• Regional crisis and recovery

Regional crisis and recovery

Thailand is one of the most successful developing countries. After decades of rapid growth, the economy rebounded quickly from the 1997-98 Asian crisis and is set to continue its expansion into the future. Nevertheless, there are doubts about the resilience of the Thai economy. The country appears to be on a lower growth trajectory now than before the crisis.

This paper asks: 'What growth can Thailand realistically expect? And what can the government do to sustain such growth into the future?' Using a new methodology for identifying binding constraints to growth, the author argues that Thailand's challenge is to maintain growth levels of 4 to 5 percent over the medium term. To achieve this goal, Thailand needs to continue its efforts of improving business infrastructure, trade integration, and skills, as well as intensifying its governance reforms.

The paper:

• looks at human, physical and social resources and asks whether they contribute to or hinder growth
• examines the 'bigger picture', looking at how different constraints to growth might affect the Thai case in the medium to short-term
• contrasts the economic recovery process since the Asian crisis with the growth period prior to the Asian crisis. The aim of this is to find changes in the current growth episode relative to the previous one and then assess its implications for growth
• analyses trends in, among others, exchange rates, interest rates, and returns to education to evaluate candidate hypotheses for what might be constraining growth

Some of the findings are:

• Thailand appears to be on a lower growth trajectory since the recovery from the Asian crisis, with growth averaging barely half the rate of the boom period
• however, Thailand’s external debt has fallen sharply due to current account surpluses, the private sector remains reluctant to take on foreign loans and inflation targeting provides a degree of flexibility in case of external shocks
• as during the boom period, exports play a key role to the current growth spur
• on the one hand, improving the business environment in the manufacturing in the Central and East regions will be essential to ensure that these companies improve their productivity and continue sustaining Thailand’s export boom. On the other hand, prosperity in Bangkok depends not so much on large scale industries but more on high quality business and producer services as well as high amenity and sophisticated cultural products
• the skills of workers have to improve to allow them to compete on par with workers from more advanced countries in the region
• strengthening and empowering public administrations from villages to provinces will enable them to provide effectively the services demanded by enterprises.

• Full text of document
• Publisher details
• Send to a friend