Thailand: ECONOMY
ECONOMY
Overview: Thailand’s developing free-enterprise economy has recovered from the Asian financial crisis triggered by speculation against the Thai baht in 1997–98. By 2002, Thailand’s standard of living had returned to the level prevailing before the financial crisis. The recovery reflected the benefit of reform measures tied to assistance by the International Monetary Fund, direct investment from Japan, the United States, Singapore, and other nations, and surging exports. During 2001–4 the economy grew at a moderate rate, but the rate of growth was slower than in the booming 1980s and the first half of the 1990s. A long-term shift from agriculture to manufacturing and services continues, but about 49 percent of the workforce is 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. Between 2002 and mid-2004, the number of poor declined by about 2 million. In percentage terms, the poverty rate declined from 15.6 percent to 12 percent during this period, according to the World Bank.
Gross Domestic Product (GDP): In 2003 Thailand’s GDP was US$143 billion, reflecting a growth rate of 6.9 percent over 2002. Per capita GDP was US$2,190 at prevailing exchange rates, but US$7,450 using purchasing power parity. In 2003 services constituted 46.4 percent of GDP, followed closely by industry with a 43.5 percent share. Agriculture accounted for the remaining 10 percent.
GOVERNMENT Budget: In fiscal year 2003–4, Thailand’s central government budget was US$26.4 billion. The budget was essentially in balance, with a small surplus of around US$393 million.
Inflation: Consumer prices increased in 2004 by 2.7 percent, up from 1.8 percent the previous year, partly as a result of global demand for crude oil.
Agriculture, Forestry, and Fishing: In 2003 agriculture, forestry, and fishing contributed 10 percent of gross domestic product (GDP) but employed 49 percent of the workforce. Thailand is the world’s leading exporter of rice and a major exporter of shrimp. Other agricultural products include coconuts, corn, rubber, soybeans, sugarcane, and tapioca. In 1985 Thailand officially designated 25 percent of the nation’s land area for protected forest and 15 percent for timber production. Protected forests have been set aside for conservation and recreation, while production forests are available for the forestry industry. Between 1992 and 2001, exports of logs and sawn timber increased from 50,000 cubic meters to 2 million cubic meters per year. The regional avian flu outbreak, which still had not been contained as of mid-2005, led to a contraction of Thailand’s agricultural sector during 2004, and the tsunami disaster of December 26, 2004, devastated the west coast fisheries industry.
Mining and Minerals: Thailand’s major minerals include fluorite, gypsum, lead, lignite, natural gas, rubber, tantalum, tin, and tungsten. The tin mining industry has declined sharply since 1985, and Thailand has gradually become a net importer of tin. As of 2003, the main mineral export was gypsum. Thailand is the world’s second largest exporter of gypsum after Canada, even though government policy limits gypsum exports to prevent price cutting. In 2003 Thailand produced more than 40 types of minerals with an annual value of about US$740 million. However, more than 80 percent of these minerals were consumed domestically. In September 2003, in order to encourage foreign investment in mining, the government relaxed severe restrictions on mining by foreign companies and reduced mineral royalties payable to the state.
Industry and Manufacturing: In 2003 industry contributed 43.5 percent of gross domestic product (GDP) but employed only 14 percent of the workforce. This relationship is the opposite of the one applying to agriculture. Industry expanded at an average annual rate of 6 percent during the 1990–2003 period. The most important subsector of industry is manufacturing, which accounted for 34.7 percent of GDP in 2003. Thailand is becoming a center of automobile manufacturing for the Association of Southeast Asian Nations (ASEAN) market. In 2004 automobile production reached 930,000 units, more than twice as much as in 2001. Two automakers active in Thailand are Toyota and Ford. The expansion of the automotive industry has been a boon for domestic steel production. Thailand’s electronics industry faces competition from Malaysia and Singapore, while its textile industry faces competition from China and Vietnam.
