GDP $USD 514.94 billions
GDP Per Capita: $USD 7,171
Currency THB (Thai baht ฿)
Imports $USD 328.06 billions
Exports $USD 337.01 billions
Main Industries tourism, textiles and garments

The ‘Know Your Region’ series is designed to support unit and individual professional military education on the South East Asian region. It’s important for all serving members of our military to have a foundational knowledge of the countries and issues in the Indo-Pacific.

THAILAND – ECONOMY

On this page:

  • Overview
  • Economy & GDP
  • Foreign Trade
  • Migrant Workers
  • Kra Canal

 

Overview

Thailand is an emerging economy and considered a newly industrialised country. As ASEAN's second-largest economy after Indonesia, it is an upper middle-income country with robust export-oriented industries and strengths in agri-business, tourism, automotive and electronics manufacturing. What differentiates Thailand from other ASEAN nations is its sheer market size, the diversity of its industrial sector, and its position as a regional manufacturing hub. The Kingdom retains its position as a regional and global manufacturing hub for vehicles, automotive components, consumer electronics, and processed food and beverages. It is also a leading exporter of agricultural commodities such as rice, palm oil, rubber, sugar and seafood. Its currency, the Thai Baht, was ranked as the tenth most frequently used world payment currency in 2017.

The Kingdom continues to rank midway in the wealth spread across Southeast Asia as it is the 4th richest nation within the region according to GDP per capita (after Singapore, Brunei, and Malaysia). What's more, Thailand offers an attractive business environment among the high-growth Southeast Asian countries and is rated 21st in the world for ease of doing business in the World Bank's Ease of Doing Business index in 2020.

Over the last four decades, Thailand has made remarkable progress in social and economic development, moving from a low-income to an upper middle-income country in less than a generation. As such, the Kingdom has been widely cited as a development success story, with sustained strong growth and impressive poverty reduction. The economy grew at an average annual rate of 7.5% in the boom years of 1960-1996 and 5% during 1999-2005 following the Asian Financial Crisis. This growth created millions of jobs that helped pull millions of people out of poverty. Gains along multiple dimensions of welfare have been impressive: more children are getting more years of education, and virtually everyone is now covered by health insurance while other forms of social security have expanded. Halfway through 2011 the World Bank upgraded Thailand’s income categorisation from a lower-middle income economy to an upper-middle income economy. In 2013, the Thai Government implemented a nationwide 300 baht (roughly $10) per day minimum wage policy and deployed new tax reforms designed to lower rates on middle-income earners. For a comprehensive breakdown of the Kingdom’s economy, watch the following video.

In recent years, economic growth slowed from 4.2% in 2018 to 2.4% in 2019. The key drivers of slowing growth were weaker demand for exports reflecting the impact of US-China trade tensions, slowing public investments, and a drought impacting agricultural production. Key development challenges also pose a risk to Thailand’s future growth if it wants to attain high-income status by 2037. These include weakness in education outcomes and skills matching, which risk future productivity and opportunities for the younger generation, and increasing spatial inequality, with remote areas falling behind in economic and welfare indicators. Additionally, COVID-19 has severely affected the Thai economy, which was already weakening even prior to the global outbreak. Thailand's economy is expected to recover gradually over the next two years, but the outlook remains highly uncertain.

The Thailand 20 Year National Strategy (2018-2037) focuses on key economic and social reforms to end poverty and boost shared prosperity. Which is based on the Kingdom's own Sufficiency Economy Philosophy (SEP) with three interrelated principles (moderation, reasonableness and prudence) alongside two pillars (knowledge, ethics and virtues). Watch the video below for a breakdown of the roadmap.

 

Economy and GDP

Thailand is a newly industrialised country, with a gross domestic product (GDP) of 16,316 trillion baht in 2018; according to the World Bank, it is the 8th largest economy of Asia. With a free-market economy, the Kingdom has a strong domestic market and a growing middle class, with the private sector being the main engine of growth. There is a strong industrial sector (40% of GDP) and a robust services sector (50% of GDP) centred on the tourism and financial services industries. Though traditionally an agrarian society and historically one of the world’s few net food exporters, the agricultural sector today only accounts for approximately 9% of the country’s GDP.

