The (economic) situation in Thailand
Before the upcoming elections in February 2019, it is hoped that there will be a public discussion about Thailand's economic prospects and economic policies. It can start from Tuesday 11 December because the political parties are allowed to campaign from that day.
In addition to convincing voters (more and more Thais say they will vote on the basis of party programs and less on individuals), there is also every reason to have this discussion: according to research, most Thais and the business community active in Thailand consider this an important subject. In addition, there is a feeling that Thailand has made little (sustainable) economic progress in the past 10-15 years. How is the country doing and what are the biggest challenges?
Data
Let's look at the data first. The official figures are shown in the table below: an annual economic growth of 3,5 to 4 % at the moment, a growth in GDP (Gross Domestic Product) both in absolute terms and per capita and a growth in exports. The economy is expected to grow by around 2018 to 3,8% in 4 and 2019% in 3,5. On the other hand, there is a growth in imports (greater than the growth in exports), a lagging private consumption (what the Thais and you and I buy every day) and the stagnation of investments. All three are inhibitors of the economy and it is therefore important for a government to do something about it.
| 2013 | 2014 | 2015 | 2016 | 2017 | |
| Population (million) | 68.3 | 68.7 | 68.8 | 69.0 | 69.1 |
| GDP per capita (USD) | 6,172 | 5,937 | 5,819 | 5,970 | 6,591 |
| GDP (USD bn) | 422 | 408 | 401 | 412 | 455 |
| Economic Growth (GDP, annual variation in %) | 2.7 | 1.0 | 3.0 | 3.3 | 3.9 |
| Consumption (annual variation in %) | 0.9 | 0.8 | 2.3 | 3.0 | 3.2 |
| Investment (annual variation in %) | -1.0 | -2.2 | 4.3 | 2.8 | 0.9 |
| Exports (USD Billion) | 228 | 227 | 214 | 214 | 235 |
| Imports (USD Billion) | 228 | 210 | 187 | 178 | 203 |
A look behind the data
Thailand mainly exports to countries such as the USA ($29.4B), China ($29.2B), Japan ($20.4B), Australia ($11.6B) and Hong Kong ($11.3B). This mainly concerns matters such as:
- Machines, incl. computers: US$40.2 Billion (17% of total exports)
- Electrical Machines: $34.1 Billion (14.4%)
- Cars: $28.5 Billion (12.1%)
- Rubber, Rubber Items: $16.3 Billion (6.9%)
- Gemstones and precious metals: $12.8 Billion (5.4%)
- Plastics, Plastic Items: $12.7 Billion (5.4%)
- Minerals, incl. oil: $8.2 Billion (3.5%)
- Meat/Fish: $6.3 Billion (2.7%)
- Optical, Engineering, Medical Devices: $5.7 Billion (2.4%)
- Grains: $5.4 Billion (2.3%)
Looking at the countries from which Thailand imports, we see some of the same names: China ($41.9B), Japan ($29.3B), the USA ($11.6B), Malaysia ($11B) and South Korea ($7.03B). This concerns:
- Electrical Machines: US$42.3 Billion (18.8% of total imports)
- Minerals, incl. oil: $31.6 Billion (14.1%)
- Machines, incl. computers: $27.4 Billion (12.1%)
- Gemstones and precious metals: $15.3 Billion (6.8%)
- Iron and Steel: $10.6 Billion (4.7%)
- Cars: $9.2 Billion (4.1%)
- Plastics, Plastic Items: $8.7 Billion (3.9%)
- Iron or Steel Items: $7.1 Billion (3.2%)
- Optical, Engineering, Medical Devices: $5.6 Billion (2.5%)
- Organic Chemicals: $4.3 Billion (1.9%)
If you look at the lists, you will see that there are quite a few categories where Thailand both imports and exports. The conclusion must therefore be that the industrial economy is mainly based on assembly and/or adding value to basic products that Thailand itself does not have or does not have to a sufficient extent. Thailand buys raw stones, makes necklaces, rings and bracelets from them and exports a large part of them. Exports of goods and services (tourism is export in economic terms because the services are sold to foreigners) represent 70% of Thailand's GDP. As a result, the country is extra sensitive to what happens on the world markets with regard to prices, regulations, sales via the internet, quality controls, trade agreements and related discussions, such as the current conflict between the USA and China (both important partners for Thailand).
