Background Information on Thailand
The present day Thailand which was previously known as Siam until 1939 is a Southeast Asian county that has a population of around 68 million people sitting on an area of 513,120km2. The county is bordered by Myanmar and Laos to the North and South respectively. Thailand’s capital city is Bangkok. Thailand is the home of Thai people who entered the current Thailand in the 11th century after migrating from their original home in Southwest China. The official language of Thailand people is Thai which is used as the learning language in schools and government offices. Chinese, English, Lao, and Khmer are also other languages spoken in Thailand. The country has a unitary government led by a King who rules by virtue of constitutional monarchy. The government has three arms namely the executive, legislature, and the judiciary. The administration of the country is conducted from Bangkok although regional administrative units exist.
The IMF 2018 economic outlook report IMF recently reported that the county’s economy is improving. Thailand’s economy has continuously been growing fast since 2013. In 2017, Thailand’s economy grew by 3.9 percent although IMF noted that the South East Asian country need to implement key economic reforms that would see a rise in domestic demand. According to the World Bank, Thailand’s economy is projected to grow by 4.1% in 2018 which is the most optimistic projection since 2012 (World Bank, 2018). Currently, Thailand has seen a broadening of its economic recovery with increased exports, higher capacity utilization. The increase in import of capital goods also show a rise in demand recovery (Feenstra, 2015). The World Bank noted that, reforms in regulatory environment and stability if policies contributed in huge extent to the improvement in business outlook.
Thailand recorded a Gross Domestic Product of US$455 billion in 2017 which was the largest in Asia. The inflation rate was rather stable at 3.02 percent. Thailand’s economy relies heavily in the tourism sector although textiles, agriculture, and manufacturing sectors are also huge contributors to its economy. In 2017, the service sector was the largest contributor to the economy accounting to 56.31% of GDP. The agriculture sector contributed to 8.6% while industry accounted to about 35.03%. In the service sector category, the tourism sector contributed to the largest share of 3.6 % GDP despite seasons of political instability coupled with insecurity.
Figure 1:share of GDP per industry
The unemployment rates in Thailand is 1% in 2018. This implies that the number of unemployed people in the country is around 385,500. The country has continuously reported a decline in unemployment over the years. In 2017, the agricultural sector employed 32.8% of Thais while industry and service sectors employed 22.55% and 44.65% respectively.
Thailand’s Economic Overview and GDP
Figure 2 : Employment comparison per industry
Thailand recorded a rise in economic growth in the recent years. However, the country’s economy faces major economic challenges. Possible trade restrictions imposed by its trading partners threatens to negatively affect its economic growth. Thailand’s GDP relies on exports to a tune of 70% in 2018 exposing it to huge risk when trade wars arise (International Monetary Fund, 2018). The country’s major trade partners are China, United States, Japan and Australia. Thailand exports huge amounts of its products to these countries. The country might be a victim in the recent trade war between the United States and China due to its proximity and economic connectedness to China. The United States has recently implemented an import tariff on steel and Aluminum from China. Thailand being reliant on international trade faces the risk of trade restrictions from its trading partners.
Thailand also faces the risk of political stability. The county has been witnessing political instability due to warring political factions. Political instability in a country discourages foreign direct investment. Foreign investors might reduce their investments in the country for fear of political risks. Political instability is characterized by coups, civil demonstrations, chaos, and destruction of property.
Trading partners might resolve to restrictive trade to protect infant local producers from foreign dominance (Leightner & Inoue, 2014). Young local companies with high chance of success once established are protected from competition until they gain strength to compete internationally. This argument is common in the manufacturing industry majorly in developing nations since they attempt to replace foreign imports with locally produced goods so as to achieve balance of payments.
Trading partners might impose trade restrictions to reduce export of employment. Importing products from foreign companies reduces employment in the home country. Local industries create employment opportunities for both skilled and unskilled labor (Pargell-Karlsson & Widen, 2018). Excessive importing weakens local industries forcing them to downsize their workforce. In addition, local investors might not invest in the local industry for fear of unfair competition from established foreign countries.
Trading partners might also resolve to trade protectionism to prevent dumping of cheap goods whose prices are less than local cost of production. Dumping is commonly perpetrated by foreign monopolies who use high profits at their home country to subsidize prices of exports to gain political and strategic mileage. Importing companies might implement trade restrictions in order to prevent elimination of local industries and prevent dependence on imports.
Unemployment Rates in Thailand
Thailand recorded a rise in economic growth in the recent years. However, the country’s economy faces major economic challenges. Trade wars between Thailand and its trade partners threatens to negatively affect its economic growth. Thailand’s GDP relies on exports to a tune of 70% in 2018 exposing it to huge risk when trade wars arise. The country might be a victim in the recent trade war between the United States and China due to its proximity and economic connectedness to China. The United States has recently implemented an import tariff on steel and Aluminum from China. Thailand being reliant on international trade faces the risk of trade restrictions from its trading partners.
To reduce possible imposition of trade restrictions on businesses, Thailand should maintain good relations with its trade partners. Good international relations between countries boosts business by allowing movement of goods and services between them. Disagreements between trade partners should be solved diplomatically so as to minimize aggression. Thailand should also develop its local demand to ensure that locals also consume the products reducing over reliance on international trade. The country can also negotiate free trade agreements with its trade partners. Trade agreements that serve interests of both countries lead to flourishing of trade. Political instability in the country can be solved by promoting political and legal reforms (Jones & Kierzkowski, 2018). This ensures that, leaders and citizens operate as per the constitution. The conflicts that occur are solved harmoniously without civil strife. The achievement of good political environment and trade relations would boost the Thailand’s economy.
Thailand exports copper and dairy products to Australia. There is excess supply of these products in Thailand and a deficit in Australia. The products are exported to Australia through the port of Bangkok. The following graph shows a demand-supply framework showing excess supply curve of copper and dairy products in Thailand. Figure 3 shows that, excess supply exists when Quantity supplied exceeds quantity demanded. Figure 4 is a graph showing excess demand of copper and dairy products in Australia. Australian investors can then exploit the opportunity by acquiring and exporting dairy and copper products for Australian market.
Figure 3: Excess supply of products in Thailand
Figure 4: Excess demand of products in Australi
References
Feenstra, R.C., 2015. Advanced international trade: theory and evidence. Princeton university press.
International Monetary Fund, 2018. IMF Country Focus. [Online]
Available at: https://www.imf.org/en/News/Articles/2018/06/07/NA060818-Thailands-Economic-Outlook-in-Six-Charts
[Accessed 25 9 2018].
Leightner, J.E. and Inoue, T., 2014. Political Instability and the Effectiveness of Economic Policies: The Case of Thailand from 1993-2013. Economy, 1(1), pp.20-31.
Jones, R.W. and Kierzkowski, H., 2018. The role of services in production and international trade: A theoretical framework. World Scientific Book Chapters, pp.233-253.
Pargell- Karlsson, M. and Widén, E., 2018. Cultural challenges in Thailand-An unchanged fact?: A minor field study abour cultural challenges among Swedish executives in Thailand.
World Bank, 2018. Thailand Economic Monitor – April 2018: Beyond the Innovation Paradox. [Online]
Available at: https://www.worldbank.org/en/country/thailand/publication/thailand-economic-monitor-april-2018-beyond-the-innovation-paradox
[Accessed 25 9 2018].
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