The Thai economy is export-dependent, with exports of goods and services equivalent to nearly 70% of GDP in 2010. Thailand's recovery from the 1997-1998 Asian financial crisis (which brought a double-digit drop in GDP) relied largely on external demand from the United States and other foreign markets. From 2001-2006, the administration of former Prime Minister Thaksin embraced a "dual track" economic policy that combined domestic stimulus programs with Thailand's traditional promotion of open markets and foreign investment. Real GDP growth strengthened sharply from 2.2% in 2001 to 7.1% in 2003 and 6.3% in 2004. In 2005-2007, economic expansion moderated, averaging 4.9% real GDP growth, due to domestic political uncertainty, rising violence in Thailand's three southernmost provinces, and repercussions from the devastating Indian Ocean tsunami of 2004. Thailand's economy in 2007 relied heavily on resilient export growth (at an 18.2% annual rate), particularly in the automobile, petrochemicals, and electronics sectors.
Political uncertainty and the global financial crisis in 2008 weakened Thailand’s economic growth by reducing domestic and international demand for both its goods and services (including tourism). Due to minimum exposure to toxic assets, Thai banks experienced limited direct impact from the global financial crisis. Nonetheless, Thai economic growth slowed to 2.5% in 2008, with fourth-quarter growth dropping below zero. In 2009, the contraction continued. Over the first three quarters, GDP contracted by 5.0% year-on-year on average and hit bottom in the first quarter. To offset weak external demand and to shore up confidence, the Abhisit administration introduced two non-budgetary stimulus packages worth $43.4 billion focusing on key sectors such as mass transit and transportation, irrigation, education, public health, and energy. The Thai economy reversed to positive growth in the fourth quarter (5.9% year-on-year), improving the 2009 full-year average to minus 2.3% year-on-year.
In the first quarter of 2010, the Thai economy surged by 12.0% year-on-year, the highest quarterly growth since 1995. The uptick was mostly due to strong exports (up 32%) from continued global recovery; despite the March-May political protests in Bangkok, growth continued through the second and third quarter of the year. The Thai economy expanded by 9.3% (year-on-year) during the first three quarters of 2010, the second-strongest performance in Southeast Asia, second only to Singapore. The government estimated nearly 8% growth (year-on-year) for full-year 2010 and expects growth to continue into 2011, but at a lower rate (3%-5%). Growth in 2011 is expected to be driven by exports and also domestic demand. Political risk related to the anticipated 2011 general elections, continued appreciation of the baht, and the uncertainties of Thailand’s major trading partners’ economic recovery also could affect the economy. Inflation is expected to gradually climb from the 2010 level (3.3%) to between 3% and 5%, due in large part to higher world commodity prices.
The Royal Thai Government welcomes foreign investment, and investors who are willing to meet certain requirements can apply for special investment privileges through the Board of Investment. U.S. investors may qualify for additional privileges under the Treaty of Amity and Economic Relations. To attract additional foreign investment, the government of Prime Minister Abhisit has promised to look for ways to expand investment opportunities, focusing more on green technology/manufacturers.
The organized labor movement remains weak and divided in Thailand. Less than 2% of the total work force is unionized, although nearly 10% of industrial workers and more than 59% of state enterprise workers are unionized. In 2009, efforts to restructure the State Railway authority met resistance from the powerful railways union, including a short strike that halted trains nationwide, showing that organized labor still has potential political clout. As a result of the global financial crisis and business restructuring, employers hired large numbers of short-term contract workers. While employers claimed to have done this in order to maintain business flexibility for greater competitiveness during financially uncertain times, labor advocates viewed these actions as reducing job security and attempts to weaken the organized labor movement.
Roughly 40% of Thailand's labor force is employed in agriculture, although agriculture accounts for only 12% of GDP (data based on the Thai National Statistics Office.) Rice is the country's most important crop; Thailand is the largest exporter in the world rice market. Other agricultural commodities produced in significant amounts include fish and fishery products, tapioca, rubber, corn, and sugar. Exports of processed foods such as canned tuna, canned pineapples, and frozen shrimp are also significant.
Thailand's increasingly diversified manufacturing sector is the largest contributor to growth. Industries registering rapid increases in production have included computers and electronics, furniture, wood products, canned food, toys, plastic products, gems, and jewelry. High-technology products such as integrated circuits and parts, hard disc drives, electrical appliances, vehicles, and vehicle parts are now leading Thailand's growth in exports. With stronger exports and a rise in inflationary pressure, the Bank of Thailand started to tighten its monetary policy in mid-July 2010 after having followed a low interest rate policy since April 2009. Large surpluses in both the current and capital accounts contributed to the Thai baht's appreciation relative to the dollar throughout 2009 and 2010. Machinery and parts, vehicles, electronic integrated circuits, chemicals, crude oil and fuels, and iron and steel are among Thailand's principal imports.
Through 2010, the United States was Thailand's third-largest single-country export market after China and Japan, and the third-largest supplier after Japan and China. Thailand's traditional major markets have been the United States, Japan, Europe, and ASEAN member countries (Singapore, Malaysia, Indonesia, the Philippines, and Vietnam). Growing export markets include China, Hong Kong, Australia, the Middle East, South Africa, and India. Due to the global economic recovery, Thai exports in 2010 surged by 25.1% from 2009. Thailand is a member of the World Trade Organization (WTO) and the Cairns Group of agricultural exporters.
Tourism contributes significantly to the Thai economy (approximately 6%). The tourism industry began to recover in the last quarter of 2009, but the protests in Bangkok in April and May 2010 drove away some foreign tourists. The heavy floods during October and November and the strong Thai baht had minimal impacts on the industry. Tourism from January to November was on average 12.7% higher than 2009 levels.