Challenges
In recent years there has been much discussion about the phenomenon of the 'middle-income trap' that also characterizes Thailand. What is that now? The 'middle-income trap' is a situation where a country (such as Thailand) does not have the appropriate resources to take the next step in economic growth and grow the middle class. Workers' incomes are at a ceiling (albeit relatively low) as companies are unable to take the next leap in their development. This is characteristic of an economy based on relatively low wages, low qualifications of potential employees and capital, and where labor productivity is low. One of the underlying reasons is that education in the countries concerned is not highly regarded and that there is therefore little innovative power. The poverty in that country is considered an advantage. Low wages enhance competitiveness in certain labour-intensive industries. Countries in the middle-income trap are characterized by low investment, slow growth, limited diversity in economic sectors and weak working conditions.
Example 1
I see one of my good former students every week. Instead of a job at a 5-star hotel, she has her own 10 m2 mobile shop on the floating market. Instead of a monthly salary of 20.000 Baht per month (and perhaps 15.000 Baht service charge) she now has 15.000 Baht per day after deduction of costs, so about 120.000 Baht per month (8 days per month).
Example 2.
A graduated, perfectly English-speaking Thai boy works as a moped taxi driver near the On Nut BTS station. Instead of 15.000 baht starting salary at a company, he now earns about 2.000 baht per day, so 50.000 baht per month.
Example 3.
My university, a government agency, started a quality improvement program two years ago. One of the ideas is to have foreign, Western Ph.D. attract professors. The offer is a 1-year contract and 100.000 Baht salary per month (equivalent to that of the president of the university). So far no one has responded.
The cure and Thailand
To avoid this middle-income trap, economists recommend the following remedy:
- Finding new markets to promote export growth;
- Stimulating private consumption, e.g. by raising the minimum wage and reducing taxes for the middle and lower classes;
- Shifting from an economy based on low wages to an economy based on higher productivity and innovation. This can be done through investments in infrastructure and in high-quality education.
In the case of Thailand, there is not only the middle-income trap but a number of other issues:
- The informal economy (e.g. online gambling, illegal lottery, casinos) and associated corruption in business and government;
- The low confidence in the government and the low tax morale;
- The unstable political situation that makes investors hesitant to invest in Thailand. If they do, it is mainly to take advantage of the low wages which does not improve the economic situation;
- The economic difference between city(s) and countryside;
- The widening gap between rich and poor Thais.
My opinion
An economic cocktail to say the least. There are no simple solutions for this, certainly not in the short term, and also not for the next government. If only because many Thai citizens do not trust the government and its measures, take laws and regulations with a grain of salt and are satisfied with populist measures such as a New Year's gift of 500 Baht for the poor. These, in my opinion, are the ingredients for many Thai governments to do something only symbolically about the real problems. It simply lacks the political will to systematically tackle issues such as corruption, illegal activities, education, innovation and the labor market. I'm not saying that improving the infrastructure (high-speed train, public transport in Bangkok), the daily capture of drug couriers, tracking down illegal foreigners and economic zones don't help, but it's still mopping up with the tap open. However, measures that are necessary will not be welcomed by everyone and will certainly not make you popular as a politician. The latter is apparently more important than telling the Thai the truth.
Sources:
www.worldstopexports.com/thailands-top-10-exports/
www.worldstopexports.com/thailands-top-10-imports/
www.worldstopexports.com/thailands-top-import-partners/
www.global-economic-symposium.org/
Good and clear piece about the thai economic situation.
But what about the relationship with neighboring countries?
