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THAILAND’S ECONOMY
WHAT LIES AHEAD?
KIRIDA BHAOPICHITR
SENIOR ECONOMIST
1
16 June 2015
Where is Thailand today?
2
GNI per Capita levels per year (World Bank Atlas Method, Current US$ as of 2013)
Source: World ...
In 2015, real GDP is forecast to
grow up to 3.5%
3
0.6
3.7
3.1
13.1
1.0
17.8
3.2
8.8
3.5
0 5 10 15 20
Private Con
Gov Con
...
Opportunities for
Thailand’s future growth
 Lower oil prices
 Greater investments/capital
flows into East Asia
 Greater...
Thailand is surrounded by
fast-growing economies
5
0.7
3.5
4.0
4.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2014 2015 2016 2017...
Developing EAP will lead high-income and
all developing regions in 2015
6
Note: SSA= SubSaharan Africa; SAS = South Asia; ...
The global economy continues to
recover although slowly
Source: World Bank, Global Economic Prospects (GEP) (January 2015)...
8
Challenges for Thai economy
Source: World Bank (Jan 2015)
http://go.worldbank.org/4ROCCIEQ50
World Rice & Rubber Prices
...
China’s economic growth will be slower
9
2
3
4
5
6
7
8
2012 2013e 2014f 2015f 2016f
China
East Asia and Pacific
India
Sour...
0
10
20
30
40
50
60
70
1995-
2010
2011-15 2016-20 2012-25 2025-30
Investment/GDP ratio
Consumption/GDP ratio
Source: World...
Can Thailand escape the
Middle Income Trap?
11
Thailand will have to grow much faster to escape
the “Middle Income Trap”
S...
-15
-10
-5
0
5
10
15
20
Q1/2013
Q2/2013
Q3/2013
Q4/2013
Q1/2014
Q2/2014
Q3/2014
Q4/2014
Q1/2015
%YOY
Indonesia Philippines...
Indicators show Thailand’s competitiveness has
declined, particularly in labor market efficiency
Change in Global Competiv...
-10
-5
0
5
10
15
20
25
30
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Percent
Thailand Philippines Vietnam
China Ind...
Labor productivity has been growing slowly in the
labor-intensive agriculture and construction sectors
Real Labor producti...
8.3
5.8
38.1
47.8
Agriculture
Others
Manufacturing
Services
Service sector could be a
future engine of growth as Thailand ...
Raising the quality of education in villages and towns from which
workers in most labor intensive sectors are from will he...
Access to better education and jobs will
help reduce income inequality
18
0
10
20
30
40
50
60
1985 2009 1984 2005 1992 200...
Thank You
All World Bank data and reports
can be downloaded at
www.worldbank.org
www.facebook.com/WorldbankThailand
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Thailand's economy - What lies ahead?

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Dr Kirida Bhaopichitr, Senior Economist, The World Bank Group

Published in: Economy & Finance

Thailand's economy - What lies ahead?

