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Thailand is one of many successful development stories which have been cited widely (World Bank, 2015). Thailand has been able to achieve remarkable and outstanding feats to become how it is today, moving from a low-income economy to an upper-middle-income economy (World Bank, 2015).
Before the effects of the Global Financial Crisis (GFC) in 2008-2009 and the flood of 2011, Thailand’s growth rate was a moderate 5% (World Bank, 2015). Since then, Thailand has achieved a steady growth rate of 1.8% in 2013 (World Bank, 2015), depending primarily on the export of industrial and agricultural goods, such as electronics, processed foods and so on (CIA, 2015).
Unemployment is at only 1% of the total workforce, one of the lowest in the world. However, this can cause pressure on companies, as they will have difficulty with payment schemes for wages and salaries (CIA, 2015). Additionally, although unemployment is low, benefits have not been shared equally, resulting in poverty remaining as a common phenomenon (World Bank, 2015). As a result, in 2013, the government has implemented a 300 baht ($10) minimum wage policy and tax reforms to support low/middle-income earners (CIA, 2015).
Thailand has a well-developed infrastructure, a free market economy, primarily pro-investment policies and a strong export industry, attracting approximately 2.5 million migrant workers from neighboring countries (CIA, 2015).
GDP: $318.9, $345.7, $365.9, $387.3 billion in 2010, 2011, 2012, 2013
GDP growth: 7.8%, 0.1%, 7.7%, 1.8% in 2010, 2011, 2012, 2013
GDP per capita: $4803, $5192, $5480, $5779 in 2010, 2011, 2012, 2013
Source: World Bank
As the data shows, Thailand’s performance has a steadily increasing trend. Its GDP per capita far exceeds that of neighboring countries of the same region, such as Laos with $1661, Cambodia with $1007 and Vietnam with $1911, indicating that Thailand’s relative performance is better than nearby nations (World Bank, 2015). It could also be interpreted as growth in the economy, as higher GDP per capita means higher productivity, which could lead to economic growth. It could also mean that the average standard of living is higher in Thailand, as people have more money to spend on basic needs and wants (Investopedia, 2015). However, this could be affected by outliers, as poverty is still known as common in Thailand.
On the other hand, Thailand’s GDP per capita is not showing a steady trend, compared to neighboring and nearby countries. This can be seen clearly in 2011 and 2013, largely due to the flooding in 2011, causing heavy damage to agricultural and manufacturing sectors, which weakened one of their most important sources of capital: exporting (CIA, 2015). The declined growth in 2013 is caused by the political uproar, which caused uncertainties (CIA, 2015).
In order to achieve higher economic performance, the Thai government has implemented macro, regional and village financial policies on growth, inequality, poverty and distribution of gains and losses (Townsend, 2010). Additionally, fiscal balances were weakened as growth slowed (World Bank, 2015).
Thailand is known for having one of the lowest unemployment rates in the world, with only 0.7% in 2013, making it the country with the 3rd lowest rate of unemployment (CIA, 2015). However, its labor market is not as well-functioning, which could affect the Thai’s economic efficiency and competitiveness (Lathapipat & Chucherd, 2013). As cited in Lathapipat & Chucherd’s paper presented on the Bank of Thailand Symposium (2013), Thailand’s rank as the 64th out of 148 countries in terms of labor market efficiency is disappointing, as it was previously 24th, which meant a significant drop occurred.
Lathapipat’s report also included a summary of firms they surveyed. After analyzing the data, they noticed multiple firms reporting labor shortage, mainly because of the lack in both quantity and quality of the labor market (Lathapipat & Chucherd, 2013). According to The Economist (2014), the conditions fit a type of unemployment called structural unemployment. In this form of unemployment, if there is a mismatch between the quantity and quality of the job and the people looking for jobs, then they are structurally unemployed. In other words, this is where the labor supply does not meet the labor demand. Other types of unemployment includes frictional unemployment with people are moving between jobs and cyclical unemployment with people who are made redundant (The Economist, 2014). However, none of these two types are present in the Thai economy.
Responding to this situation, the Thai government implemented education-promoting policies, enabling Thai students to access tertiary education (Lathapipat & Chucherd, 2013).
Inflation rates: 3.7%, 4.2%, 0.2%, 2.8% in 2010, 2011, 2012, 2013
Source: World Bank
Although economists have tried to estimate the damage of the flood on the Thai economy, they did not expect it to have such a heavy impact. It is not until quarter 3 of 2012 that economic stability was re-stabilized (Bank of Thailand, 2012). The flood heavily damaged domestic agricultural crops, such as rice, production plants supply chains, transportation and so on and caused a sharp decline in exports. However, fortunately, domestic strength helped cushion those weaknesses (Bank of Thailand, 2012).
Given the delayed flood recovery, inflation was subsided due to deceleration of consumer spending and delayed recovery in private demand (Bank of Thailand, 2012). However, domestic price pressure rose over time, but was offset by softer pressure from overseas sources (Bank of Thailand, 2012).
Knowing that their economy needs to achieve stable prices, the government provided initial momentum for recovery in the private sector (Bank of Thailand, 2012). Additionally, the government will also provide support so that economic activities can return to pre-flood levels (Bank of Thailand, 2012).
All in all, Thailand is considered very well-developed compared to other countries in the same area. It has evolved from a low-income country to an upper-middle-income country in a matter of years, despite having to deal with multiple barriers, such as the global financial crisis (GFC), the flood of 2011 and political unrest/uncertainty in 2012.
Thailand’s GDP, GDP growth rate and GDP per capita are also developed. Compared to other countries in the region, Thailand has a higher GDP than others, with the exception of Malaysia. GDP per capita is also high, which could signify a higher standard of living, economic growth, higher productivity and so on. However, its GDP growth has not showed equal signs of well-being, mainly due to damage caused by the flood and political unrest, causing uncertainties in government spending and therefore limited growth.
Thailand has a very low unemployment rate, but its labor market efficiency affected Thailand’s competitiveness. This is because there is a lack in quality and quantity of the labor market, resulting in high structured unemployment. To improve the situation, the government has spent on tertiary education so that the future work force would meet the requirements of work.
Inflation rates in Thailand are relatively low, due to the damage caused by the flood and decline in overseas demand. However, with the support of the government and de-pressurized domestic prices, Thailand returned to its pre-flood status.
In conclusion, Thailand, despite its many barriers and challenges, is doing very well economically. It is hoped that when the political unrest is settled, Thailand can continue growing and developing in a more stable environment.
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