Economical overview
Thailand's economy has grown rapidly since
the 1950s. Growth is primarily driven by large exports,
which are largely made up of electronic components made
by a modern industry. An extensive tourism industry is
also contributing to the upturn. However, the dependence
on exports and tourism makes the economy vulnerable to
fluctuations in the world economy, and the growth rate
has slowed down in the 2010s.
Market economics and free trade are the main
principles, although no-fuss about protecting one's own
market from outside competition is sometimes heard in
the political debate. The standard of living has been
gradually increased for the residents, but the
improvements are unevenly distributed. The economic
upturn is most noticeable in Bangkok and its environs,
and least in southern, northern and northeastern
Thailand.
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Major imports by Thailand, covering a full list of top products imported by the country and trade value for each product category.
Over a period of years after World War II, annual
growth was usually 7-10 percent. The most noteworthy
development took place in 1986–1996, when the structure
of the economy also began to be seriously transformed.
The basis for the economy, which was previously based on
agriculture, was widened and the industry grew strong.
Over a period, exports increased by 30 percent per year.
Asian crisis
But in 1997, the economy went into a serious crisis.
Increased imports caused the current account deficit to
grow. As a result, currency speculators attacked the
national currency, Baht. The central bank tried to keep
the exchange rate up through support purchases and
raised interest rates. The foreign exchange reserve
shrank rapidly. At the same time, reduced foreign
investment had created overcapacity in the real estate
and construction industries, which had problems paying
off their loans. This, in turn, affected the finance
companies that were feeding on lending money to the
construction industry. In June 1997, the real estate and
financial markets collapsed. It became clear that the
banking system was working poorly.
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In July the baht was released, and in a few months
the value against the dollar had halved. The loan body
IMF decided on a support package of about $ 17 billion.
Tough requirements were linked to the auxiliary package.
Thailand needs to tighten interest rate and currency
policy, increase VAT and cut government budgets.
Thailand passed the IMF's requirements and began
repaying the loans in 2000.
Several different institutions were set up to restore
the credibility of the financial system after the
so-called Asian crisis of 1997–1998. The state took over
six banks and a bank emergency was set up. Prime
Minister Thaksin Shinawatra's government (2001–2006) ran
an active campaign to reduce public sector imports of
goods and services. A sale of several state-owned
companies was initiated, but the process is slow.
Political concerns are affecting the economy
During the first year of the 2000s, the economy again
showed good growth. The Thaksin government introduced a
series of reforms that favored poor rural residents:
investment funds for small farmers, deferred mortgages
on loans from a state bank and preferential loans to buy
houses. One particular bank would give credit to
low-income earners and another bank would give loans to
SMEs.
The military coup against Thaksin in the autumn of
2006 (see Modern history) caused great concern in the
financial market. The military-backed government, which
was appointed after the coup, sought to calm the market
by emphasizing that the country's economic rate was set.
But as early as February 2007, the Minister of Finance,
the respected former Governor of the Central Bank
Pridiyathorn Devakula, had to step down after harsh
criticism for a series of economic decisions that led
foreign investors to leave the country and the stock
market to collapse.
The Thaksin-faithful government formed after the
December 2007 election promised to pursue the deposed
prime minister's efforts in the poor areas of the
country's periphery. But the continued political
uncertainty had a negative impact on the economy. Not
least, the airport occupations in the autumn of 2008,
when hundreds of thousands of tourists were stranded,
caused a major financial breakdown for the tourism
industry. At the same time, the global economic downturn
hit Thailand with full force, due to shrinking exports,
declining tourist incomes and reduced contributions from
Thais with jobs abroad. Compared to the autumn of 2007,
the economy shrank by more than 4 percent in the last
months of 2008. Exports, which account for
three-quarters of the country's GDP, fell by almost a
tenth.
Expensive floods
Although the weakness was deep, the economy could
quickly turn up again from the second quarter of 2009,
thanks to increased income from exports and tourism as
well as a rising private consumption combined with
government efforts by the Abhisit government (2008–2011)
to stimulate the economy. Despite new political unrest
in the spring of 2010 (see Modern history), the positive
economic development continued, and in July the central
bank raised the interest rate for fear of rising
inflation. However, the tourism industry lost big
revenue as a result of the protests in Bangkok.
In October 2011, the Yingluck government (2011–2014)
launched a program for subsidies to the country's rice
farmers. The program guaranteed the rice growers a fixed
price for the harvesters. However, the rice subsidies
soon proved to be expensive and government debt began to
rise. The high price of Thai rice also caused the
country to lose market share to countries such as India,
Vietnam and China.
The Thai economy shrank by 9 percent in the last
quarter of 2011, compared to the same period the year
before. However, the main reason was the severe flooding
that hit the country earlier that year. Several
industries saw their production and profits decline as a
result of the floods, including foreign companies such
as Honda, Toshiba and Fujitsu. Prime Minister Yingluck
announced that the government would allocate 350 billion
baht (equivalent to SEK 75 billion) for reconstruction
following the natural disaster.
