ECONOMICS IN THAILAND
Thailand has been classified as a “middle-income developing country” and a “relatively economically developed nation.” The World Bank currently labels it as “upper middle income.” Thailand is Southeast Asia’s 2nd largest economy after Indonesia, a position it has held for some time. The Thai economy is considerably smaller than the economies of China and Japan. It is one 56th the size of the economy in Japan. The economic situation in Thailand has improved greatly in recent decades. In 2011 it had the third lowest unemployment rate in the world. In terms of economic growth, Thailand's average income per household in 2011 rose about 30 percent from five years before. Less than 10 percent of the population lives below the poverty line.
The Thai economy is driven by tourism and exports. Todd Pitman of Associated Press wrote: “Thailand is a lucrative manufacturing hub whose factories produce everything from computer hard drives to cars that feed a global supply chain. The country is one of the world's leading rice exporters. Its sapphire-blue water beaches are among the world's most popular tourist destinations. [Source: Todd Pitman, Associated Press, December 2, 2013]
According to the Tourist Authority of Thailand: “Thailand’s economy remains export-dependent, with exports accounting for 60 percent of a GDP that stood at roughly $270 billion in 2008. Thailand’s exports, worth approximately USD180 billion per annum, consist primarily of agricultural products, including fish and rice, the latter of which Thailand is the largest exporter of in the world, as well as textiles, rubber, automobiles, jewelry, and computers/electronic appliances. While Thailand is one of the premier tourist destinations in the world, the Thai economy only receives around 7 percent of its GDP from international tourism revenue, a figure which is nonetheless a substantial $16 billion.
According to the CIA World Factbook: “With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand enjoyed solid growth from 2000 to 2007 - averaging more than 4 percent per year - as it recovered from the Asian financial crisis of 1997-98. Thai exports - mostly machinery and electronic components, agricultural commodities, and jewelry - continue to drive the economy, accounting for more than half of GDP. The global financial crisis of 2008-09 severely cut Thailand's exports, with most sectors experiencing double-digit drops. In 2009, the economy contracted 2.3 percent. In 2010, Thailand's economy expanded 7.8 percent, its fastest pace since 1995, as exports rebounded from their depressed 2009 level. Steady economic growth at just below 4 percent during the first three quarters of 2011 was interrupted by historic flooding in October and November in the industrial areas north of Bangkok, crippling the manufacturing sector and leading to a revised growth rate of only 0.1 percent for the year. The industrial sector is poised to recover from the second quarter of 2012 onward, however, and the government anticipates the economy will probably grow between 5.5 and 6.5 percent for 2012, while private sector forecasts range between 3.8 percent and 5.7 percent. [Source: CIA World Factbook]
In terms of regions: 1) central Thailand is regarded as the country’s breadbasket, with large amounts of rice, sugarcane and fruits such as pineapples produced there, as well as being a major center for industry. 2) Fishing, rubber, tin mining and tourism are the primary money earners in southern Thailand. 3) Dry rice and maize are the main crops on the north. Tourism is an important industry. Opium is still grown but is no longer the cash crop it once was. 4) The Northeast is Thailand’ poorest region. Most people are farmers. Hand-woven textiles are also a major product there.
