General framework

Before the Asian financial crisis of 1997, Thai economy’s GDP, stimulated by the export of manufactured goods, increased with a high rate. Thailand belonged to the Asia Dragons which the economic performances were qualified as miracle by the economists.

From 1985 to 1995, Thai economic growth progressed with a high rate averaging almost 9% annually.

Affected hit by the Asian financial crisis of 1997, Thailand really went out of the crisis in 2003, largely due to restrictive economic policy.

From his election in 2001 to his exile further to the military coup of 2006, Prime Minister Taksin Shinawatra set up a populist policy (aid programme for farmers, a programnme of hospitalization for 30 baths, subsidies in villages) and an economic strategy oriented to the export (increase in the number of multilateral or bilateral agreements), encouraging exports and increasing domestic spending as a result of several mega projects.

Thaksinomics economic strategy knew a success. Growth in 2002 was 5.2%, in 2003 was 6.9% and 2004 was 6.1%, the highest economic performance in South-East Asia (China included). Due both to the oil price increase and to the weakening of the US and Yen dollar and an increasingly strong Thai currency, Thai exporters was less competitive compare to the others Asian competitors. The political crisis internal demonstration anti-taksin in 2006 led to coup d’Etat of September, 2006.

Thai economic remains healthy and is expected to increase in 2007 and in 2008 (estimation of 2008) about 4%.

The main doubt concerns the consequences of the American recession on Thai economy and, on the risk of temptations protectionisms in Thailand, which would have consequence to push the country in the following vicious circle:

Weak morale of the households and the manufacturers (of in the bad political climate) = > fall of the imports = > surplus of the balance of trade = > appreciation of the baht = > loss of competitiveness in the export = > lost morale of the households and manufacturers.

For 2008, the analysts plan an increase of the imports of finished or semi finished products, encouraged by the government on one the hand to allow to decrease the baht (by reducing the commercial surplus of the balance), and on the other hand for increase the production capacity of the electronic manufacturers, oil and chemical, automobile and electronic products, which operate over more than 80 % of their capacity.

Structure by sector

Agriculture

If the modernization of the economy allowed a decrease of the weight of the agriculture in the economy (less than 10 % of Thai economy’s GDP), the farming sector remains the biggest supplier of employment of the country, employing around 40 % of working population.

Thailand occupies a weight importing in the international trade of several farm produces, in particular the rice ( 1st world exporter), the (2nd) manioc, the (3rd) sugar, the(3rd) latex. A variety of fruits and vegetables (pineapple, mangoes, papayas, bananas) is cultivated for the local market (produced freshly) and for the export (processed and canned products).

Concerning stockbreeding, poultry and pork are predominant. Fishing has an important weight and also fish farming that allow the country to appear among the first top 10 world producers sea produce (1st exporter of frozen shrimp).

Industry

Industry sector knew a lightning development during the last decades. In 1965, it represented only 14 % of Thai economy’s GDP, then 27 % in 2000, and 40 % in 2007. The comparative statement below reports main industries of the Kingdom in 2006.

Thai main industries are the textile and the automobile. The light industry is very important, because they group together a main part the production of jewels, electric components, integrated circuits and plastics.

Thailand exports major export as automobile, electronics, electric possessions and textile. With the intensification of the presence of Toyota and Ford, car industry is in full expansion (+ 34, 8 % in volume in 2005). Textile, on the other hand, suffers from a lack of competitiveness in front of Vietnamese and Chinese suppliers.

Services

Services, in Thailand, are one of the protected activities, and thus non-opened to the competition. So, the creation of a service company is controlled by the ministry of commerce. A foreigner wishing to create a service company has to obtain one of the director of the office of the Commercial Recording Department of Commerce ( DBD) and a favorable opinion of the Foreign Business Board.

Thai economy depends so much on the international environment. The new government, named since February, 2008, will have for main objective to boost the demand internal, especially with the American financial crisis; the international climate does not seem to be able to support the country growth.

Foreign Trade

As we saw it previously, foreign trade is the mainspring of Thai growth. Thailand takes advantage of its numerous trade agreements (bilateral and regional) to develop its exports (see multilateral and bilateral agreements).

However, it is important that Thailand manages "to go up in range its production ". The opening of China, India and Vietnam competes with its traditional industries with strong hand of work (agriculture and textile industry mainly), which, if they represent only 15.6 % of the exports in 2006, occupy more than 45 % of working population (see the structure of the foreign trade).