  1. 1. THAILAND’S ECONOMY WHAT LIES AHEAD? KIRIDA BHAOPICHITR SENIOR ECONOMIST 1 16 June 2015
  2. 2. Where is Thailand today? 2 GNI per Capita levels per year (World Bank Atlas Method, Current US$ as of 2013) Source: World Bank 0 34 1,045 12,746 50 4,125 55 LOW LOWER-MIDDLE UPPER MIDDLE HIGH •Cambodia (950) •Nepal (730) • Philippines (3,270) •Myanmar • Thailand (5,370) • Lao PDR (1,460) • Malaysia (10,400) • Vietnam (1,730) • China (5,560) • Indonesia (3.580) 75 • S. Korea (25,920) • USA (53,670) • Singapore (54,040) • UK (39,140) • Japan (46,140) • Norway (102,610) • Mexico (9,640) • Brazil (11,690) GNI per Capita per year
  3. 3. In 2015, real GDP is forecast to grow up to 3.5% 3 0.6 3.7 3.1 13.1 1.0 17.8 3.2 8.8 3.5 0 5 10 15 20 Private Con Gov Con Private Inv Public Inv Export goods (volume) Export Services Import Goods Import Services (volume) GDP Source: World Bank projections Real GDP Growth, 2015 (%)
  4. 4. Opportunities for Thailand’s future growth  Lower oil prices  Greater investments/capital flows into East Asia  Greater Regional integration and openness (AEC & FTAs)  A bigger middle-income class, especially in China – higher purchasing power 4 Net Foreign Direct Investment (FDI) in Thailand (Million US$) Source: BOT and World Bank Calculation -2,000 00 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2007 2008 2009 2010 2011 2012 2013 2014 Japan China US EU ASEAN Others Total
  5. 5. Thailand is surrounded by fast-growing economies 5 0.7 3.5 4.0 4.5 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2014 2015 2016 2017 Cambodia Indonesia Lao, PDR Malaysia Philippines Thailand Vietnam Source: World Bank’, Global Economic Prospects (January, 2015) Real GDP Growth (%) -2,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2007 2008 2009 2010 2011 2012 2013 2014 US Japan Hong Kong Australia EU ASEAN Others Total Thai Direct Investment Abroad (Million US$) Source: Bank of Thailand
  6. 6. Developing EAP will lead high-income and all developing regions in 2015 6 Note: SSA= SubSaharan Africa; SAS = South Asia; MENA = Middle East & North Africa; ECA = Eastern Europe & Central Asia; LAC = Latin America & Caribbean Source: World Bank’, Global Economic Prospects (January, 2015) Forecasted Real GDP growth in 2015 (%year-on-year) 0 1 2 3 4 5 6 7 8 EAP SAS SSA ECA MENA LAC percent
  7. 7. The global economy continues to recover although slowly Source: World Bank, Global Economic Prospects (GEP) (January 2015) and East Asia and Pacific Economic Update (October 2014) e = estimate; f = forecast 7 Real GDP Growth (%) 4.1 2.8 2.4 2.5 2.6 3.0 3.3 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2010 2011 2012 2013e 2014f 2015f 2016f High income Developing economies World
  8. 8. 8 Challenges for Thai economy Source: World Bank (Jan 2015) http://go.worldbank.org/4ROCCIEQ50 World Rice & Rubber Prices 0.0 0.5 1.0 1.5 2.0 2.5 3.0 380 400 420 440 460 480 500 520 2013 2014 2015 2016 2017 Rubber Rice Rice, Thailand 5% ($/MT) Rubber, Malaysian ($/kg) • Softening of key agriculture prices e.g. rice and rubber • Rise in interest rates after US raises its rates • Slow down in Chinese economy • Competition from of other countries in East Asia, that are “catching up” with Thailand • Thailand is aging
  9. 9. China’s economic growth will be slower 9 2 3 4 5 6 7 8 2012 2013e 2014f 2015f 2016f China East Asia and Pacific India Source: World Bank, Global Economic Prospects (GEP) (January 2015) and East Asia and Pacific Economic Update (October 2014); e = estimate; f = forecast Real GDP Growth (%)
  10. 10. 0 10 20 30 40 50 60 70 1995- 2010 2011-15 2016-20 2012-25 2025-30 Investment/GDP ratio Consumption/GDP ratio Source: World Bank, China 2030 (2012) Share in China’s Real GDP (%), 1995-2030 China’s economic structure will be different as it rebalances 0 5 10 15 20 25 30 35 40 45 50 Primary IndustryServicesPrimary IndustryServices Production Employment 2010 2030 China’s Production and Employment Shares (%), 2010 & 2030 10