And what about the working conditions of employees?
I've always understood that this is also a reason to start something self-sanding or
especially for young students to go to korea or japan.
Is it compulsory to choose in Thailand?
I have already seen that electoral lists exist in the municipalities. What about people who spend a whole year in a different place?
Yes, you are required to vote. People who work elsewhere and have not officially deregistered must therefore go back to their previous place of residence (for many, their native village) to vote.
As a non-university student, I have to rely on my common sense and read things on the internet in the hope that there is some truth in the news items, such as the following article http://www.reuters.com/article/us-thailand-economy-debt/as-debt-levels-rise-more-thais-struggle-to-keep-up-idUSKCN1LF0CQ
In addition, she also makes a contribution to the government if you just take the super inefficient government services as an example with its bureaucracy and hidden unemployment, then it not only takes a lot of time to get something done, but it also costs a lot of money to be raised by taxes.
A reform in this area ensures that the staff hours that are released can be used in commercial industries so that more money comes in there, which can then be levied corporate tax.
Together with the savings on tax money, a pot could be made that ensures that better education is affordable for everyone, so that this problem can also be tackled.
Perhaps there is also more competition on the labor market, so that the work ethic will also increase.
Unfortunately, both the financial sector and the government see a fragile economy as an inconvenience rather than a problem, so nothing will change and we will have to wait and see when the bubble will burst.
I still have some time and if the time comes then it's a good time to buy a house and second hand car at a foreclosure auction and start enjoying my retirement.
Don't blame me for my plans because I'm in no position to do anything about the problem, so just use common sense again.
Meanwhile, Thailand has moved from third to first in the list of countries in the world with the highest gap between rich and poor, ahead of India and Russia, who have now moved to second and third.
Very clear analysis. Points out an important problem: rich Thailand is not at all interested in educating and raising poor Thailand, so to speak de-leveling. And that is why GDP will hardly rise, and stagnation will therefore occur, which in the long run (if the working population does not develop further) will lead to a strong demand for skilled foreign workers, or to the departure of businesses from Thailand, which in both cases will only but will lead to a widening gap between rich and poor.
Furthermore, I still ask myself (perhaps the writer can shed light on this) why the Central Bank does not make the Bath cheaper in order to promote exports and stimulate tourism.
You could also argue that Thailand is a very liberal country in the sense of self-reliance.
The government encourages people to be independent and to sit on the blisters if they make wrong decisions.
About the latter, the so-called minors for theft can just end up in a cell for years, while someone who deliberately does not pay 50.000 baht for business credit can continue to walk around quietly, since the cost-technical limit is 150.000 baht.
Again a thing that one can tackle but simply does not do and so it is not surprised when another dead person is found.
Maybe weird in "our" eyes but so be it
Making the Baht cheaper is not really the solution for the middle-in come-trap. GDP is already 70% dependent on exports. That seems risky enough to me, given the average low added value of current export products.
Weekly, on Friday, Prayuth presents the plans and projects with procedures and organizations that promise improvement in the areas of:
- education
- employment opportunities
_ infrastructure
- Poverty Reduction
– anti-corruption
In my view, these are detailed projects. I hope that these projects will be continued by any government. That seems important to me for the future and stability of Thailand. Improvement is always possible, but continuing on the chosen path seems to me to be a good thing.
Prayuth does "wishful thinking". No Thai believes this anymore!
The speeches are accompanied by extensive explanatory images, in which the projects take concrete shape. Of course, whether they will ultimately succeed also depends on the people who have to support it. There are very interesting projects. For example, making teaching materials available free of charge via the Internet. Anyone who wants to can thus train in knowledge and skills that support a profession. Of course that is wishful thinking. I hope that many people will support and realize the projects. Whether there is “No Thai left who believes that”? I do not know. I see a lot of completed projects on the news. One of them, for example, is to stop using plastic and to clean up waste. That seems like a good goal to me. But whether it is carried out depends on the people themselves. And that starts with believing that something is achievable. That is wishful thinking. Yes, I do that too.
