Thailand; a small country in South Asia, despite having enormous potential, couldn’t prosper and flourish for a long period of time. There are many reasons which held the economic growth of Thailand for a long period of time; social-political issues were the most prevalent ones.
However, the country has managed to sort out many of its issues and gradually, it is evolving as a promising economy. Though, the picture hasn’t been quite promising over the last couple of years; where the GDP of the country had gone down considerably or failed to meet the expectations.
According to World Bank Analysis, one of the major obstacles which are Thailand is facing at this moment is the lack of proper infrastructure. There isn’t enough capital being invested; either by domestic and local groups nor by foreign investors. As a result, when it comes to industrial growth; the situation hasn’t improved much.
The economy of Thailand has always been dominated by agriculture. Besides, tourism has also played an important role in earning foreign currencies. These two sectors still remain to be the major pillars of Thailand’s economy. However, the fact that there has hardly been any development in the industrial sector for more than a decade now; the economy of Thailand has failed to reach the heights of its expectations.
A Brief Insight into Economic Growth of Thailand
The economic growth of Thailand reached its peak over a quarter of five years in 2013. This came as a shock and surprise to most of the economists and experts who didn’t see this coming. The country experienced massive gains from private consumptions and exports; primarily agricultural products.
During this period, the GDP or Gross Domestic Product of the country was booming by 4.8%. The Social Development Board and National Economic stated that this was an unbelievable achievement, and was the best as far as Thailand’s GPD growth is concerned. It needs to mentioned in this regard that the median estimate of the= economists was 4%. The actual GDP growth was, in fact, higher than 1.1% than the median estimate which was drawn by the experts.
Ever since the military establishment of Thailand seized power, the economy of the country is rebounding and over a period of time has experienced sustained growth, marked by a considerable improvement in exports. The income of foreign currency from tourism had reached its summit during this period.
The statistics agencies of the country, after witnessing this massive improvement, forecasted the growth rate by 4.2% to 4.7% for the next quarter. Whereas, for the previous quarter, their estimate was 3.6% to 4.6%
The Deputy General Secretary of the State Planning Agency, Mr. Wichayayuth Boonchit had stated that the manufacturing sector got benefited as a result of the higher rate of exports. He also added that the Private Investment was expected to do well during that quarter.
The military regime of Thailand took proper measures to reform the country’s economic policies during this period. The made commendable efforts to boost foreign direct investment, which was required to improve the country’s industrial sector and infrastructure. However, some of the big projects got delayed during this phase as the country was standing on the verge of elections.
The current-account surplus and foreign-reserve buffers of the country played a major role during this period to protect the nation’s economy from instability as the rate of Dollar was increasing. It was during this period, the overall economy of the country experienced massive growth. The industrial sector was receiving a good amount of investment from foreign investors. This also helped in the process of controlling the rate of inflation which was one of the major concerns as far as the economy of Thailand was concerned.
World Bank’s Overview of Thailand’s Economy
According to the World Bank, over the last 4 decades, Thailand has made tremendous improvements in its economic and social indexes. As a matter of fact, Thailand managed to attain the status of an “Upper-Income Country” from a “Low-Income” one. It took Thailand less than a generation to achieve this status. The World Bank further added, that there has been a striking reduction of poverty in Thailand; due to a sustained and continuous growth if its economy.
The Economy of Thailand started growing at a rate of 7.5% per annum. It was from the year 1960 to 1996, the country had experienced one of its golden eras. There was downslide from 1995 till 1998; however, in the year 1999, the country managed to pull itself out of the rough phase it was going through. It was from the year 1999 till 2005; millions of jobs were created, which played a major role in the reduction of poverty in the country.
The fact that Thailand started improving on its financial index; helped it to progress on its social segment as well. One of the most impressive achievements during this period was the fact that basic education could be offered to more and more children; from the backward section of Thai society. Besides, the health care segment also benefited a lot due to this remarkable growth of the overall economy of Thailand.
As mentioned, Thailand experienced a massive improvement as far as controlling poverty is concerned. From 1986 to 2017; poverty in Thailand declined from 67% to 7.8%.
However, the economic growth of the country slowed down to a certain extent from 2015 to 2017. The price of the agricultural products experienced a considerable fall during this phase which had a negative effect on the farmers and the agricultural sector of the country. The level of employment also experienced a decline during this phase; both in manufacturing as well as agricultural sectors. Compared to 2015, the number of people living below the line of poverty raised by a staggering figure of 478,000 in the year 2017. The financial disparity is believed to be one of the main reasons for worsening the conditions during this period. There was hardly any FDI or Foreign Direct Investment during this time; which resulted in the decline of the overall economic index of Thailand.