A rapid economic recovery was noted in the first
quarter of 2012, both for GDP growth and for industrial
production. GDP grew by 11 percent during the first
three months of the year compared to the previous
quarter. The second quarter of 2012 also showed an
economic upturn. Growth was driven by increased domestic
consumption and growing exports in the manufacturing
industry.
Expensive rice subsidies
The economic downturn in the world also affected the
Thai economy during the second half of 2012. Demand for
Thai goods abroad decreased but was offset by continued
strong domestic consumption. Inflation was relatively
low. On the whole, the country seemed to be recovering
well from the 2011 flood disaster.
However, during the first half of 2013, economic
growth again fluctuated downwards and the country went
into a recession (economic decline) since growth has
been negative for two consecutive quarters. In June, the
government cut down on the expensive rice subsidies,
which angered the rice farmers in the northeast.
In early 2014, reports emerged that the Thai economy
has been hurt by the political turmoil that has been
going on since the fall of 2013 (see Modern History).
GDP growth in the first quarter of the year shrank,
compared with the last quarter of 2013. The causes of
the economic difficulties were numerous: foreign
investors were scared away from the country by political
turmoil, tourists chose other destinations, exports
dropped and households consumed less. Several of the
major government-critical demonstrations had been held
in Bangkok's business district, which also hampered
economic development.
Military junta's emergency plan
In February, China withdrew from a planned major
purchase of Thai rice. The reason China changed was that
a review was initiated against the government's program
for rice purchases. A calculation had shown that the
rice subsidies cost the Thai taxpayers $ 6 billion a
year. The Yingluck government now chose to abolish the
rice subsidies.
In May 2014, the Yingluck government was deposed in a
military coup. Among other things, the military
management used the employed economy as an argument for
their actions. The new military leadership quickly
presented an economic crisis plan. A number of measures
would be taken in the coming year to increase the
confidence of the Thai economy and the foreign investors
abroad. The Military Council stressed the importance of
keeping the budget in balance and having coverage for
all expenses. The governing continued to pay subsidies
to the farmers.
In October 2014, the military junta presented an
economic stimulus package with major infrastructure
investments, mainly on new highways and irrigation
systems, as well as fuel subsidies. The Thai Ministry of
Finance announced that the rice subsidy program has
resulted in a total loss of 518 billion baht ($ 15.7
billion), which was more than twice as much as
previously estimated. The IMF demanded that the rice
subsidies be completely abolished.
Weak growth, high costs
In August 2016, the central bank announced that
foreign investment has not been so low since 2005. The
military regime looked to deter investors from outside.
Private consumption had also slowed down. Money was now
pumped in to develop Thailand's poor eastern parts. New
railways and airports were planned. At the same time,
exports increased, the baht strengthened and tourists
flocked.
In early 2017, the military government presented a
20-year strategic development plan with six priority
areas: security, competitiveness, education, public
sector development, social equality and "green growth".
Exports and tourism continued to grow, but so did the
central government debt, while consumption and
investment were at a low tide. The defense budget rose
sharply, as did the costs of subsidies and grants to
poor households.
In February 2018, the military-supported government
decided to implement the Eastern Economic Corridor (EEC)
infrastructure project. The project includes making the
eastern coastal region a regional economic hub by 2021
by developing industrial zones, tourism and
agglomerations. The EEC is estimated to cost $ 54
billion and is partly financed by China and Japan. The
project is part of China's infrastructure project New
Silk Road and in the 20-year national development plan
that the military has made part of the constitution (see
Political system).
When public elections were announced in March 2019,
Thailand had been ruled by the military for almost five
years. The economy was still struggling with a deficit
in the Treasury due to the high spending of the military
regime, while inflation and unemployment were low. In
2010, Thailand had one of the lowest growth rates in
Southeast Asia.
FACTS - FINANCE
GDP per person
US $ 7,274 (2018)
Total GDP
US $ 504,993 Million (2018)
GDP growth
4.1 percent (2018)
Agriculture's share of GDP
8.1 percent (2018)
Manufacturing industry's share of GDP
26.9 percent (2018)
The service sector's share of GDP
56.9 percent (2018)
Inflation
0.9 percent (2019)
Government debt's share of GDP
42.1 percent (2018)
External debt
US $ 129,765 million (2017)
Currency
baht
Merchandise exports
US $ 252 156 million (2018)
Imports
US $ 229 808 M (2018)
Current account
US $ 35 159 million (2018)
Commodity trade's share of GDP
99 percent (2018)
Main export goods
electrical appliances, computers and circuit boards,
clothing, food (including rice, fish, seafood, chicken)
Largest trading partner
China, USA, Japan
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