Thailand ECONOMIC AND FINANCIAL DEVELOPMENT
Open-air market in Bangkok
Courtesy United Nations
Umbrella-painting cottage industry in Chiang Mai
Courtesy United Nations
In the 1960s and 1970s, the country's abundant natural
resources, an enterprising and competitive private sector, and
cautious and pragmatic economic management resulted in the
emergence of one of the fastest growing and most successful
economies among the developing countries. Between 1960 and 1970,
the country's average annual growth rate of gross domestic
product
(
GDP--see Glossary) was 8.4 percent, compared with 5.8
percent for all middle-income, oil-importing countries. Between
1970 and 1980, the GDP rate of growth was 7.2 percent, compared
with 5.6 percent for the middle-income oil-importing countries.
The world slowdown by the late 1970s was mainly caused by the
rise in oil prices. The Thai GDP in 1982 was US$36.7 billion. It
rose to US$42 billion in 1985 (see
table 5, Appendix). The
projected rate of growth for GDP during the early 1980s was
around 4.3 percent as a result of falling demand and prices for
Thai exports despite a drop in oil price. It was apparent that in
the 1980s Thailand had lost its momentum; its Fifth Economic
Development Plan targets had not been met because of serious
macroeconomic imbalances, such as decreasing savings and
investment rates, increasing budget deficits, and increasing debt
and debt- servicing obligations. Whether Thailand could regain
its former momentum depended on the success of its Sixth Economic
Development Plan (1987-91).
Between 1970 and 1980, investment represented on the average
25.2 percent of GDP, compared with 24.7 percent by the mid-1980s.
This proportion was one of the lowest investment rates in
Southeast Asia. The national savings rate had fallen even more,
from an average of 22 percent during the 1970s to around 17.8
percent by the mid-1980s. Hence, the average current-account
deficit of 7 percent of GDP during the early 1980s had been
caused by a declining savings rate rather than by an increase in
investment rate. This imbalance was more serious than one caused
by rising investment because rising investment could pay for
itself with increased output and, possibly, increased savings so
that debt could be repaid. With falling savings, foreign
borrowing was used not to raise investment but merely to fill the
investment-savings gap, which was mirrored in the external debt
ratio of 39 percent of GDP and 146 percent of exports by the mid1980s . The total debt service ratio went up from 17.3 percent in
1980 to more than 25 percent by the mid-1980s. The increase was
an important factor in the decision of the government to sharply
reduce authorization for new commitments of public debt.
Data as of September 1987
|