Thailand Economic Monitor - February 2014

  • In 2013, the Thai economy is expected to have grown by around 3% as exports, household consumption, investments and government spending all slowed. Tourism was the bright spot, expanding at a record high rate of around 20 percent year-on-year despite a slowdown towards the end of the year. [Note: Actual 2013 GDP data will be released next week by the National Economic and Social Development Board]

  • Thailand is lagging other countries in the region which are recovering faster from the global financial crisis. Part of this is explained by a shift in global demand for products made in Thailand such as hard disk drives. However domestic factors were also important, including household de-leveraging after a rapid expansion of household debt, slowdown in government spending and withdrawal of global financial crisis-related stimulus measures.

  • All of these trends were evident before the protests began in November, and the protests are not estimated to have had a broad-based macroeconomic impact in 2013; the main impact had been on tourism which slowed down in the last quarter of 2013.

  • Thailand’s Paddy Pledging Program also affected economic outcomes in 2013. While the program has helped raise incomes of participating farmers, it has been very expensive. The Program is estimated to cost the Government around Bt200 billion or almost 2% of GDP each harvest year since 2012 (see World Bank East Asia Update report, October 2013).  Many countries, including the EU, that have implemented large agricultural subsidy programs have found them to be costly and that they have reduced competitiveness of the agricultural sector, while the most successful programs that supported and strengthened the agricultural sector had focused on raising agricultural productivity and helping the poor.

  • As the global economic recovery gain strength, real GDP is projected to expand by around 4% in 2014. Exports of goods are likely to grow by around 6% after contracting last year, and private investment by around 5%. Consumption is expected to remain subdued. Downside risks could stem from the continuation of the political uncertainties whose impact on investment and tourism will last over the duration of the protests and would disrupt Government policies and investments as well as distract it from longer term development issues.
  • Taking a longer term perspective, this Monitor finds that a focus on the spatial distribution of public spending, the organization of local governments, and accountability at the local levels can support a more inclusive pattern of growth in the future.