Thailand turns Japanese

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.