Economic Statistics of Thailand
GDP (purchasing power parity): $602.2 billion (2011 est.); country comparison to the world: 25; $601.9 billion (2010 est.); $558.5 billion (2009 est.). GDP (official exchange rate): $340.1 billion (2011 est.). In 2006 Thailand’s GDP was US$196.6 billion. [Source: CIA World Factbook, Library of Congress *]
GDP - per capita (PPP): $9,400 (2011 est.), country comparison to the world: 114; $9,400 (2010 est.); $8,800 (2009 est.). Per capita GDP in 2005 was US$9,100 using purchasing power parity. The per capita domestic product in 1995 was $5,500. *
Growth: GDP - real growth rate: 0.1 percent (2011 est.), country comparison to the world: 197; 7.8 percent (2010 est.); -2.3 percent (2009 est.). The growth rate in 2005 was 4.4 percent. Growth between 1991 and 1995: 8.5 percent. *
Unemployment rate: 0.7 percent (2011 est.), country comparison to the world: 3. 1 percent (2010 est.). The unemployment rate has been very low—often between 1 and 2 percent—for some time. Unemployment, youth ages 15-24: total: 4.3 percent, country comparison to the world: 125; male: 3.7 percent; female: 5.1 percent (2009). *
Inflation rate (consumer prices): 3.8 percent (2011 est.), country comparison to the world: 96 3.3 percent (2010 est.). Consumer prices increased by 4.5 percent in 2005, up from 1.8 percent the previous year, partly as a result of global demand for crude oil. *
GDP - composition by sector: agriculture: 13.3 percent; industry: 43 percent; services: 43.7 percent (2011 est.). In 2006 services constituted 45.2 percent of GDP, followed closely by industry with a 44.9 percent share. Agriculture accounted for the remaining 10 percent. *
Population below poverty line: 8.1 percent (2009 est.). Household income or consumption by percentage share: lowest 10 percent: 2.8 percent; highest 10 percent: 31.5 percent (2009 est.) Distribution of family income - Gini index: 53.6 (2009); country comparison to the world: 12; 42 (2002). *
Budget: revenues: $66.21 billion. Expenditures: $71.35 billion (2011 est.). Taxes and other revenues: 19.5 percent of GDP (2011 est.), country comparison to the world: 169. Budget surplus (+) or deficit (-): -1.5 percent of GDP (2011 est.), country comparison to the world: 69. Public debt: 44.9 percent of GDP (2011 est.), country comparison to the world: 71; 43.1 percent of GDP (2010 est.) In 2005 Thailand’s central government budget was estimated at US$35.2 billion. The budget was essentially in balance, with a small surplus of around US$467 million. *
According to Global Competiveness Survey in 2012 conducted by the World Economic Forum, Thailand ranked 38th, up one notch from the previous years. This was after falling six years in a row still Thailand lags behind its neighbours Singapore and Malaysia.
Fiscal year: 1 October - 30 September.
Money, Costs and Exchange Rates in Thailand
Denominations: The currency of Thailand is the baht, which is divided into 100 satangs. There are 25 and 50 satang coins and 1, 5 and 10 baht coins. There are also 10 (brown), 20 (green), 100 (red), 500 (purple) and 1,000 (gray) baht banknotes. The larger the banknote the higher the denomination.
Exchange Rates (February 2013): 1 Dollar = 29.82 baht. 1 baht = three U.S. cents. Exchange rates: baht per US dollar : 30.492 (2011 est.); 31.686 (2010 est.); 34.286 (2009); 33.37 (2008); 34.52 (2007). Currency code: THB.
After the U.S. dollar the Thai baht is the second most widely used currency in Southeast Asia. It is widely accepted in Laos, Cambodia and Myanmar, where banks even hold some of their reserves sin baht.
Thailand is very cheap by American and European standards. It is relatively inexpensive in terms of budget accommodation, buses, taxis and cheap restaurant food. Backpackers can live on around $20 to $30 a day. A descent meal at a local restaurant often costs around $4 and a room in a guesthouse is sometimes less than $10. Top end hotels and meals at fancy restaurants are a good value in Thailand. Rooms in tourist hotels go for between $40 and $60. Doubles in a five-star hotel generally go for between $150 and $200 and sometimes available for $100. There are sometimes different prices for foreigners and Thais. Some tourists complain about this but even foreigner prices are pretty reasonable.
Macroeconomics in Thailand
In Thailand there has been a long-term shift from agriculture to manufacturing and services, but as of 2006 about 39 percent of the workforce was still employed in agriculture, forestry, and fishing, although this sector is responsible for only 10 percent of gross domestic product (GDP). The economy is heavily dependent on exports, such as textiles and computer components, which account for 60 percent of GDP.
