Thailand Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

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.

Countryaah.com: 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.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including THA which represents the country of Thailand. Check findjobdescriptions to learn more about Thailand.

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.