Thailand’s economic performance since 2011
In 2011, the country witnessed two major crucial events that destabilized Thailand’s economic growth-general elections, and flooding in most parts of the country. 2011 politics was partly divisive and inhibited the growth of the country’s economy. In these elections, the Pheu Thai Party had worn against the Democratic Party. Yingluck Shinawatra, who was the youngest sister of Thaksin, was leading Pheu Thai Party, hence she became the president. Thus, it is notable that the entire year was marked by elections that hindered economic development. As if that is not enough, the floods came destroying the little efforts put forth by the citizens in production. These two events reduced the country’s GDP growth by 0.1%. However, the losses were massive in the fourth quarter where the county witnessed about $45 billion losses owing to floods.
Due to this setback, Yingluck embarked in the creation of infrastructure and water management in her first year of being the president of the country. In her efforts, the country realized an increase of GDP by about 6.9% (Regnier, 2017). This was attributed to the huge investments in roads and other transport facilities. Notably, this enhanced the efficiency of businesses in the economy. Accordingly, this increase in the economic growth rate also lead to the stabilization of the inflation rate at 3.02%
Unfortunately, in 2013, the country dropped in the GDP growth rate owing to political unrests that were building in the previous year. In this year, it is recorded that the country’s currency considerably weakened compared to the other international currencies. In particular, the country’s currency 4.6% while compared to the US dollar. This was an indication of the country’s decrease in the growth rate, as foreign investments were considerably affected. Scores of foreign investors stopped to exploit the national opportunities, hence leading to a reduction in the GDP growth rate.
In the following years, the country experienced a military coup that further worsened the situation. This implies that the economy has been on stagnating in the growth of the GDP as their not a stable political environment within the state. The military-led government has since outlined a series of steps that would increase the country’s economic growth. For instance, the military government has established a successive growth of the economy from the agricultural based economy, to light industry economy in a period of two years. In a period of five years, this government envisages having advanced the economy to a technological economy. Hopefully, since 2014, the nation has experienced a slight growth in the GDP. The military-led government has managed to revitalize the tourism sector, hence increasing the foreign exchange in the economy. Further, it is also projected that the economic growth will grow by about 2.5% on annual basis under the current leadership (Schaffar, 2018).
Thailand’s macroeconomic performance in the next three years
Thailand’s economy is projected to increase and broaden in the next three years. This is supported by the fact that local consumption is remarkably on the increase. The economy is also slowly advancing to industrial based as opposed to agricultural based. This implies that the country is likely to add more value to its internal produce. Besides, this will also reduce the amount importation, while stabilizing exports out of the country. The manufacturing sector is likely to expand in the next three years. This would increase the ability of the country to provide jobs for its citizens. Consequently, the unemployment rate is likely to reduce. Currently, the economy records an unemployment rate of about 1.0%. Compared to the past few years, this unemployment rate is apparently higher. For example, just last year the country had an unemployment rate of about 0.8%. However, this increased to 1% in the current fiscal year.
The county’s rate of inflation is also likely to stabilize given the current growth rate and rising consumption rate. The current rate of inflation is 0.8%. Markedly, this is a lower figure compared to the previous years. For example, in 2014, the country had an inflation rate of 1.7% (Phongpaichit, Guns, & Gambling, 2014). In the last year, the economy recorded an inflation rate of about 1%. Thus, according to this trend, it is visible that the inflation rate is likely to reduce further owing to stable economic activities in the country.
Potential macroeconomic problems
Two notable macroeconomic problems that the country is likely to experience in the near feature are on the internal and external fronts. The first internal challenge that Thailand economy is expected to face is lack of stable financial credit facilities for the rapidly growing businesses in the economy. As earlier mentioned, it is noteworthy that the nation is experiencing an enormous growth in the domestic consumption. Notably, this would lead to the urge to increase economic activities. However, owing to inefficient financial systems, these business people may lack the credit facilities to increase their output. Thus, this would impact negatively on the country’s economic development.
On an external viewpoint, it is likely that the uncertain global economic conditions would equally impact on the local government. For example, the current issues concerning the euro bond crisis would impact on the monetary policies that the central bank of Thailand should implement. Further, the US recovery agenda would also have an impact on the country’s monetary policies. Due to these uncertainties, the country has witnessed an upsurge in the influx of capital into the country from the internal sources. Without proper control of these global financial interests, the country is likely to stall in its economic growth. For example, an increase in foreign country investments into the country would decrease the country’s development of local companies. This would, thus; mean that the economy will only be serving the interests of the foreign countries and not its interests. Accordingly, the country needs to create a perfect balance that will promote local development, as well as, create a sustainable financial relationship on the global scale. Essentially, global financial uncertainties remain to be a challenge for Thailand economy.
Potential risks facing Thailand in the next three years
The first risk for the country would thus emanate from the rising business tensions on the global fronts. In particular, the economy faces eminent risks from the United States business agenda. The United States is out to increase its global position in business. As such, it is seeking to exploit the business opportunities, especially in the developing countries. Additionally, owing to the political might of the country, the country will have to make wise decisions that would not only benefit the United States, but also its internal growth. A factor that the country’s policymakers need to consider is the current high household indebtedness. The public debt is significantly rising. The country’ current public debt stands at 41% of the GDP. This does not facilitate the growth of local industries. Evidently, most of the national income is used to service this debt instead of enhancing the country’s infrastructure. Thus, global business tensions are an imminent risk for the county’s economic growth.
Another risk that the country is expected to face in the next three years is on political instability. The country is expected to hold general elections before the end of February next year, which is, 2019. However, due to the political history of the country, many investors in the country are likely to reduce their investments into the country. Owing to these uncertainties, business is likely to stall in the part of the following two years while the prospective investors are watching out for political stability in the country. In case the country goes into another period of heightened tensions, and instability, then the economic growth will again decline. However, if the converse is true, then the country is likely to experience a dramatic increase in the nations GDP. Thus, political upheavals are likely to pose a great risk for Thailand’s development.
Policies for Thailand’s economy
With the above challenges and risks in mind, the first policy that the government should use to ensure that the county continues on the upward growth is to stabilize the financial institutions. The economy is growing at a fast pace, hence will need a robust financial system to help in the provision of credit facilities. To ensure that the financial institutions are providing affordable rates on borrowed fiancés, the central bank of Thailand should ensure that the banks’ lending rates are as low as possible. This will increase the ability of citizens to obtain bank loans for investment activities. Consequently, this is also likely to increase the country’s GDP as many individuals would engage in economic activities.
Another essential policy for the economy is on tax policies. In a bid to control the amount of important and by extension regulate the amount of capital influx, the county needs to strengthen its tax policies. The taxation systems should ensure that tax on foreign goods is set at a point that would encourage forewing investments, as well as enhance the growth of local industries. Thus, through a robust taxation policy, the country will create a balance between promoting financial stability in the country and encouraging the growth of local industries.
Phongpaichit, P., Guns, G., & Gambling, G. (2014). Thailand’s Illegal Economy and Public Policy. In Seminar paper delivered at the Centre of Southeast Asian Studies, Kyoto University (p. 57).
Regnier, P. (2017). Small and Medium Enterprises in Distress: Thailand, the East Asian Crisis and Beyond: Thailand, the East Asian Crisis and Beyond . Routledge.
Schaffar, W. (2018). Alternative Development Concepts and Their Political Embedding: The Case of Sufficiency Economy in Thailand. In Forum for Development Studies (pp. 1-27). Routledge.