Thailand turns Japanese

With inflation remaining stubbornly low, there is something of Japan a quarter of a century ago about Thailand.

891-thailand-634
The country's economy is dozing off

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".

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.

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
The Arab Spring ten years on: a revolution that failed to blossom
Global Economy

The Arab Spring ten years on: a revolution that failed to blossom

Ten years ago, the Arab world was rocked by mass protests and popular uprisings that ousted long-reviled dictators. For the most part, the end result …
23 Jan 2021
The MoneyWeek Podcast: let's talk about bubbles
Stockmarkets

The MoneyWeek Podcast: let's talk about bubbles

Merryn and John talk about the many obvious signs of a bubble in certain assets, including tech stocks, TikTok, and stock-trading 12-year olds. It's c…
22 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021
When will the US stockmarket bubble burst?
US stockmarkets

When will the US stockmarket bubble burst?

With US stocks more expensive than before the Wall Street crash of 1929, there are growing signs of “mania”. But what will push markets over the edge?
22 Jan 2021