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Thailand: Sound Economic Fundamentals

Key Information
CapitalBangkok
Population68.1 million
CurrencyThai Baht (1 THB = 0.0291 USD as of 23 May 2017)
Official languageThai
Form of governmentConstitutional monarchy

 

Major merchandise exports (% of total, 2015)Major merchandise imports (% of total, 2015)
Manufactured goods (74.6%)Manufactured goods (69.6%)
Agricultural products (17.0%)Fuels and mining products (18.5%)
Fuels and mining products (5.0%)Agricultural products (7.9%)
Top three export markets (% of total, 2015)Top three import markets (% of total, 2015)
USA (11.2%)China (20.3%)
China (11.1%)Japan (15.4%)
European Union (10.3%)European Union (8.9%)

Source: Economist Intelligence Unit (www.eiu.com), World Trade Organization

Political Highlights

Thailand is a constitutional monarchy. Last year, the widely-revered King Bhumibol Adulyadej passed away after 70 years on the throne, and his son Maha Vajiralongkorn ascended. The country’s military has a history of intervening in politics, the current prime minister General Prayuth Chan-ocha has taken power since a coup in 2014 and continuously cemented the military’s control over politics. Although the risk of major clashes has declined, struggle for power between supporters and detractors of Thaksin Shinawatra, the former prime minister who was ousted by the military in 2006, will continue. Meanwhile, insurgency in southern Malay-Muslim majority provinces could emerge threatened to national security.

The military-controlled government prioritised economic revival and is pursuing policies to boost the consumption and investment, including ramping up public spending on infrastructure. The government has unveiled a US$40 billion infrastructure investment programme involving 20 major infrastructure projects, covering rail, roads, air transport and ports. Diplomatically, the military's seizure of power initially cooled relations with Western countries, but links are gradually being restored. And Thailand is one of China’s key allies in Southeast Asia. Unlike some other neighboring countries, Thailand is not involved in any territorial disputes with China that could fuel tension or sour ties.

Economic Trend

Economic Indicators2014201520162017^2018^
Nominal GDP (USD bn)406.6
399.4
407.0
429.3
446.6
Real GDP growth (%)0.9
3.0
3.2
3.5
2.2
GDP per capita (USD)6,000
5,8805,970
6,2906,530
Inflation (%)1.9
-0.9
0.2
1.3
1.0
Budget balance (% of GDP)-2.0
-0.4
-2.7*
-2.3
-2.5
Current account balance (% of GDP)3.8
8.1
11.4*
11.7
10.8
External debt (% of GDP)33.3
32.5
32.1*
31.7
31.7

* Estimate ^ Forecast
Source: Economist Intelligence Unit (www.eiu.com)

Thailand is an export-oriented economy with exports accounting for around 70% of its GDP, while tourism makes up of 10% of GDP. As a result of domestic political turmoil and sluggish global demand, Thailand’s growth slowed down in 2013/14 but recovered in 2016, driven by exports of services and public investment. Recovery is expected to advance at a moderate pace, and public investment remains a key driver under the government’s infrastructure plans.

Average inflation was 0.2% in 2016, below the 1%-4% target range of the Bank of Thailand for two consecutive years. Modest recovery in energy prices and firming domestic demand gradually increase the inflationary pressures, resulting in average consumer prices rising by 1.3% this year. Thailand has ample international reserves, a sizable current account surplus, and relatively limited foreign debt. Strong fundamentals and ample buffers have enhanced Thailand’s resilience for facing external and internal challenges.

Thailand’s growth has trailed regional peers for almost a decade as political uncertainty has undermined policy planning and implementation, and the region’s lower-cost locations are gaining ground. Rapid population ageing, low education quality and skill sets are holding back investment. With rising wages, labor-intensive exports are increasingly squeezed by competition from lower-cost producers in low-income countries and better quality exports from higher-income ones. Initiative of “Thailand 4.0” was to make innovation and technological creativity bigger engines of expansion. The long-term outlook for Thailand's economy is heavily dependent on whether the government is able to enact the structural reforms and develop its infrastructure to retain a competitive edge.

Chart: Hong Kong total exports to Thailand
Chart: Hong Kong total exports to Thailand

Hong Kong-Thailand Trade

Total exports from Hong Kong to Thailand decreased by 2.3% from HK$49,093 million in 2015 to HK$47,949 million in 2016. The top three export categories to Thailand were: (1) telecommunications, audio & video equipment (+14.4%), (2) electrical machinery, apparatus & appliances, & parts (-7.7%), and (3) office machines & computers (-16.2%), which represented 59.0% of total exports to Thailand.

ECIC Underwriting Experience

The ECIC imposes no restrictions on covering Thailand buyers. The Corporation’s underwriting experience on Thailand has been satisfactory, with no claim payment or payment difficulty case reported from May 2016 to April 2017.

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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