Energy: In 2002 Thailand’s total energy consumption was estimated at 3.1 quadrillion British thermal units, representing 0.7 percent of total world energy consumption. Thailand is a net importer of oil and natural gas, but the government is promoting the use of ethanol to reduce imports of petroleum and the gasoline additive methyl tertiary butyl ether. In 2003 daily oil consumption of 851,000 barrels per day exceeded domestic production of 259,000 barrels per day. Thailand’s four oil refineries have a combined capacity of 703,100 barrels per day. Thailand’s government is considering establishing a regional oil processing and transportation hub, serving the needs of south-central China. In 2002 natural gas consumption of 904 billion cubic feet exceeded domestic production of 685 billion cubic feet. Also in 2002, estimated coal consumption of 28.1 million short tons exceeded coal production of 21.8 million short tons. As of December 2004, proven oil reserves totaled 583 million barrels, and proven natural gas reserves were 13.3 trillion cubic feet. As of December 1999, recoverable coal reserves were 1.4 billion short tons.
In 2003 Thailand generated 118.9 billion kilowatt-hours of electricity. Although electricity reserves were in the safe range in mid-2002, some observers fear that demand may outstrip capacity as soon as 2006. Thailand’s state-controlled electric utility and petroleum monopolies are undergoing restructuring.
Services: In 2003 the services sector, which ranges from tourism to banking and finance, contributed 46.4 percent of gross domestic product (GDP) and employed 37 percent of the workforce.
Banking and Finance: Dangerous levels of nonperforming assets at Thai banks helped trigger the attack on the Thai baht by currency speculators that led to the Asian financial crisis in 1997–98. By 2003 nonperforming assets had been cut in half to about 30 percent. Despite a return to profitability, however, Thailand’s banks continue to struggle with the legacy of the financial crisis in the form of unrealized losses and inadequate capital. Therefore, the government is considering various reforms, including establishing an integrated financial regulatory agency that would free up the Bank of Thailand to focus on monetary policy. In addition, the Thai government is attempting to strengthen the financial sector through the consolidation of commercial, state-owned, and foreign-owned institutions. Specifically, the government’s Financial Sector Master Plan provides tax breaks to financial institutions that engage in mergers and acquisitions.
Tourism: Tourism makes a larger contribution to Thailand’s economy (typically about 6 percent of gross domestic product) than that of any other Asian nation. In 2003 some 10 million tourists visited Thailand. However, terrorism in southern Thailand and in Indonesia and natural disasters, most notably the December 2004 tsunami, have taken their toll on tourism. One of the negative side effects of Thailand’s tourism industry is a burgeoning sex tourism industry and a related threat from human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS).
Labor: Thailand’s labor force was estimated at 36.4 million as of November 2004. About 49 percent were employed in agriculture, 37 percent in services, and 14 percent in industry. In 2004 women constituted 48 percent of the labor force and held an increasing share of professional jobs. Less than 4 percent of the workforce is unionized, but 11 percent of industrial workers and 50 percent of state enterprise employees are unionized. According to the U.S. Department of State, union workers are inadequately protected. In 2003 Thailand’s unemployment rate was 2.2 percent of the labor force.
Foreign Economic Relations: Thailand seeks expanded trade through free-trade agreements and multilateral cooperation within such organizations as the Asian Development Bank, Asia-Pacific Economic Cooperation, Association of Southeast Asian Nations, and World Trade Organization. Under the auspices of the Asian Development Bank, Thailand joined the Greater Mekong Subregion’s development program in 1992. Japan and the United States are Thailand’s top two trading partners and sources of direct investment. Thailand grants the United States preferential treatment for investment under the Thai-U.S. Treaty of Amity and Economic Relations of 1966. Despite close economic ties between Thailand and the United States, the relationship suffers from disputes over agricultural trade, intellectual property rights, and customs procedures. In 2005 Thailand was negotiating a free-trade agreement with the United States. China is gaining importance as a trading partner and competitor for foreign direct investment and export markets, particularly in the areas of agriculture, computer hardware, and textiles.
Imports: In 2003 Thailand imported US$66.9 billion of goods, including capital goods (US$33.9 billion), raw materials (US$20.0 billion), and fuel and lubricants (US$8.5 billion). Thailand’s principal import partners were Japan (24.1 percent), the United States (9.5 percent), China (8 percent), Malaysia (6 percent), and Singapore (4.3 percent).
