Thailand is the second largest economy in Southeast Asia. Thailand ranks second in Southeast Asia in external trade volume, after Singapore. The nation is recognized by the World Bank as “one of the great economic development success stories”
According to the World Bank Thailand became an upper-middle economy in 2011. Over the last four decades, Thailand has made remarkable progress in social and economic development, moving from a low-income country to an upper-income country in less than a generation. As such, Thailand has been one of the widely cited development success stories, with sustained strong growth and impressive poverty reduction, particularly in the 1980s. However, average growth has slowed to 3.5 percent over 2005-2015. The government has embarked on an ambitious reform program to raise Thailand’s long-term growth path and achieve high-income status.
Thailand’s economy grew at an average annual rate of 7.5 percent in the boom years of 1960 to 1996 and 5 percent following the Asian crisis during 1999-2005, creating millions of jobs that helped pull millions of people out of poverty. Gains along multiple dimensions of welfare have been impressive: more children are now getting more years of education, and virtually everyone is now covered by health insurance while other forms of social security have expanded.
Poverty has declined substantially over the last 30 years from 67% in 1986 to 7.2% in 2015 during periods of high growth and rising agricultural prices. However, poverty and inequality continue to pose significant challenges, with vulnerabilities as a result of faltering economic growth, falling agricultural prices, and ongoing droughts. Poverty in Thailand is primarily a rural phenomenon. As of 2014, over 80 percent of the country’s 7.1 million poor live in rural areas. Moreover, an additional 6.7 million were living within 20 percent above the national poverty line and remained vulnerable to falling back into poverty. Although inequality has declined over the past 30 years, the distribution in Thailand remains unequal compared with many countries in East Asia. Significant and growing disparities in household income and consumption can be seen across and within regions of Thailand, with pockets of poverty remaining in the Northeast, North, and Deep South.
Historically, economic growth has been the key driver of poverty reduction in Thailand. However, GDP grew by less than 2.5 percent a year in 2014 and 2016. Looking ahead, the World Bank forecasts growth to pick-up 3.2 percent for 2017.
The rate of economic recovery and reigniting growth, will depend on how fast Thailand can overcome factors constraining growth and promote a more inclusive growth model. There are opportunities in the horizon, including improving business regulatory environment, expanding trade through enhanced integration with the global economy, bolstering growth by implementing transformative public investments to crowd-in private capital, stimulate domestic consumption, and improving quality of public services across the entire country. This will support a resumption of higher, more balanced, growth path that eliminates poverty and boosts shared prosperity for all citizens.
Long-term economic aspirations are laid out in Thailand’s recent 20-year strategic plan for attaining developed country status through broad reforms. The reforms address economic stability, human capital, equal economic opportunities, environmental sustainability, competitiveness, and effective government bureaucracies. Progress on reforms has already been made. These include the implementation of multi-year large public infrastructure projects, setting up of a State Enterprise Policy Committee to improve state-owned enterprise governance, transfer of supervisory oversight of specialized financial institutions to the Bank of Thailand, approval of progressive inheritance and property taxes and the launch of the National Savings Fund, a retirement safety net for informal workers.
Going forward, the sustained pace and quality of reforms as well as sound implementation will be crucial for translating the reform effort into the desired economic outcomes. Reversing the relative erosion of competitiveness, improving effectiveness of the public sector, and improving education and skills will be particularly important to take Thailand out from middle to high income status. The World Bank is supportive of the reform agenda.
Today, according to World Bank, Thailand is ranked among Top 50 economies for doing business. Read more