The basis of the entire political / economic spectrum must be a consistently implemented and controlled policy that radiates confidence and the citizen knows where it stands.
In almost every area, after a decision or measure, maintenance and long-term control are lacking.
Government agencies are drowning in endless masses of paper, stamps, even handwritten manuscripts! Efficiency is lacking.
From below, measures are being taken to stimulate the economy. The question remains for what amount the super rich in Thailand have to pay in taxes in order to give the infrastructure a "boost"!
Just a few thoughts that bubble up when one looks around!
Thank you Chris. Interesting data and analysis.
However, the synthesis, conclusion and improvement measures are a completely different matter.
It is to be hoped for the people of Thailand that their future elected officials will act wisely with the best interests of the whole nation in mind.
If history teaches us anything, the chances of that hope being preserved are slim.
Dear Chris, example 2 a moped taxi driver in Bangkok who earns 50000 baht a month. Are you sure about that .
My stepson graduated with a Bacheler degree in software from CMU University in Chiangmai and has been working for a software company in Bangkok for a few years now. He says I will immediately stop using the computer and go on my moped .
Too good to be true .
Jan Beute
I also have my big doubts about example number 1.
This man earns about $375 a day!?
With that all costs are deducted…
I can't imagine that he earns 8x average income here in the Netherlands with 1.5 days of work.
If this is the case, the floating market will be full of these shops within a week, so that everyone can just get out of their costs.
It's a she but that aside.
And yes, she really earns 15.000 Baht a day. She does sell value-added products, so no knick-knacks of 30 Baht each. She is only at the market during the weekend and the other days she does the purchasing and makes the products herself. She already won prizes at the university with fruit carving and she now makes soaps with the same technique.
She has a child that she now sends to an international school.
Moral of the story: if you are smart and good, you can earn much, much more as an independent entrepreneur than as an employee in a company. In a hotel she should be at least F&B manager with 15 years of experience. She graduated four years ago.
I don't find it surprising that employees and civil servants are jealous and try to earn a little extra in every possible way (including illegal ones).
This boy was on TV telling his story. It is at a very good point, at the exit/entrance of BTS station On Nut with two, three sois where many condos have been built in recent years. And of course he has to pay everything from that income. He probably doesn't pay for a number of things, such as health insurance, saving for retirement.
50.000 Baht / 25 (days) = 2000 Baht per day. With a fare of 20 Baht, that's 100 rides. Seems like a really busy point to me.
My stepson is home for a week and then works for his company online at our home here in Pasang.
He made some inquiries through his circle of acquaintances , and this afternoon he told me over dinner that an amount of around 20000 baht per month for a moped taxi in Bangkok is closer to reality .
Jan Beute.
Dear Chris.
As an ordinary boy and therefore not highly educated, I come to the following calculation.
Assuming that an average ride on a moped taxi easily takes 15 minutes.
Then 15 minutes times 100 trips in a day is 1500 minutes.
A day in Bangkok also has 24 hours and is therefore 24 times 60 minutes and that is a total of 1440 minutes.
That boy never sleeps, and the day is minutes short.
So really not possible.
Jan Beute.
I suppose Chris will have to believe his old student's brown eyes too.
But you are of course right that it is quite illogical and that answers given can sometimes be viewed critically.
Assuming a soi ride I get there and back in 5 minutes. 100 x 5 minutes is 500 minutes and is already 8 hours. Nobody can handle this and that is why the number of permits for a location is regulated, just like the fares.
My experience is that the average daily turnover is around 800 baht and after deduction of costs you arrive at 14.000 baht per month
Of course there is a bit of difference between the best and worst places in Bangkok.
I have also heard from reliable sources that with vests of 800.000 baht, about 30.000 baht can be earned gross, but then it still costs more than 48 hours a week
If this English-speaking driver does indeed succeed, he can start working for me tomorrow against better working conditions and the risk of accidents is also a lot less.
