ECONOMY
The Thai economy is export-dependent, with exports of goods and services accounting for over 70% of GDP in 2007. Thailand's recovery from the 1997-98 Asian financial crisis relied largely on external demand from the United States and other foreign markets. From 2001-2006, the administration of former Prime Minister Thaksin embraced a "dual track" economic policy that combined domestic stimulus programs with Thailand's traditional promotion of open markets and foreign investment. Real GDP growth strengthened sharply from 2.2% in 2001 to 7.1% in 2003 and 6.3% in 2004. In 2005-2007, economic expansion moderated, averaging 4.5% to 5.0% real GDP growth, due to domestic political uncertainty, rising violence in Thailand's four southernmost provinces, and repercussions from the devastating Indian Ocean tsunami of 2004. Thailand's economy in 2007 relied heavily on resilient export growth (at an 18.6% annual rate), particularly in the automobile, petrochemicals, and electronics sectors.
Before the 1997 financial crisis, the Thai economy had years of manufacturing-led economic growth--averaging 9.4% for the decade up to 1996. Relatively abundant and inexpensive labor and natural resources, fiscal conservatism, open foreign investment policies, and encouragement of the private sector underlay the economic success in the years up to 1997. The economy is essentially a free-enterprise system. Certain services--such as power generation, transportation, and communications--are state-owned and operated, but the government is considering privatizing them in the wake of the financial crisis. The timetable for privatization of some state-owned enterprises, however, has slipped due to resistance from labor unions and parts of civil society. Despite the resistance, some firms were successfully privatized, such as Airports of Thailand (renamed from Airport Authority of Thailand), PTT Public Company Limited (renamed from the Petroleum Authority of Thailand), and MCOT (renamed from Mass Communication Authority of Thailand).
The Royal Thai Government welcomes foreign investment, and investors who are willing to meet certain requirements can apply for special investment privileges through the Board of Investment. To attract additional foreign investment, the government has modified its investment regulations. In a reaction to former Prime Minister Thaksin's 2006 sale of his telecommunications company to foreign investors, the interim Thai government introduced amendments to the Foreign Business Act in 2007 which would have further restricted non-Thais from owning or controlling businesses operating in the Thai services sector. The National Assembly did not complete consideration of the amendments before its session concluded at the end of 2007. However, the new government has stated its intention to liberalize the act rather than strengthen the restrictions.
The organized labor movement remains weak and divided in Thailand; less than 2% of the work force is unionized. In 2000, the State Enterprise Labor Relations Act (SELRA) was passed, giving public sector employees similar rights to those of private sector workers, including the right to unionize.
Roughly 40% of Thailand's labor force is employed in agriculture (data based on Bank of Thailand.) Rice is the country's most important crop; Thailand is the largest exporter in the world rice market. Other agricultural commodities produced in significant amounts include fish and fishery products, tapioca, rubber, corn, and sugar. Exports of processed foods such as canned tuna, canned pineapples, and frozen shrimp are on the rise.
Thailand's increasingly diversified manufacturing sector is the largest contributor to growth. Industries registering rapid increases in production included computers and electronics, furniture, wood products, canned food, toys, plastic products, gems, and jewelry. High-technology products such as integrated circuits and parts, hard disc drives, electrical appliances, vehicles, and vehicle parts are now leading Thailand's strong growth in exports. The appreciation of the Thai baht to the U.S. dollar relative to other regional currencies during the 2006-2007 period has dampened some of Thailand's exports, and export sector margins have been affected. To help arrest baht appreciation, the Bank of Thailand applied controls on the import of capital into the country in December 2006. Nevertheless, the baht continued to appreciate.
The United States is Thailand's largest export market and third-largest supplier after Japan and China. While Thailand's traditional major markets have been North America, Japan, and Europe, economic recovery among Thailand's regional trading partners has helped Thai export growth (21.6% in 2004, 15.0% in 2005, 17.4% in 2006, and 18.6% in 2007). Export growth has been highest in some of Thailand's non-traditional export markets including India, China, and the Middle East. Due to domestic political uncertainty and concern about government's economic policies, Thai domestic demand and private investment were flat from early 2006 through late 2007.
Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil and fuels, and iron and steel are among Thailand's principal imports. The moderation in import levels (7.0% increase in 2006 versus 26.0% in 2005) reflects the low confidence of both consumers and investors.
Thailand is a member of the World Trade Organization (WTO) and the Cairns Group of agricultural exporters. Tourism contributes significantly to the Thai economy (about 6%). Tourist arrivals, which declined in 2005 due to the tsunami catastrophe, recovered strongly in 2006.
Bangkok and its environs are the most prosperous part of Thailand, and the barren northeast is the poorest. An overriding concern of successive Thai Governments, and a particularly strong focus of the Thaksin government, has been to reduce these regional income differentials, which have been exacerbated by rapid economic growth in and around Bangkok and the financial crisis. The government has tried to stimulate provincial economic growth with programs such as the Eastern Seaboard project and the development of an alternate deep-sea port on Thailand's southern peninsula. It also is conducting discussions with Malaysia to focus on economic development along the Thai-Malaysian border.
Although the economy has demonstrated moderate positive growth since 1999, future performance depends on continued reform of the financial sector, corporate debt restructuring, attracting foreign investment, and improving domestic investment and consumption to balance past reliance on exports. Telecommunications, transportation networks, and electricity generation showed increasing strain during the period of sustained economic growth and may pose a future challenge. Thailand's growing shortage of engineers and skilled technical personnel may limit its future technological creativity and productivity.
GDP (2007): $246 billion.
Annual GDP growth rate (2007): 4.8%.
Per capita income (2007): $3,737.
Unemployment rate (2007): 1.5% of total labor force.
Natural resources: Tin, rubber, natural gas, tungsten, tantalum, timber, lead, fish, gypsum, lignite, fluorite.
Agriculture (8.9% of GDP): Products--rice, tapioca, rubber, corn, sugarcane, coconuts, soybeans.
Industry: Types--tourism, textiles, garments, agricultural processing, cement, integrated circuits, jewelry, electronics, and auto assembly.
Trade (2007): Merchandise exports--$152.5 billion. Products--automatic data processing machines and parts, automobiles and parts, precious stones and jewelry, refined fuels, rubber, electronic integrated circuits, polymers of ethylene and propylene, rice, iron and steel and their products, rubber products, chemical products. Major markets--ASEAN, EU, U.S., Japan, China, and Singapore. Merchandise imports--$140.0 billion. Products--crude oil, machinery and parts, electrical machinery and parts, chemicals, iron and steel and their products, electrical circuits panels, computers and parts, other metal ores and metal waste scrap, ships and boats and floating structure, jewelry including silver and gold. Major suppliers--Japan, ASEAN, China, EU, U.S. and Malaysia.
