Last updated April 2019
Over the last four decades, Thailand has made remarkable progress in social and economic development, moving from a low-income country to an upper-income country in less than a generation. As such, Thailand has been one of the widely cited development success stories, with sustained strong growth and impressive poverty reduction, particularly in the 1980s.
Thailand’s economy grew at an average annual rate of 7.5% in the boom years of 1960 to 1996 and 5% following the Asian Financial Crisis during 1999-2005, creating millions of jobs that helped pull millions of people out of poverty. Gains along multiple dimensions of welfare have been impressive: more children are now getting more years of education, and virtually everyone is now covered by health insurance while other forms of social security have expanded. After average growth slowed to 3.5% over 2005-2015, with a dip to 2.3% in 2014-2016, Thailand is now on the path to recovery. The Thai economy posted the highest growth rate in six years, at 4.1% in 2018, despite external shocks to trade and tourism.
Poverty declined substantially over the last 30 years from 67% in 1986 to 7.8% in 2017 (as measured by the upper-middle income class poverty line of $5.5/day) during periods of high growth and rising agricultural prices. However, in recent years, progress in poverty and inequality reduction has slowed down, mainly due falling agricultural prices and slower wage growth. This led to low and negative growth in household consumption among the poorer segments of the population and caused a small increase in inequality. As of 2014, over 80% of the country's 7.1 million poor live in rural areas. Moreover, an additional 6.7 million were living within 20% above the national poverty line and remain vulnerable to falling back into poverty.
Income inequality – as measured by the Gini coefficient – declined less so in recent years. From 2015 to 2017, average household consumption grew by 1.3%. However, among the bottom 40% of the population consumptions shrank by 0.6%. At the same time, income grew in the Central, North and South regions but shrank in Bangkok and the Northeast regions.
While worsening and stagnating poverty and inequality conditions were seen between 2015-2017, positive indicators are emerging in 2018 that may signal renewed progress in poverty reduction. In 2018, employment increased after four years of decline, led by strong recovery in agricultural employment. In line with rising employment, the unemployment rate was the lowest in eight quarters.
According to the World Bank Human Capital Index, which measures the productivity level for the next generation of workers relative to their full if all education and health outcomes were maximized, finds that while Thailand scores in the upper half of the various indicators compared to ASEAN countries and other upper-middle income country peers, there remains room for improvement.
For Thailand, unequal education quality is a big challenge, with poorer areas being underserved. Small under-resourced schools with inadequate infrastructure and education materials are mostly located in poorer regions of the country. A Thai child born today can expect to obtain 12.4 years of school before the age of 18. However, the same Thai child can expect to complete only 8.6 learning-adjusted years of schooling, indicating a learning gap of 3.8 years.
Thailand has laid out its long-term economic goals in its 20-Year National Strategy (2017-2036) for attaining developed country status through broad reforms. The reforms address economic stability, human capital, equal economic opportunities, environmental sustainability, competitiveness, and effective government bureaucracies. Recent reforms include the implementation of large multi-year public infrastructure projects related to dual tracking of railways, regulatory reforms aimed at improving ease of doing business, setting up the State Enterprise Policy Committee to improve state-owned enterprise governance, the transfer of supervisory oversight of specialized financial institutions to the Bank of Thailand, the approval of progressive inheritance and property taxes, and the launch of the National Savings Fund, a retirement safety net for informal workers.
Going forward, the sustained pace and quality of reforms, as well as sound implementation, will be crucial for translating the reform effort into the desired economic outcomes. Reversing the relative erosion of competitiveness, improving effectiveness of the public sector, and improving education and skills will be particularly important to take Thailand out from middle to high-income status.