Last updated December 5th, 2018.

 

Once a high-growth market in Southeast Asia, the Thai economy is no longer what it used to be. That’s especially true with declining tourism numbers and a GDP growth rate well below the regional average.

A brief look at economic indicators shows the Thai economy has indeed been going downhill since a coup back in May of 2014. Likewise, it appears the authorities in “The Land of Smiles” understand this fact.

Thailand’s ruling party is doing their best to bring the economy back to its feet through driving FDI and tourism arrivals. Elections are planned in 2019 and time is now running out for an economic revival before then.

One way Thailand is trying to lure more foreign investment is through offering business incentives in the form of tax benefits and better infrastructure.

Furthermore, the government is hyping up Thailand’s Eastern Economic Corridor (EEC). The trade zone will offer foreign investors a right to own freehold land, a low flat tax rate, and other perks.

But will all these things be enough?

 

Slow Growth, High Debt in Thailand Economy

There are many factors working together, transforming Thailand from one of Southeast Asia’s top performing economies into arguably the worst.

A major reason is the change in the country’s leadership. The coup in May 2014 resulted in the military junta taking control of Thailand.

The country failed to boost investors’ confidence following the coup, therefore inbound foreign investment dropped significantly.

Thailand’s 7.2% GDP growth rate back in 2012 seems like a long time ago. You might as well call them the “good old times” because 2019’s GDP growth forecast is 4.3%.

During the first half of 2018, Thailand only managed to attract below 10% of total ASEAN in-bound foreign investment. That was despite boasting the Southeast Asian region’s second largest economy.

Not only does Thailand have a different time luring foreign investors, it has trouble attracting its own local investors too. Thais are investing in their own country less while investing abroad more, especially throughout the rest of Southeast Asia.

Household debt is now at the highest point in a decade too. More than 80% of Thailand’s population is incurring debt – an increase of over 10% from last year’s figures. The number of homeless people is also on a discouraging upward trend.

 

A five-year graph showing Thailand’s GDP growth rate between 2012 and 2017. Now rising at below 5% annually, the Thai economy is among Southeast Asia’s weakest.

 

More Foreign Direct Investment is Key

According to a panel of experts, the only way out is for Thailand to focus on bringing in more foreign investment. But progress is hindered by high labor costs, a low supply of labor, and a tough regulatory environment.

Thailand must create an environment that welcomes foreign investors. The Kingdom must become a stable, efficient, and transparent place for capital.

Whose responsibility is it to make all that happen? The Finance Ministry and Thailand Board of Investment are two institutions leading the change.

Taking baby steps towards a brighter future, Thai Finance Minister Apisak Tantivorawong is looking to set up tax incentives and increase investment throughout his country.

Meanwhile, the Thailand Board of Investment (BOI) is a few steps ahead of the Finance Ministry. They already offer tax benefits for private investors.

According to a press release, the BOI recently approved investment for 17 projects worth 78 billion Thai Baht in total. These include subsidiaries of multinational firms like Toto, Ford Motor, and AirAsia.

It’s very possible that a rough Thailand economy could turn still itself around. But it will require a conscious effort from government, businesses, and citizens alike.

 

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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