You can of course discuss figures up to Sint Juttemis, but I hope the message sticks. And that is that the (starting) salaries of academics (15.000 Baht per month according to the law) are so low that 1. you cannot make ends meet in Bangkok and other cities unless you have a partner who earns at least the same and 2. that many are therefore looking for extra income or an activity that yields more per month. (which sometimes has nothing to do with what they studied). The underlying reason is not only the low salaries, but also the quality of the dilpoma. (cqthe quality of education)
If that is earned, then that is very clever and reserved for 0,1% of this profession.
What is not told is that you have to pay about 700-800 thousand baht for a vest for such a location. The maintenance and fuel costs and the 72-hour working week are also not included.
Very well noted Johnny,
It may be only a few who are lucky and can earn a good living.
Unfortunately, the vast majority are less fortunate than what is outlined in the examples.
Here in Chiang Mai, I see many small independent entrepreneurs struggling to survive.
When someone has a good business and can earn well with it, the concept is immediately copied by other Thais and in no time anyone earns anything because there is an oversupply.
Yes. That's right. Here at Kam Chanot there was a need for lodging. The resorts sprang up like mushrooms
The margin has now dropped so far that you have to pay attention to all the costs such as laundry. A friend of ours barely gets by. Too bad, because a nice piece of employment had been created by this tourist attraction. In that respect, regulation of the market would be better.
So you see I'm right about Thais and their income. It doesn't surprise me that a Thai who can transport some people on a moped has a salary to say to you.
I am not surprised when I see the wealth around me. And then I'm only talking about a city in the Isan.
There is a very important point missing from the overview.
Namely the national debt.
I suspect that a large part of the GDP consists of rising government debt.
After all, all those beautiful government projects have to be paid for.
Whether those projects will ever generate income for the government is highly questionable.
Good point. Of course, the government finances its business with a national debt. In Thailand it is 41,9% of GDP (was 45), in the Netherlands 56,7 (was 68 but the Dutch government has cut back significantly) and in Belgium 103,1%.
Thailand is therefore in a much better position and that is because the government does not do much for the people here: no or hardly any pension, no benefits, no subsidies (from rent subsidies to study grants). In short: the government is very frugal here. That could change a bit, but yes, then taxes have to go up …….
The Thai government is indeed in good shape, but the question is how long it will stay that way.
Government investments increase the national debt, but this is camouflaged because that expenditure also increases GDP.
The percentage of that debt to GDP may not increase as much, because spending increases GDP, but the debt itself will.
If in a few years, when the construction is finished, it turns out that those billions of money have been wasted on projects that don't pay a penny, GDP will go down, because no more construction is being done, and then the percentage of the national debt to the GDP will shoot up. GDP suddenly up.
Nice story to read but what can you do about it, just like everywhere in the world, the rich are getting richer and the poor are not getting any better.
My wife has done university and works in the PR department of a large company, she has no complaints with 40.000 baht, but that is Thai, I would be gone long ago if I always had to work late because the job always continues after working hours because it has to and therefore always take work home with nothing in return.
If she takes a day off, she has to work longer the days before because the job has to be finished, so she actually works that day off in advance, but she does have to hand in a day off.
So please share the trade of that lady in example 1 and maybe I can persuade my wife to do something else, she will certainly not turn down 3x as much salary for only 8 days of work, unless of course it is illegal what this lady is doing. If you then give an example that seems rather implausible (read other responses) then mentioning the trade might remove this.
I also doubt the example of the scooter taxi because if you earn 50.000: 25 = baht 2000 per day and assume that most rides are 20 baht, then the man would do 100 rides per day and sit on a scooter taxi seat sometimes. 15 men, that is a lot of trips per day and it is not very busy all day long or is it there?
Have you ever seen the queue of potential passengers at busy points? Have you ever gone to the Dutch embassy by public transport?