William Pesek of Bloomberg wrote: “Thailand is walking in place even if its headline growth rates outpace Japan, the U.S. and Europe. To Bank of Thailand economist Piti Disyatat, per-capita gross domestic product tells the story: It has been hovering around 15 percent to 20 percent of U.S. levels for more than 10 years. This is a precarious moment for Thailand to be stuck at a per capita GDP of about $5,000. Global growth is tepid, China is slowing, and Indonesia, Philippines and Vietnam are winning jobs that Thailand once took for granted. As Thai wages rise, so do production costs. It must move faster up the value chain to build more technologically advanced products in the electronics and automobiles sectors -- preferably bearing Thai names, not just Japanese ones.[Source: William Pesek, Bloomberg, July 11, 2013]
According to the Thai government: “Besides its strong fiscal and financial system, Thailand also has a suitable structure and foundation contributing to economic development. Moreover, Thailand has always embraced the free trade system and promoted international trade and investment, all factors that helped the country recover from the 1997 and 2008 economic crises in a short time. Since the export-oriented Thai economy largely depends on the stability of the world economy, the Thai government focuses on developing infrastructure within the country and stimulating all aspects of the economy in a variety of ways. The main driving factors in the Thai economy, apart from exports, are agriculture, manufacturing, tourism, and the service industry. [Source: Thailand Foreign Office, The Government Public Relations Department =]
“Thailand’s economy at present can be termed as a mixed capitalist and socialist system, open to free competition and foreign trade. Moreover, the country is open to foreign direct investment, which contributes to its fast and steady economic growth. Businesses in the agricultural, industrial, and service sectors are for the most part privately owned, with certain state-owned units such as state enterprises operating public utilities, as well as state-owned financial institutions. At present, the government sector’s role in production activities has been reduced, by transforming state enterprises into private concessions for various public utility projects such as electric trains and telephone connections. =
Energy and Economics in Thailand
According to the New York Times Thailand has one of the most fuel-inefficient economies. It has some but not much domestic energy supplies and is vulnerable to high oil prices. According to the World Bank: Continuous economic development in Thailand has resulted in a steadily rising demand for energy in the country, as energy is an important resource in order to drive the economy, whether the energy comes from electricity or fossil fuels. [Source: World Bank, International Energy Agency]
When the economic was growing in the early 2000s, energy was heavily subsidized. In 2004, when oil hit $50 a barrel, Thais spent about the same for diesel fuel as they when oil was cheaper because the government paid $5.5 million a day in subsides on oil. These measures helped Thaksin in the 2005 election but of course increased the national debt.
In 2005 Thaksin tried to prop up the economy by boosting consumer confidence and cutting fuel consumption. He introduced a stimulus package to try and achieve the former and cut subsidies on fuel prices to cut consumption of oil products. He also named Thanong Bidaya—best known as the man who decided to devalue the baht, triggering the 1997-1998 Asian financial crisis—as finance minister again.
In June 2005, aimed to cut fuel consumption by reducing the hours gas stations could sell fuel and limiting the time bright billboards could keep their lights on. Subsidies on diesel fuel were phased out gradually There was even discussion of forcing television station to stop broadcasting after midnight.
Bank of Thailand and Monetary Policy in Thailand
The Bank of Thailand is the primary state-owned facility. It has responsibility and authority for monetary control in its role as the central bank and serves as the fiscal agent and the financier of the government, regulating the money supply, foreign exchange, and the banking system; and also serving as the lender of last resort to the banks.
In December 2006, The Bank of Thailand sought to stem the flow of foreign funds into the country. 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. The Bank of Thailand has a woman governor Tarisa Watanagase. She a shrewd of the bank when the stock market crashed after currency controls were introduced.
The Bank of Thailand is mandated by the Bank of Thailand Act to implement monetary policies and to operate as the central bank, taking into consideration monetary value and monetary system stability, as the Monetary Policy Committee is empowered to determine the standard interest rate and to trade debt instruments and foreign exchange, as well as to provide collateralized loans to financial institutions. [Source: Thailand Foreign Office, The Government Public Relations Department+]
The monetary policy under the operation of the Bank of Thailand is setting the framework for a flexible inflation target, using core inflation as the target in implementing the policy, which is set in the range of 0-3.5 percent. The Bank of Thailand believes that maintaining a low and non-volatile inflation rate gives the economic system price stability, and contributes to improved planning and decisions involving consumption, production, savings, and investment in the private sector. +
As for the exchange rate, the Bank of Thailand follows the policy of the managed-float exchange rate regime, allowing the baht value to move in accordance with the market condition, which reflects the demand and supply of the baht currency in comparison with foreign currencies. The supervision of the exchange rate must not be in conflict with the monetary policy under the framework of a flexible inflation target, so as to prevent exchange rate movement caused by or leading to speculation for profit, with a condition that the volatility of the baht value must be kept at a level acceptable by the economy; another condition is that the country’s competitiveness is maintained, by considering mainly the Nominal Effective Exchange Rate, which must not move against economic trends and thus lead to the accumulation of imbalances. +