Exports: In 2003 Thailand exported US$78.1 billion of goods. Most exports related to manufacturing, including machinery and mechanical appliances (US$10.6 billion), electrical apparatus for circuits (US$10.6 billion), and computer parts (US$8 billion). Thailand’s principal export partners were the United States (17 percent), Japan (14.2 percent), Singapore (7.3 percent), China (7.1 percent), and Hong Kong (5.4 percent).
Trade Balance: In 2003 Thailand posted a merchandise trade surplus of US$11.2 billion.
Balance of Payments: In 2003 Thailand had a positive current account balance of US$8 billion, or 5.6 percent of gross domestic product (GDP). This surplus represented a significant positive swing from the current account deficit experienced prior to the financial crisis of 1997–98.
External Debt: In 2002 total external debt was US$59.2 billion, or about 41 percent of gross domestic product (GDP).
Foreign Investment: In 2003 foreign direct investment was inbound US$1.9 billion. The largest foreign investors were the United States, Japan, Singapore, and the European Union.
Foreign Aid: On July 31, 2003, Thailand repaid its outstanding obligations under a standby arrangement from the International Monetary Fund designed to help it recover from the 1997–98 Asian financial crisis. Payment was made one year ahead of schedule, reflecting the achievement of macroeconomic and balance-of-payments stability. In 2005 the World Bank was funding eight development projects in Thailand. These projects encompassed the areas of social investment (US$300 million), education (US$225 million), land titling (US$118 million), technical assistance (US$30 million), and energy (US$245 million).
Currency and Exchange Rate: Thailand’s currency is the baht. As of late September 2005, one U.S. dollar was equivalent to about 41 baht. Foreign exchange reserves, depleted during the financial crisis of 1997, have risen steadily to US$41 billion in 2003. Currency is issued in 10, 20, 50, 100, 500, and 1,000 baht notes. Coins are minted in 25 and 50 satang and 1, 5, and 10 baht denominations.
Fiscal Year: October 1 to September 30.
Overview: Thailand’s developing free-enterprise economy has recovered from the Asian financial crisis triggered by speculation against the Thai baht in 1997–98. By 2002, Thailand’s standard of living had returned to the level prevailing before the financial crisis. The recovery reflected the benefit of reform measures tied to assistance by the International Monetary Fund, direct investment from Japan, the United States, Singapore, and other nations, and surging exports. During 2001–4 the economy grew at a moderate rate, but the rate of growth was slower than in the booming 1980s and the first half of the 1990s. A long-term shift from agriculture to manufacturing and services continues, but about 49 percent of the workforce is 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. Between 2002 and mid-2004, the number of poor declined by about 2 million. In percentage terms, the poverty rate declined from 15.6 percent to 12 percent during this period, according to the World Bank.
Gross Domestic Product (GDP): In 2003 Thailand’s GDP was US$143 billion, reflecting a growth rate of 6.9 percent over 2002. Per capita GDP was US$2,190 at prevailing exchange rates, but US$7,450 using purchasing power parity. In 2003 services constituted 46.4 percent of GDP, followed closely by industry with a 43.5 percent share. Agriculture accounted for the remaining 10 percent.
GOVERNMENT Budget: In fiscal year 2003–4, Thailand’s central government budget was US$26.4 billion. The budget was essentially in balance, with a small surplus of around US$393 million.
Inflation: Consumer prices increased in 2004 by 2.7 percent, up from 1.8 percent the previous year, partly as a result of global demand for crude oil.
Agriculture, Forestry, and Fishing: In 2003 agriculture, forestry, and fishing contributed 10 percent of gross domestic product (GDP) but employed 49 percent of the workforce. Thailand is the world’s leading exporter of rice and a major exporter of shrimp. Other agricultural products include coconuts, corn, rubber, soybeans, sugarcane, and tapioca. In 1985 Thailand officially designated 25 percent of the nation’s land area for protected forest and 15 percent for timber production. Protected forests have been set aside for conservation and recreation, while production forests are available for the forestry industry. Between 1992 and 2001, exports of logs and sawn timber increased from 50,000 cubic meters to 2 million cubic meters per year. The regional avian flu outbreak, which still had not been contained as of mid-2005, led to a contraction of Thailand’s agricultural sector during 2004, and the tsunami disaster of December 26, 2004, devastated the west coast fisheries industry.
