Thailand Economic Analysis
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INTRODUCTION
Thailand’s economy is defined by more than a decade of continuous and rapid economic growth starting in 1985, followed by a brutal recession that started near the end of 1997. During the boom years, economic growth averaged more than 7 percent annually, one of the highest rates in the world. Many different factors added to the rapid growth of Thailand’s economy; low wages, policy reforms that opened the economy more to trade, and careful economic management resulted in low inflation and a stable exchange rate. These factors encouraged domestic savings and investment and made the Thai economy an ideal host for foreign investment. As industry expanded, many Thai people who previously had worked in agriculture began to work in manufacturing, slowing growth in the agriculture sector. Meanwhile, manufacturing growth spurred the expansion of service sector activities.
In the early 1990s a series of economic policy reforms introduced by the Thai government made it easy and attractive for foreign banks to offer loans to Thai banks. The Thai banks used the capital to lend money to domestic finance companies, property developers, and other investors, starting an investment boom. The consequential outflow of capital caused the Thai banking system to crash in the middle of 1997. Thailand’s economy remained deep in recession through 1998, with gross domestic product shrinking an estimated 8.5 percent that year.
By 2001 Thailand’s per capita income reached $1,940, making it an upper-middle income developing economy. Although Thailand was technically still a poor country, the urban middle class enjoyed income gains and made the country one of the world’s large markets for luxury cars and other expensive consumer goods. However, the gains of growth were not distributed equally among the Thai population: between 1981 and 1994 the incomes of the richest 20 percent of the population grew significantly in comparison to those of the poorest 20 percent. Nevertheless, nearly all of Thailand benefited in some fashion from growth. The percentage of the population living in poverty fell from 23 percent in 1981 to less than 10 percent in 1994.
Agriculture was traditionally the mainstay of the Thai economy. The economy is heavily agricultural, with rice by far the leading crop. Other commercial crops include rubber, corn, kenaf, jute, tapioca, cotton, tobacco, kapok, and sugarcane. Thailands teak, once a major export, is still a valuable commodity. Marine and freshwater fisheries are important; fish provide most of the protein in the diet, and some of the deep-sea catches (mackerel, shark, shrimp, and crab) are exported. Thailand is also a major exporter of farmed shrimp. Agriculture’s share of GDP fell from 23 percent in 1980 to 11 percent in 1996 as Thailand moved into the ranks of the so-called newly industrializing economies.
Thailand’s basic unit of currency is the Baht. The central bank is the Bank of Thailand, which issues the currency. Until 1997 the Thai banking system combined private and publicly owned banks, with limited participation by foreign banks.
In the late 1980s economic policy reforms greatly facilitated foreign purchases of Thai stocks and bonds as well as international borrowing by Thai banks. Thailand also imports natural gas along a pipeline from Myanmar.
Residents of cities are 20 percent of Thailand’s inhabitants. With an annual rate of population growth of 1 percent, Thailand’s population is expected to double in 73 years. The proportion of the Thai population that is elderly has grown in recent decades, with 7 percent of the population age 65 or older in 2003. This number is expected to reach 14 percent by 2025.
Thailand’s economy is closely linked to world markets through trade as well as through investment and other capital flows. The composition of trade has shifted dramatically towards manufactures; between 1980 and 2000 manufactures as a percentage of total exports increased from 25 percent to 75 percent. Thailand’s economy is highly vulnerable to fluctuations in world prices of its major imports, such as oil. On the other hand, it has successfully taken advantage of growth in world demand for many of its exports, including seafood products, clothing and textiles, and electronics. Japan is Thailand’s largest trading partner, followed by the United States and Singapore. Thailand’s trade with other developing Southeast Asian and East Asian economies has increased in importance.
POPULATION
Total
The total population in Thailand is 64,631,595, of which 25 percent is under the age of 15. Estimates for this country explicitly take into account the effects of excess mortality due to AIDS; this can result in lower life expectancy, higher infant mortality and death