The economy is recovering from slow growth during the years since the 2014 coup. Thailand’s economic fundamentals are sound, with low inflation, low unemployment, and reasonable public and external debt levels. Tourism and government spending – mostly on infrastructure and short-term stimulus measures – have helped to boost the economy, and the Bank of Thailand has been supportive, with several interest rate reductions.

Thailand is on the cusp of a new demographic transition as its population is rapidly ageing. With the abundance of labour disappearing, productivity improvements by fostering an innovation-friendly competitive economy and equipping the young with the right skills will be of vital importance to sustain growth. Over the longer-term, household debt levels, political uncertainty, and an ageing population pose risks to growth.

Poverty declined substantially over the last 30 years from 65.2% in 1988 to 9.85% in 2018. However, the growth of household incomes and consumption growth have both stalled nationwide in recent years – reversing poverty reduction progress in the Kingdom with the number of people living in poverty rising. Between 2015 and 2018, the poverty rate in Thailand increased from 7.2% to 9.8%, and the absolute number of people living in poverty rose from 4.85 million to more than 6.7 million. While Thailand has been successful in stemming the tide of COVID-19 infections, the economic impact has been severe and has led to widespread job losses, affecting middle-class households and the poor alike. For more information on the pandemic’s threat to hard-won gains in poverty reduction, watch the World Bank’s video below.

The government of Thailand has announced a 'Thailand 4.0' development plan to encourage investment into a value-based, digital, innovation-driven and services-based economy. The economic model aims to unlock the country from several economic challenges resulting from past economic models which placed emphasis on agriculture (Thailand 1.0), light industry (Thailand 2.0), and advanced industry (Thailand 3.0). These challenges include the middle-income trap, inequality trap, and imbalance trap. It is an ambitious 20-year plan to transform the economy into one which is higher value-added, innovative and knowledge‑based, with an increased focus on services. The government is seeking to boost Thailand's international competitiveness in high-potential industries as part of this plan. To learn more about Thailand 4.0’s objectives, check out the introductory video below.

For more information on the Thai Kingdom’s economy, access the following resources.

 

Foreign Trade

The Thai economy is well integrated into the global marketplace with trade relations around the world. Thailand is highly dependent on international trade with a relatively well-developed infrastructure, a free-enterprise economy, and generally pro-investment policies. Thailand's top four export partners are: United States 13%, China 12%, Japan 10%, and Vietnam 5%; focusing on commodities such as office machinery/parts, cars and vehicle parts, integrated circuits, delivery trucks, and gold.

Given the importance of exports to Thailand, it has been a leader in the region in terms of trade liberalisation and facilitation with the rest of the world, starting with its Asian neighbours. Thailand's development success means other countries are increasingly looking to Thailand for leadership in regional integration. The Kingdom functions as an anchor economy for the neighbouring developing economies of Laos, Myanmar and Cambodia. Thailand is committed to the importance of the Mekong sub-region to regional peace and security, and is recommitting to strengthening sub-regional frameworks, including the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS).

The Kingdom is a key player in the Association of Southeast Asian Nations (ASEAN), enjoying a strategic location that provides easy access to a larger market of over 660 million people, making it a community of connectivity, a single market, and a production base all together. Furthermore, Thailand’s convenient access to China and India, as well as to other East Asian countries such as Japan and the Republic of Korea, takes this huge consumer market to even bigger proportions. To learn more about Thailand’s expanding network of free trade agreements turning into an Eastern Economic Corridor watch the next video.

Australia and Thailand enjoy a substantial commercial relationship, underpinned by the Thailand-Australia Free Trade Agreement (TAFTA), alongside the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) and Regional Comprehensive Economic Partnership (RCEP). Free trade agreements (FTAs) provide a mechanism for the facilitation of trade in goods, see Australian Border Force for a full list of Australia's FTAs. Two-way trade in goods and services in 2019-20 was worth $21.6 billion, making Thailand Australia’s 3rd largest trading partner among Southeast Asian countries and 11th largest overall. Following the Joint Declaration on a Strategic Partnership Between the Kingdom of Thailand and Australia in November 2020, Canberra and Bangkok have recommitted to increasing economic interdependence. Australia is also working closely with Thailand to implement the Mekong-Australia Partnership. For more data on Canberra's investment relationship with Bangkok, see the Australian Department of Foreign Affairs and Trade's Thailand fact sheet and watch the report by The Nation.

