Economic Setting::

Thailand

Reported by:

Ronjie Budiao

(Crim. 2-B, Group 7)

Economic Setting:

Thailand

• The recent history of Thailand’seconomy is defined by morethan a decade of sustained andrapid economic growthbeginning in 1985, followed by asevere recession that started inlate 1997. During the boom

Economic Setting:

Thailand

years, economic growthaveraged more than 7 percentannually, one of the highestrates in the world. The crisis of1997 and 1998 wiped out someof the gains of the boom andforced major adjustments in Thaiindustry and economic policy.

Economic Setting:

Thailand

Many different factorscontributed to the rapid growthof Thailand’s economy. Lowwages, policy reforms thatopened the economy more totrade, and careful economicmanagement resulted in lowinflation and a stable exchange

Economic Setting:

Thailand

rate. These factors encourageddomestic savings and investmentand made the Thai economy anideal host for foreigninvestment. Foreign anddomestic investment causedmanufacturing to grow rapidly,

Economic Setting:

Thailand

especially in labor-intensive,export-oriented industries, suchas those producing clothing,footwear, electronics, andconsumer appliances. Theseindustries also benefited from atremendous expansion in world

Economic Setting:

Thailand

trade during the 1980s. Asindustry expanded, many Thaipeople who previously hadworked in agriculture began towork in manufacturing, slowinggrowth in the agriculture sector.Meanwhile, manufacturing

Economic Setting:

Thailand

growth spurred the expansion ofservice sector activities.

Economic Setting:

Thailand

Although Thailand wastechnically still a poor country,spectacular income gainsenjoyed by the urban middleclass made the country one ofthe world’s large markets forluxury cars and other expensive

Economic Setting:

Thailand

consumer goods. However, byAsian standards the gains ofgrowth were not distributedequally among the Thaipopulation: between 1981 and1994 the incomes of the richest20 percent of the population

Economic Setting:

Thailand

grew significantly in comparisonto those of the poorest 20percent. Nevertheless, nearly allThai benefited in some fashionfrom growth.

Economic Setting:

Thailand

In the early 1990s a series ofeconomic policy reformsintroduced by the Thaigovernment made it easy andattractive for foreign banks tooffer loans to Thai banks. TheThai banks used the capital to

Economic Setting:

Thailand

domestic finance companies,property developers, and otherinvestors, stimulating aninvestment boom. In anatmosphere of great optimismabout continued rapid growth,the resulting investment boom

Economic Setting:

Thailand

created a “bubble economy”based on speculation in urbanproperty and stocks. The bubbleburst in 1996 and 1997, whenstock and property pricesdeclined steeply. As speculatorsin these sectors failed to repay

Economic Setting:

Thailand

loans, many Thai banks becameunable to service their foreigndebt, causing investorconfidence to fall sharply. Theconsequent outflow of capitalcaused the Thai banking systemto crash in mid-1997. The

Economic Setting:

Thailand

resulting credit shortage drovemany companies intobankruptcy and created a largepool of unemployed workers.Thailand’s economy remaineddeep in recession through 1998,with gross domestic product

Economic Setting:

Thailand

shrinking an estimated 8.5percent that year. In the early2000s Thailand made a fulleconomic recovery, driven bystrong growth in exports.

Economic Setting:

Thailand

Thai governments, includingunelected military regimes, havein general worked to ensureprice stability while promotingeconomic growth. Other than insome key infrastructure andenergy sectors, the government

Economic Setting:

Thailand

has not made extensive use ofdirect interventions in themarket. Instead, it prefers toexert influence through indirectmeasures, such as investmentincentives and taxes on trade.

Economic Setting:

Thailand

Thailand’s basic unit of currencyis the baht. The central bank isthe Bank of Thailand(established in 1942), whichissues the currency. Until 1997the Thai banking systemcombined private and publicly

Economic Setting:

Thailand

owned banks, with limitedparticipation by foreign banks.

Economic Setting:

Thailand

In the late 1980s economicpolicy reforms greatly facilitatedforeign purchases of Thai stocksand bonds as well asinternational borrowing by Thaibanks. Whereas private foreigncapital flows had previously

Economic Setting:

Thailand

consisted mainly of directinvestments in factories andequipment, by the early 1990sthe major source of foreigncapital was short-term loans toThai banks. The boom in capitalinflows placed great stresses not

Economic Setting:

Thailand

only on the private bankingsystem (to which most foreignloans flowed) but also on thecapacity of the Bank of Thailandto monitor and regulate thefinancial sector. Theseinstitutional weaknesses formed

Economic Setting:

Thailand

fault lines along which the Thaifinancial economy fragmentedwhen capital inflows abruptlyreversed in 1997.

Economic Setting:

Thailand

Allowed to float, the baht fell aslow as 60 to the dollar beforestabilizing at around 36 by late1998. The 1997 crisis also led toa number of reforms in bankingand finance. Restrictions onforeign ownership of Thai banks,

Economic Setting:

Thailand

property, and corporations wererelaxed, and measures werepassed to improve the structureof the banking sector and thetransparency and efficiency offinancial transactions.

Economic Setting:

Thailand

Source:

Microsoft ® Encarta ® 2009. © 1993-2008 Microsoft

Corporation. All rights reserved.

Economic Setting:

Thailand

Khop Khun!!!

Economic Setting

as we

Understanding

Economic Community

for

establish an

Republic of the Philippines

CAPIZ STATE UNIVERSITY

Dumarao Satellite College, Dumarao, Capiz

Theme: “Understanding Better the Political, Economic & Socio-Cultural Setting of Southeast Asian Nations for

Peace, Prosperity & People”

March 09, 2015 (8:00-11:30 am)

Campus Library