Thailand's era of economic stagnation
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Thailand's era of economic stagnation

Visitors take in a sweeping view of Bangkok from atop the King Power Mahanakhon  skyscraper on February 5. (Photo: Varuth Hirunyatheb)
Visitors take in a sweeping view of Bangkok from atop the King Power Mahanakhon skyscraper on February 5. (Photo: Varuth Hirunyatheb)

After two decades of political instability and turmoil, it was a matter of time before the Thai economy would exhibit signs of distress and desperation. For decades, the Thai economy has proved resilient with an uncanny knack for bouncing back. But Teflon Thailand may have become a thing of the past. Headlines on the Thai economy have been heading south precipitously. Unless fundamental political reforms take place, Thailand will likely enter a period of low and plateaued growth with risks of grinding stagnation.

While it faced political instability and fragility for much of the four decades preceding the 1997-98 economic crisis, characterised by military coups, elections, and constitutions, the Thai economy still managed to expand around 7% a year. During the post-crisis economic recovery phase in 1999-2005, the economy grew 5% annually, according to World Bank data. Since Thai politics became topsy-turvy with more coups and constitutions, economic expansion has been choppy and patchy.

The country's growth trajectory now hovers in the 3% range, with downside trends. In 2023, for instance, Thailand's GDP growth came in at just 1.9%. For 2024, according to the National Economic and Social Development Council (the country's economic planning agency), growth projections have been adjusted downwards from 2.7-3.7%, calculated last November, to 2.2-3.2% in February. This lower range is consistent with forecasts by the World Bank and the Bank of Thailand.

Underpinning the growth doldrums is an assortment of challenges from lower external demand and geoeconomic disruptions from the United States-China conflict to high household debt and an overall loss of competitiveness in the face of stiffer competition in the regional neighbourhood. Above all, however, is Thailand's protracted political volatility. A year or two of a military coup followed by a constitution and election to reset the scene would have been par for the course in the eyes of foreign investors and economic partners.

But when Thailand kept shooting itself in the foot with one coup after another in 2006 and 2014, alongside street protests, judicial interventions, and dissolutions of political parties regardless of electoral outcomes, bouncing back became increasingly harder. Emblematic of the last two decades of uncertainty and malaise was the government under Gen Prayut Chan-o-cha from 2014 to 2023, the first five years as an outright military regime ruling by decree and the other four years under military-backed and judiciary-enabled governance that prioritised internal security over economic growth and prosperity.

The Prayut period culminated with the May 2023 poll as Thailand's major inflection point. For Thailand watchers from the investing community and elsewhere in and outside the country, the election last year was the indispensable reset when the Thai economy was supposed to regain its footing with a semblance of political stability and effectiveness. Thailand should have moved forward after a clear election outcome that gave two-thirds of the vote to the Move Forward and Pheu Thai parties. Many Thailand watchers saw Move Forward's reform agenda, which significantly overlapped with Pheu Thai's policy platform, as the way forward.

But more than a year after the election, the country has gone nowhere. By all accounts, Move Forward is due to be dissolved because of its election pledges to reform Section 112, or the lese majeste law. Even Pheu Thai, which formed and leads the coalition government, is being stymied left and right when trying to implement its policy programmes without touching on key military and monarchy reforms. For Thailand watchers, this country is just not bouncing back anymore. The famous Thai Teflon has worn off.

Anecdotal data and evidence of Thailand's economic decline because of political backwardness have thus flowed from various sources. Take the automobile sector, which traditionally accounts for 11% of GDP. As a Nikkei Asia headline noted, Malaysia has overtaken Thailand as Asean's second-biggest auto market, despite Thailand's market size being twice as big as Malaysia's. Moreover, a large Japanese auto multinational recently held a big meeting in Bangkok to determine whether it should still stay in Thailand at this level or shift some of its assets elsewhere, especially if the Thai government intends to favour Chinese-made electric vehicles.

It used to be an easy rule of thumb to say that Thailand is Asean's second-largest economy after Indonesia. But at Thailand's current low rate of growth, this trend may soon change. Vietnam's nominal GDP in early 2024 stands roughly at US$466 billion, compared to Thailand's US$548 billion. If Vietnam maintains its growth trajectory of 6% while the Thai economy expands 3% annually, the Vietnamese economy will surpass Thailand's GDP size by 2030. No wonder a local news outfit screamed a headline asking: "Has Thailand become the sick man of Asean?" Were it not for worse growth stories, such as Pakistan's, the category could be broadened to Asia, not just Asean.

Thailand was famous in the past for attracting foreign direct investment (FDI). This story is also changing. Thailand has fallen to fifth among Asean member economies in 2022, from second place in 2010. Indonesia, Vietnam and Malaysia have joined Singapore ahead of Thailand, according to data from the Asean Secretariat in Jakarta.

One can also randomly look at other areas of competitiveness, such as the global airline industry. In the 2024 survey, once-famous Thai Airways International is nowhere to be seen in the top table of 25 premium airlines. Korean Air comes in second, Japan's All Nippon 7th, Vietnam Airlines 11th, Singapore Airlines 12th, and Taiwan's Eva Air 13th. The performance of national airlines can often be seen as microcosms of a country's competitiveness and wherewithal. What's gone poorly at Thai Airways is analogous to all that has gone wrong with the Thai economy, from nepotism and corruption to unaccountable management and lack of shareholder accountability.

Similar stories can be told about Thai universities that have slid down global rankings, while Singapore's top two institutions of higher learning are among the top 20 internationally, not to mention up-and-coming universities in Malaysia. Unsurprisingly, Thai students' Pisa (Programme for International Student Assessment) scores last December were the lowest ever. While nearby countries like Malaysia are trying to incorporate coding into their secondary school curriculum, Thailand's education ministry is concerned about teaching how to revere the traditional symbols of nation, religion, and monarchy.

There will likely be no shortage of deniers who hide behind complacency and past laurels. They will insist that Thailand is doing just fine. Some will have a vested interest in keeping the alarming status quo just the way it is. Others just don't have the stomach to face up to hard realities. In truth, Thailand has been and is falling behind. Without a cathartic course correction, it will become an also-ran country, still appealing for its naturally hospitable people and good-value tourism but not a lot more.

Thitinan Pongsudhirak

Senior fellow of the Institute of Security and International Studies at Chulalongkorn University

A professor and senior fellow of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, he earned a PhD from the London School of Economics with a top dissertation prize in 2002. Recognised for excellence in opinion writing from Society of Publishers in Asia, his views and articles have been published widely by local and international media.

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