 

Migrant Workers

Thailand is a destination, transit, and source country for migrants. It has 3 to 4.5 million migrant workers, mainly providing low-skilled labour in the construction, agriculture, manufacturing, services, and fishing and seafood processing sectors. Migrant workers from other Southeast Asian countries with lower wages – primarily Myanmar (also known as Burma) and, to a lesser extent, Laos and Cambodia – have been coming to Thailand for decades to work in labour-intensive industries. Many are undocumented and thus vulnerable to human trafficking for forced labour or sexual exploitation. A July 2017 migrant worker law stiffening fines on undocumented workers and their employers, prompted an exodus of migrants. However, fearing a labour shortage, the Thai Government postponed implementation of the law and rapidly registered workers.

Thailand has also hosted ethnic minority refugees from neighbouring Myanmar for more than 30 years. As of 2016, approximately 105,000 mainly Karen refugees were living in nine camps along the border. In recent years Rohingya refugees are also fleeing violence in Myanmar. Estimates on the number of stateless persons in Thailand range from the 480,000 registered with the Thai Government to a high of 3.5 million. The bulk of the stateless population is made up of Thailand's northern hill tribe people (who do not have citizenship) and children born to refugees. All are denied access to voting, property, education, employment, healthcare, and driving licenses. In 2016, the Thai Government approved changes to its citizenship laws to open pathways for stateless persons with a goal to achieve zero statelessness by 2024. For more information on the current approach by Thai authorities, watch the following report.

Thailand has a significant amount of internal migration, most often from rural areas to urban centres where there are more job opportunities. Low and semi-skilled Thai people also go abroad to work, mainly in Asia and a smaller number in the Middle East and Africa – primarily to more economically developed countries where they can earn higher wages. To learn more about migrant workers in and outside of Thailand, access the resources below.

 

Kra Canal

The Kra Canal or Thai Canal refers to proposals for a canal that would connect the Gulf of Thailand with the Andaman Sea across the Kra Isthmus in southern Thailand. It is envisaged that such a canal would improve transportation in the region. It would be the Kingdom's largest infrastructure project ever and have significant impacts on regional dynamics.

The canal would provide an alternative to transit through the Straits of Malacca and shorten transit for shipments of oil to Japan and China by 1,200km. The Republic of China refers to it as part of its 21st century maritime Silk Road. Proposals for the canal in 2015 measure 102km long, 400m wide and 25m deep. Supporters of the canal believe that it would end Thailand's economic slump and make it a global shipping and economic hub, rivalling the Panama Canal. Plans have been discussed and explored at various times but never implemented. The potential economic and strategic benefits are weighed against the immense cost, environmental concerns, geopolitical anxieties, and the security risk of separating the four southernmost provinces from the rest of the Kingdom.

In February 2018, Thailand's Prime Minister Prayut Chan-o-cha declared that the canal was not a government priority. Yet, on 16 January 2020, the Thai House of Representatives agreed to set up a committee within 120 days to study the Thai Canal project. To learn more about the centuries old idea of a canal cutting through the Kra Isthmus, watch the videos and access the following articles.

 

 

Discussion Questions:

  1. Over the last four decades, Thailand has made remarkable progress in social and economic development, moving from a low-income to an upper middle-income country in less than a generation. What has been the secret of Thailand’s success? How have they managed this despite frequent internal political instability?
  2. The Thai Canal has the potential to significantly improve transportation capability within the nation, which will have significant positive regional economic implications. What other benefits would come from this? Is the project even feasible?
  3. Australia and Thailand enjoy a substantial commercial relationship, underpinned by the Thailand-Australia Free Trade Agreement (TAFTA). What are the key benefits of this relationship? What opportunities may present themselves over the next decade for improved relationships? What regional opportunities could Australia and Thailand take the lead on?