Tariffs applied by Thailand as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements
• International Trade Statistics of Thailand (2014)
• Quality Learning Foundation