  11. 11. Can Thailand escape the Middle Income Trap? 11 Thailand will have to grow much faster to escape the “Middle Income Trap” Source: World Bank, World Development Indicators $0 $5,000 $10,000 $15,000 $20,000 $25,000 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 GNI per capita (2000 constant USD) China Korea, Rep. Malaysia Thailand
  12. 12. -15 -10 -5 0 5 10 15 20 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 %YOY Indonesia Philippines Vietnam Malaysia Thailand Improving export competitiveness is an important agenda for Thailand Source: Comtrade, in US$ terms * 12 Thai key export products accounting for 50% of total Thai exports 12 Export growth of selected Asian countries in Thai key export products* (%, average of each period) Export growth of selected ASEAN countries, 2013-2015 2.7 -12.1 4.3 9.6 3.0 9.4 12.5 8.8 23.8 15.3 1.2 26.2 21.3 11.6 -15 -10 -5 0 5 10 15 20 25 30 Thailand Indonesia Malaysia Phillipines Vietnam India China 2009-11 2012-13 Source: CEIC, in US$ terms 12
  13. 13. Indicators show Thailand’s competitiveness has declined, particularly in labor market efficiency Change in Global Competiveness Index Rankings from 2008 to 2015 (Negative means rank in 2015 is lower than that in 2008) Source: WEF, Global Competitive Index Note: Figures in ( ) are Thailand’s rankings in 2015 out of 144 economies 13 -55 -31 -13 -3 -80 -60 -40 -20 0 20 40 Labor market efficiency Innovation Institution Global Competitiveness Index Thailand Vietnam Philippines Malaysia Indonesia (84) (67) (66) (31) 13
  14. 14. -10 -5 0 5 10 15 20 25 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Percent Thailand Philippines Vietnam China Indonesia Thailand’s wage competitiveness (adjusted for labor productivity growth) has been declining in recent years 14 Source: World Development Indicators Note: 2014 data for China is unavailable Figures in ( ) next to country names are average values for 2011-2014for the country Nominal labor productivity growth (%) minus Wage growth (%) (Higher bar means more competitive) Source: World Development Indicators Nominal labor productivity growth of selected E. Asian countries (%) -18 -15 -12 -9 -6 -3 0 3 6 9 12 2011 2012 2013 2014 Percentage-points Thailand (-4.7) Indonesia (-6.5) Philippines (3.4) Vietnam (-3.2) China (3.6) 14
  15. 15. Labor productivity has been growing slowly in the labor-intensive agriculture and construction sectors Real Labor productivity index (2001=100) Source: BOT 118.6 152.2 89.0 136.5 40 60 80 100 120 140 160 180 200 220 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Agriculture Manufacturing Construction Hotels&restaurants Transport,storage,& communications Financial intermediation Total In 2014, agriculture & construction sectors together employed almost 40% of labor force. 15 15
  16. 16. 8.3 5.8 38.1 47.8 Agriculture Others Manufacturing Services Service sector could be a future engine of growth as Thailand ages 16 Share of Real GDP (%), 2013 Share of Employment (%), 2013 39.6 0.7 14.0 45.7
  17. 17. Raising the quality of education in villages and towns from which workers in most labor intensive sectors are from will help increase their productivity & mobility to high productivity sectors 360 380 400 420 440 460 480 500 Village Small Town Town City Large City Reading Mathematics Science Mean Score in PISA 2012 Source: Program for International Student Assessment (PISA), OECD 17 0 100 200 300 400 500 600 700 Tokyo (Japan) Seoul (Korea) Shanghai (China) Jakata (Indonesia) Kuala Lumpur (Malaysia) Bangkok (Thailand) Rural Areas Vietnam Hanoi (Vietnam) Reading Mathematics Science 17
  18. 18. Access to better education and jobs will help reduce income inequality 18 0 10 20 30 40 50 60 1985 2009 1984 2005 1992 2008 1981 2007 1994 2008 1993 2008 1990 2010 1984 2010 Philippines Indonesia Lao China Cambodia Vietnam Thailand Malaysia Increasing inequality Constant inequality Decreasing inequality Source: World Bank, World Development Indicators Gini coefficients (Income)
  19. 19. Thank You All World Bank data and reports can be downloaded at www.worldbank.org www.facebook.com/WorldbankThailand

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