Central bank discount rate: 3.25 percent (31 December 2011 est.), country comparison to the world: 111. 2 percent (31 December 2010 est.) [Source: CIA World Factbook~]
Commercial bank prime lending rate: 6.91 percent (31 December 2011 est.), country comparison to the world: 143. 5.94 percent (31 December 2010 est.). ~
Reserves of foreign exchange and gold: $175.1 billion (2011 est.), country comparison to the world: 15. $172.1 billion (2010 est.). ~
Debt - external: $82.54 billion (31 December 2011 est.), country comparison to the world: 50. $71.26 billion (31 December 2010 est.). ~
Monetary policy target; Core inflation within the range of 0-3.5 percent. ~
Thailand’s Economic Problems and Keeping Up with Other Southeast Asia Economies
According to 2012 article in The Nation: “Thailand is 38th in the competitiveness ranking by the Executive Opinion Survey for the World Economic Forum but it should be higher. After all, the country enjoys a favourable business environment. Our location in the region has been considered as an economic driver, given our proximity to China. We have a geographical advantage. Over the past decade, Thailand did not fully utilise its economic capital, which started from the government's policy to promote foreign investment and the automobile industry by providing incentives. [Source: The Nation, September 10, 2012 ]
“What happened in Thailand in recent years suggests that we failed to maintain the momentum. Our ASEAN neighbours, namely Singapore and Malaysia, have managed to achieve better rankings due to their success in advancing technology, improving infrastructure, upgrading the quality of education and combating corruption. Singapore was the world's second most competitive country after Switzerland. Malaysia is No 25. Thailand, over the past decade, was instead looking over its shoulder at the emerging countries such as Vietnam and Cambodia. Thais may be content to stay ahead of Indonesia, the Philippines and Vietnam. But that could change soon. Vietnam, for instance, is fast catching up, especially in the areas of research and development and education, which would pave the way for a stronger economic foundation in the long run.
“The prospects for the Thai economic environment also suggest we are at risk of losing competitiveness, because the same old problems have not been fixed. First of all, the ongoing political instability is still a risk to the implementation of a continuous economic policy. Development of basic infrastructure has also been lagging behind other countries, because of the instability. The ratio of investment to GDP here has declined from 34 per cent from 1991-2000 to only 25.5 per cent from 2001-2010.
“The country's pervasive corruption has never been eradicated. In fact, it is getting worse, as graft scandals have often come along with the government's massive spending policies. The country's measures to protect intellectual property rights are not conducive to promoting research and innovation either. Thailand performed poorly in basic education and technological application, which are the building blocks for future competitiveness. In the future, Thailand's competitiveness could be further eroded by a string of populism policies, which would stretch the country's finances....Thailand should strive to boost its economic edge by focusing on four areas - fiscal stability, macroeconomic stability, institutional framework, political stability and human resource development.
Political Instability Hurts Thailand's Credit Rating Despite
Bruce Gale wrote in The Straits Times: “Ask Thai government officials and they will fume that it is just unfair. How can Thailand be denied an "A" sovereign credit rating when other countries with poorer macroeconomic numbers already have that coveted assessment? Securing a high credit rating helps a country access cheap funding on international bond markets. And for the Thais, the obvious comparison is with Malaysia. All three major rating agencies - Standard & Poor's, Moody's and Fitch - give Malaysia an A grade. Those same agencies put Thailand at the upper end of the B category, meaning that while Thai bonds are still rated investment grade, they are not regarded as being of the same quality as Malaysia's. [Source: Bruce Gale, The Straits Times, February 6, 2013 ]
“The macroeconomic numbers, however, suggest otherwise. Thailand's public debt stands at around 44 per cent of gross domestic product, significantly lower than Malaysia's 53.7 per cent. And while both countries have fiscal deficits, Malaysia's is proportionately higher (4.5 per cent of GDP last year) compared to that of Thailand (3 per cent). Both countries also hold international reserves equal to more than nine months of retained imports. The reality, however, is that such numbers are not the only factors rating agencies look at when making their assessments. Also considered is the impact of more subjective political variables. While Malaysia certainly has its problems, the political impasse in Thailand seems far riskier.
“Thailand's recent political history, involving military coups, constitutional change and deadly street clashes, cannot be ignored. Malaysia's political difficulties will be dealt with at the ballot box in a couple of months; Thailand's could easily be settled at the point of a gun. Despite the comfortable parliamentary majority that Thai Prime Minister Yingluck Shinawatra's Pheu Thai Party secured in the 2011 elections, government economic planners are far more easily sidetracked by urgent, short-term political considerations than in most other countries. Frequent changes of government have not helped either. Education reform, which could help promote the country's long-term economic prospects, is already being neglected.