Mining and Minerals: Thailand’s major minerals include fluorite, gypsum, lead, lignite, natural gas, rubber, tantalum, tin, and tungsten. The tin mining industry has declined sharply since 1985, and Thailand has gradually become a net importer of tin. As of 2003, the main mineral export was gypsum. Thailand is the world’s second largest exporter of gypsum after Canada, even though government policy limits gypsum exports to prevent price cutting. In 2003 Thailand produced more than 40 types of minerals with an annual value of about US$740 million. However, more than 80 percent of these minerals were consumed domestically. In September 2003, in order to encourage foreign investment in mining, the government relaxed severe restrictions on mining by foreign companies and reduced mineral royalties payable to the state.
Industry and Manufacturing: In 2003 industry contributed 43.5 percent of gross domestic product (GDP) but employed only 14 percent of the workforce. This relationship is the opposite of the one applying to agriculture. Industry expanded at an average annual rate of 6 percent during the 1990–2003 period. The most important subsector of industry is manufacturing, which accounted for 34.7 percent of GDP in 2003. Thailand is becoming a center of automobile manufacturing for the Association of Southeast Asian Nations (ASEAN) market. In 2004 automobile production reached 930,000 units, more than twice as much as in 2001. Two automakers active in Thailand are Toyota and Ford. The expansion of the automotive industry has been a boon for domestic steel production. Thailand’s electronics industry faces competition from Malaysia and Singapore, while its textile industry faces competition from China and Vietnam.
Energy: In 2002 Thailand’s total energy consumption was estimated at 3.1 quadrillion British thermal units, representing 0.7 percent of total world energy consumption. Thailand is a net importer of oil and natural gas, but the government is promoting the use of ethanol to reduce imports of petroleum and the gasoline additive methyl tertiary butyl ether. In 2003 daily oil consumption of 851,000 barrels per day exceeded domestic production of 259,000 barrels per day. Thailand’s four oil refineries have a combined capacity of 703,100 barrels per day. Thailand’s government is considering establishing a regional oil processing and transportation hub, serving the needs of south-central China. In 2002 natural gas consumption of 904 billion cubic feet exceeded domestic production of 685 billion cubic feet. Also in 2002, estimated coal consumption of 28.1 million short tons exceeded coal production of 21.8 million short tons. As of December 2004, proven oil reserves totaled 583 million barrels, and proven natural gas reserves were 13.3 trillion cubic feet. As of December 1999, recoverable coal reserves were 1.4 billion short tons.
In 2003 Thailand generated 118.9 billion kilowatt-hours of electricity. Although electricity reserves were in the safe range in mid-2002, some observers fear that demand may outstrip capacity as soon as 2006. Thailand’s state-controlled electric utility and petroleum monopolies are undergoing restructuring.
Services: In 2003 the services sector, which ranges from tourism to banking and finance, contributed 46.4 percent of gross domestic product (GDP) and employed 37 percent of the workforce.
Banking and Finance: Dangerous levels of nonperforming assets at Thai banks helped trigger the attack on the Thai baht by currency speculators that led to the Asian financial crisis in 1997–98. By 2003 nonperforming assets had been cut in half to about 30 percent. Despite a return to profitability, however, Thailand’s banks continue to struggle with the legacy of the financial crisis in the form of unrealized losses and inadequate capital. Therefore, the government is considering various reforms, including establishing an integrated financial regulatory agency that would free up the Bank of Thailand to focus on monetary policy. In addition, the Thai government is attempting to strengthen the financial sector through the consolidation of commercial, state-owned, and foreign-owned institutions. Specifically, the government’s Financial Sector Master Plan provides tax breaks to financial institutions that engage in mergers and acquisitions.