Inequality; mostly on the economic ground increased between 2015 to 2017. The average household consumption per capita grew during this period; however, the household consumption as far as the bottom 40% of the population was concerned declined.
According to a report published by World Bank Human Capital Index; the health and education sector though has improved considerably over the last four decades, yet there is much room for improvement. One of the main challenges Thailand is facing at this moment is uneven quality in education and health care services.
Promoting Economic Growth of Thailand
As far as economic development for any country is concerned, manufacturing industries have played an instrumental role. According to the experts; for Thailand to achieve sustainable economic growth, more emphasis needs to be put in the manufacturing sectors. The process of promoting and developing the manufacturing sector of Thailand began in the mid-90s; however, it is yet to reach the heights which it has aimed for. It needs to be mentioned in this regard that there has been progressing in this area over the last couple of decades. Despite all the odds, Thailand has managed to emerge as one of the major hubs as far as global manufacturing zones are concerned. ASEAN, or the Association of Southeast Asian Nations; today is considered to be one of the most rapidly developing regions, and Thailand is included in this region.
The manufacturing sector of Thailand today, is considered to be one of the key elements as far as the economic growth of the country is concerned. Over the years, Thailand has become a major hub for manufacturing electronic products, automobiles, different types of electrical appliances, computer parts and peripherals, and others.
In order to ensure that the manufacturing sector of the country keeps on booming; the government of Thailand has recently declared its new and modified policy; where they have targeted 10 major industries. They are as follows:
- Smart Electronic products
- Next-generation automotive
- Biotechnology and Agriculture
- Wellness and affluent medical tourism
- Robotics and Automation
- Food Processing Industry
- Bio-Chemical and Bio-Fuel industry
- Logistics and Aviation industry
- Medical Hub
- Digital Economy
These are the 10 major industrial sectors which have been targeted by the Thai government, as they have the maximum potential to attract foreign direct investment and also to generate more job opportunities; which in turn would help in the overall economic development of Thailand
Major Technologies for Industrial Promotion
In order to achieve industrial growth, the latest and advanced technologies need to be introduced. The government of Thailand has listed down 4 major technologies that they are going to emphasize. They are as follows
- Digital Technology, and
- Advanced Material Technology
The experts believe that these are the technologies that would help to improve the overall industrial growth of Thailand, which in turn would contribute towards the nation’s economic development. All the projects which would be driven by these technologies would be exempted from corporate tax for a period of 10 years. In the case of EEC or Eastern Economic Corridor, the period of tax exemption has been extended up to 13 years.
It is quite evident that the government of Thailand has recognized the key areas which need to focus on and at the same time, they have formulated policies and protocols to ensure that optimum amount of output could be achieved. Over the last couple of years, the government of Thailand has invested millions of dollars in order to introduce these technologies in Thailand’s industrial sector. Read more about Thailand’s Digital Technology scenario.
Future Looks Promising
Though presently the picture is not as rosy and one would expect it to be; however, according to the experts, with the help of proper investment; both local and foreign, Thailand can certainly emerge as one of the major economies in South-East Asia. It is worth mentioning that since 2016; new foreign investments have started coming in; however, the rate is not as high as it needs to be. The government of Thailand, in order to attract foreign investors, has come up with new policies. It is expected that by the end of 2030; with the adequate inflow of capital and support from the government; Thailand would emerge as an economic force to reckon with.
At the conclusion, it can be stated that the future of Thailand’s economy looks promising. However, the government of Thailand needs to be consistent with its efforts and at the same time should not avoid other main sectors; like agriculture. By modernizing the agricultural sector and promoting the manufacturing industries; Thailand is likely to accomplish its target within the next 10 years. Thailand has also made remarkable progress in developing its small scale and cottage industries; which have played a supportive role in the development of major industrial sectors.
In the post-Covid economy, as per the London Post, it is declared that Thailand is the 2nd best country for business investments. The country has capitalized greatly on the trade tension between the US and China. The growth of the Thai market and her momentum indicators have remained steady and strong.
Forbes listed the country as the 8th best-emerging market of 2020.
Read more about various industries in Thailand and their growth areas here
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