“Thailand remains bitterly divided between yellow- and red-shirt protesters, together with their respective allies. A loose grouping of middle-class professionals and royalists, yellow-shirt protesters supported the 2006 military coup that ousted Ms Yingluck's brother, Thaksin Shinawatra. The red shirts, on the other hand, hotly oppose what they see as attempts by the urban and military elite to monopolise political power. Sympathetic to Thaksin, they include students, left-wing activists, farmers and some businessmen. Both groups were responsible for violent street protests in recent years. And as Yingluck well knows, a future round of violence could trigger yet another military coup.
“In order to maintain strong support among rural voters, her government implemented several populist policies, some of which are contributing to the growing fiscal deficit. According to the World Bank, a controversial rice-buyback scheme alone was responsible for a 115 billion baht (US$3.86 billion) loss from the 2011-12 bumper harvest. The government says it is aiming for a balanced budget by 2017. The maximum level of public debt is officially estimated at 49.9 per cent of GDP. But critics give much higher debt projections. "No one in this government is concerned with fiscal discipline," former finance minister Pridiyathorn Devakula told an economic forum in Bangkok. The rising cost of living and lower prices of agricultural produce are also causing concern. Street protests by farmers could, if left unaddressed, seriously undermine the government's support in rural areas. And this, in turn, could give the government's opponents outside Parliament the opportunity they are looking for.
King Bhumibol , Sufficiency Economy and Social Integrity
King Bhumibol has introduced the philosophy of sufficiency economy as a way for Thailand to grow and prosper in balance with human society and the environment, It emphasizes moderation, responsible consumption and resilience and “not overdo” things by being acutely aware of ones own potentials and limits. This approach has been recognized by the United Nations. [Source: Thailand Foreign Office, The Government Public Relations Department+]
Thailand is applying the philosophy of Sufficiency Economy, advocated and developed by His Majesty King Bhumibol Adulyadej, to national administration and all fields of development. This philosophy has become the country’s new approach to development strategies and policies, which are evident in the 10th National Economic and Social Development Plan, 2007-2011. It has three components: moderation, reasonableness, and a self-immunity system. +
Together with this Sufficiency Economy concept, the vision of the current National Economic and Social Development Plan also seeks to develop Thailand into a “green and happiness” society. Moreover, the Royal Thai Government has placed an emphasis on raising public awareness for leading a life of virtue to attain the goal of a more just, more equitable, and more sustainable society. It believes that promoting this emphasis in accordance with Sufficiency Economy will help build a “caring and sharing society” and lead to well-balanced and sustainable development. +
Based on common sense and rationality, Sufficiency Economy involves social integrity and is applicable to everyone at all levels, from the individual to the community and the national levels. It is important to note that Sufficiency Economy is not something that would isolate Thailand from the outside world, but would better enable the country to cope with challenges arising from globalization and other changes. +
Recognizing the work of His Majesty the King, especially his philosophy of Sufficiency Economy, the United Nations Development Program (UNDP) presented the first Human Development Lifetime Achievement Award to His Majesty in May 2006. Later in January 2007, it launched the Thailand Human Development Report 2007, with the theme of “Sufficiency Economy and Human Development,” spreading this philosophy to a wider international audience. +
The philosophy of Sufficiency Economy has been found in most projects initiated by His Majesty the King and it can be applied to all economic fields as well as public affairs. The Government is applying this philosophy to its development process, while many developing countries have sent delegations to study royally initiated projects on alternative development in Thailand, based on this concept. In one of his royal addresses, His Majesty cautioned that it was not important whether or not Thailand became a “tiger” or a newly industrialized economy. The important thing was to have a selfsupporting economy. A self-supporting economy means to have enough to survive. In another royal speech on 23 December 1999, His Majesty the King said that the term “Sufficiency Economy” did not exist in textbooks, as it was a new theory. It is a middle-path philosophy to achieving equitable and stable development, which is often referred to as sustainable development. The philosophy points the way for Thailand to achieve contentment through knowledge of itself. His Majesty suggested that Thai people at all levels follow the “middle path” as an appropriate model for conduct in every aspect of life. The concepts of Sufficiency Economy and sustainable development are interrelated and will lead to self-reliance. With the focus on this philosophy, Prime Minister Surayud believes that the future of Thailand will be better. +
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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Tourist Authority of Thailand, Thailand Foreign Office, The Government Public Relations Department, CIA World Factbook, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.
Last updated May 2014