Thailand turns Japanese
With inflation remaining stubbornly low, there is something of Japan a quarter of a century ago about Thailand.
Thailand "was once prized for its economic strength", says Suttinee Yuvejwattana on Bloomberg. But these days investors in Asia often head straight for Vietnam or the Philippines, which are growing by 6%. Thailand's GDP expanded by around 3.8% last year, the fastest pace in five years.
But the bigger picture is that the economy appears to have shifted down a gear in recent years. It expanded by an average of 4.6% a year in the 2000s. A military coup in 2014 has hampered investment, while both consumers and businesses are grappling with high debt levels. The buoyant global economy has boosted exports, which rose by 9% last year. But now the worry is that Thailand could be among the countries worst affected by a global trade war. Exports of goods and services comprise around 70% of GDP.
Thailand's structural slowdown could see the economy slip into a coma, says The Economist. Inflation is "stubbornly low" and consumer prices rose by only 0.8% in March. Inflation has remained below the Bank of Thailand's target range of 1%-4% for 13 months in a row. Indeed, according to one "veteran observer" of Thailand's economy,"It's Japan. It's got Japan's demographics from 25 years ago, [and] it's on the Japanese path of zero inflation [and] very low interest rates".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Thailand's economic policymakers "also exhibit some of the passivity that once paralysed Japan", notes The Economist. The central bank, still scarred by 1940s hyperinflation, hasn't cut interest rates since April 2015. Another Japanese characteristic is a reluctance to allow immigrants to come in and make up for the shrinking workforce. Meanwhile, public investment is "beset by backtracking and delays". Investors should approach Thailand with caution.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alice grew up in Stockholm and studied at the University of the Arts London, where she gained a first-class BA in Journalism. She has written for several publications in Stockholm and London, and joined MoneyWeek in 2017.
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?
Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
By Kalpana Fitzpatrick Published
-
What does Rachel Reeves’s plan for growth mean for UK investors?
Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
By Katie Williams Published