Tourism: Tourism makes a larger contribution to Thailand’s economy (typically about 6 percent of gross domestic product) than that of any other Asian nation. In 2003 some 10 million tourists visited Thailand. However, terrorism in southern Thailand and in Indonesia and natural disasters, most notably the December 2004 tsunami, have taken their toll on tourism. One of the negative side effects of Thailand’s tourism industry is a burgeoning sex tourism industry and a related threat from human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS).
Labor: Thailand’s labor force was estimated at 36.4 million as of November 2004. About 49 percent were employed in agriculture, 37 percent in services, and 14 percent in industry. In 2004 women constituted 48 percent of the labor force and held an increasing share of professional jobs. Less than 4 percent of the workforce is unionized, but 11 percent of industrial workers and 50 percent of state enterprise employees are unionized. According to the U.S. Department of State, union workers are inadequately protected. In 2003 Thailand’s unemployment rate was 2.2 percent of the labor force.
Foreign Economic Relations: Thailand seeks expanded trade through free-trade agreements and multilateral cooperation within such organizations as the Asian Development Bank, Asia-Pacific Economic Cooperation, Association of Southeast Asian Nations, and World Trade Organization. Under the auspices of the Asian Development Bank, Thailand joined the Greater Mekong Subregion’s development program in 1992. Japan and the United States are Thailand’s top two trading partners and sources of direct investment. Thailand grants the United States preferential treatment for investment under the Thai-U.S. Treaty of Amity and Economic Relations of 1966. Despite close economic ties between Thailand and the United States, the relationship suffers from disputes over agricultural trade, intellectual property rights, and customs procedures. In 2005 Thailand was negotiating a free-trade agreement with the United States. China is gaining importance as a trading partner and competitor for foreign direct investment and export markets, particularly in the areas of agriculture, computer hardware, and textiles.
Imports: In 2003 Thailand imported US$66.9 billion of goods, including capital goods (US$33.9 billion), raw materials (US$20.0 billion), and fuel and lubricants (US$8.5 billion). Thailand’s principal import partners were Japan (24.1 percent), the United States (9.5 percent), China (8 percent), Malaysia (6 percent), and Singapore (4.3 percent).
Exports: In 2003 Thailand exported US$78.1 billion of goods. Most exports related to manufacturing, including machinery and mechanical appliances (US$10.6 billion), electrical apparatus for circuits (US$10.6 billion), and computer parts (US$8 billion). Thailand’s principal export partners were the United States (17 percent), Japan (14.2 percent), Singapore (7.3 percent), China (7.1 percent), and Hong Kong (5.4 percent).
Trade Balance: In 2003 Thailand posted a merchandise trade surplus of US$11.2 billion.
Balance of Payments: In 2003 Thailand had a positive current account balance of US$8 billion, or 5.6 percent of gross domestic product (GDP). This surplus represented a significant positive swing from the current account deficit experienced prior to the financial crisis of 1997–98.
External Debt: In 2002 total external debt was US$59.2 billion, or about 41 percent of gross domestic product (GDP).
Foreign Investment: In 2003 foreign direct investment was inbound US$1.9 billion. The largest foreign investors were the United States, Japan, Singapore, and the European Union.
Foreign Aid: On July 31, 2003, Thailand repaid its outstanding obligations under a standby arrangement from the International Monetary Fund designed to help it recover from the 1997–98 Asian financial crisis. Payment was made one year ahead of schedule, reflecting the achievement of macroeconomic and balance-of-payments stability. In 2005 the World Bank was funding eight development projects in Thailand. These projects encompassed the areas of social investment (US$300 million), education (US$225 million), land titling (US$118 million), technical assistance (US$30 million), and energy (US$245 million).
Currency and Exchange Rate: Thailand’s currency is the baht. As of late September 2005, one U.S. dollar was equivalent to about 41 baht. Foreign exchange reserves, depleted during the financial crisis of 1997, have risen steadily to US$41 billion in 2003. Currency is issued in 10, 20, 50, 100, 500, and 1,000 baht notes. Coins are minted in 25 and 50 satang and 1, 5, and 10 baht denominations.
Fiscal Year: October 1 to September 30.