Navigating Turbulence, Sustaining Growth: Key findings on Thailand and the region from the East Asia Pacific Economic Update

November 22, 2011

Key Findings

  • Real GDP growth in East Asia remains strong, but it is moderating. Manufacturing exporters is the group most affected by the global economic slow-down. Growth in Thailand is estimated at 2.4% in 2011, this is lower than other countries in the region and lower than the average for the developing East Asia pacific region excluding China. The slower growth in Thailand in 2011 is due to three factors: the global economic slow-down, the earthquake in Japan and the recent floods affecting 26 provinces of the country.
  • Industrial production growth in the East Asia Pacific region is weakening largely due to dwindling demand for East Asian exports from advanced economies, which is slowing the exports of electronics, telecom equipment, auto-parts, and apparel from the developing East Asia Pacific region.
  • Thailand’s exposure to trade with Europe is moderate. 35 % of Thailand’s exports go to the EU, U.S. and Japan. Only 12 % of Thailand’s exports are to the EU. However, Thailand is also exposed to these economies through its participation in production networks and trade with other countries in its region. 21 % of China’s exports are for the EU market. 11 % of Thailand's exports are to China.
  • Regional demand, including from China, has helped support exports from Thailand. China’s imports of consumption goods grew fast, as it is set to overtake Europe as the second largest importer. Thailand has a 3.5% (1.4 billion USD) share in China’s consumer goods market. This is substantially more than for example Indonesia’s, Malaysia’s or the Philippines’ respective share in the Chinese consumer goods market.
  • As market volatility increased, many investors around the world turned to U.S. Treasury bonds. The developing East Asia Pacific region’s equity prices dropped by more than a quarter from their May high.
  • International reserves declined in September in all countries, but the relatively high levels of reserves, including in Thailand, provide a strong buffer in case of further volatility in financial flows.
  • Policies should be implemented with a view to promote growth and domestic demand in the long-term. Higher investments in infrastructure, education and social security systems can help countries increase productivity and move toward higher value added production. Further investment in disaster management and prevention is also becoming more important for the East Asia Pacific region.
  • The March 2011 earthquake and tsunami in Japan impacted also Thailand, but most industry sectors in Japan recovered in six months after the earthquake. Japan’s automotive industry was particularly hard hit; the plant which produced 40 percent of the world’s microcontrollers was destroyed, halting car production around the world Thailand, as other East Asian countries, suffered economic loss from the disrupted supply chains in electronics and automotive industries. Small car manufacturing in Thailand swung from growth at 46 percent in February 2011 to a 40 percent decline in April. But six months after the disaster the Thai automotive industry was growing at pre-disaster rates and at almost pre-disaster levels