Advertisement

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

2004 AFP

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.

Advertisement - Article continues below

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.

Advertisement
Advertisement

Recommended

Visit/investments/stockmarkets/600688/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
Visit/519872/beware-the-hidden-risks-when-investing-in-emerging-markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/517395/emerging-markets-buy-when-the-news-is-bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Visit/investments/commodities/gold/601444/these-seven-charts-show-exactly-why-you-must-own-gold-today
Gold

These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020
Visit/investments/stockmarkets/601460/disease-rioting-and-mass-unemployment-so-why-are-markets-soaring
Stockmarkets

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
Visit/economy/eu-economy/601463/why-a-stronger-euro-is-good-news-for-investors
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020