Bangkok and its environs are the most prosperous part of Thailand, and the seasonally barren northeast is the poorest. An overriding concern of successive Thai governments has been to reduce these regional income differentials, which have been exacerbated by rapid economic growth in and around Bangkok. The government has tried to stimulate provincial economic growth with programs such as the Eastern Seaboard project and various populist and crop price support policies.
Although the economy has demonstrated moderate positive growth in recent years, future performance depends on moving up on the value-added ladder away from low-wage industries where regional competition is growing. Key reforms are needed to open the financial sector; improve the foreign investment climate, including updating telecommunications capabilities; and stimulate domestic investment and consumption to balance reliance on exports. Logistics networks and electricity generation increasingly run the risk of bottlenecks and may pose a challenge to growth. Thailand's relative shortage of engineers and skilled technical personnel may limit its future technological creativity and productivity, even as the government is pushing for an increase in the proportion that creative industries contribute to GDP from 12% to 20% by 2015.
GDP (2010 prelim.): $317 billion. (Data based on the National Economic and Social Development Board)
Annual GDP growth rate (2010 prelim.): 7.8%.
Inflation rates (2010): 3.3% (headline) and 0.9% (excluding energy and food prices).
Per capita income (2010 prelim.): $4,716.
Unemployment rate (2010 prelim.): 1.0% of total labor force.
Natural resources: Tin, rubber, natural gas, tungsten, tantalum, timber, lead, fish, gypsum, lignite, fluorite.
Agriculture (12% of GDP): Products--rice, tapioca, rubber, corn, sugarcane, coconuts, soybeans.
Industry: Types--tourism, textiles, garments, agricultural processing, cement, integrated circuits, jewelry, electronics, petrochemical, and auto assembly.
Trade (2010 preliminary): Merchandise exports--$188.8 billion. Products--automatic data processing machines and parts, automobiles and parts, precious stones and jewelry, refined fuels, rubber, electronic integrated circuits, polymers of ethylene and propylene, rice, iron and steel and their products, rubber products, chemical products. Major markets--ASEAN, EU, China, U.S., Japan, and Hong Kong. Merchandise imports--$175.5 billion. Products--crude oil, machinery and parts, electrical machinery and parts, chemicals, iron and steel and their products, electrical circuits panels, computers and parts, other metal ores and metal waste scrap, ships and boats and floating structure, jewelry including silver and gold. Major suppliers--Japan, ASEAN, China, the Middle East, EU, and U.S.
Thailand is a constitutional monarchy. From 1992 and until the 2006 coup, the country was considered a functioning democracy with constitutional changes of government. Generally free and fair multi-party elections held in December 2007 subsequently restored democratic governance 1 year after the coup. The King has little direct power under Thailand's constitutions but is a symbol of national identity and unity. King Bhumibol (Rama IX)--who has been on the throne since 1946--commands enormous popular respect and moral authority, which he has used on occasion to resolve political crises that have threatened national stability.
Under the 2007 constitution, the National Assembly consists of two chambers--the Senate and the House of Representatives. The Senate is a non-partisan body with 150 members, 76 of whom are directly elected (one per province). The remaining 74 are appointed by a panel comprised of judges and senior independent officials from a list of candidates compiled by the Election Commission. The House has 480 members, 400 of whom are directly elected from constituent districts and the remainder drawn proportionally from party lists. Constitutional amendments that would change the number and manner of election of House members were under consideration as of January 2011, in anticipation of elections later in 2011.
Thailand's legal system blends principles of traditional Thai and Western laws. Under the constitution, the Constitutional Court is the highest court of appeals, though its jurisdiction is limited to clearly defined constitutional issues. Its members are nominated by a committee of judges, leaders in parliament, and senior independent officials, whose nominees are confirmed by the Senate and appointed by the King. The Courts of Justice have jurisdiction over criminal and civil cases and are organized in three tiers: Courts of First Instance, the Court of Appeals, and the Supreme Court of Justice. Administrative courts have jurisdiction over suits between private parties and the government, and cases in which one government entity is suing another. In Thailand's southern border provinces, where Muslims constitute the majority of the population, Provincial Islamic Committees have limited jurisdiction over probate, family, marriage, and divorce cases.
Thailand's 77 provinces include the metropolis of greater Bangkok. Bangkok's governor is popularly elected, but those of the remaining provinces are career civil servants appointed by the Ministry of Interior.
Principal Government Officials
Chief of State--King Bhumibol Adulyadej
Prime Minister--Abhisit Vejjajiva
Minister of Foreign Affairs--Kasit Piromya
Ambassador to the U.S.--Kittiphong Na Ranong
Ambassador to the UN--Norachit Sinhaseni
Thailand maintains an embassy in the United States at 1024 Wisconsin Ave. NW, Washington DC 20007 (tel. 202-944-3600). Consulates are located in New York City, Chicago, and Los Angeles.
Type: Constitutional monarchy.
Constitution: Thailand adopted its current constitution following an August 19, 2007 referendum.
Independence: Never colonized; traditional founding date 1238.
Branches: Executive--King (chief of state), Prime Minister (head of government). Legislative--bicameral, with a fully-elected House of Representatives and a partially-elected Senate. Judicial--composed of the Constitutional Tribunal, the Courts of Justice, and the Administrative Courts.
Administrative subdivisions: 76 provinces, including Bangkok municipality, subdivided into 877 districts, 7,255 tambon administration, and 74,944 villages.
Political parties: Multi-party system; Communist Party is prohibited.
Suffrage: Universal and compulsory at 18 years of age.
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