The Thai Economy in the Mid-1990s

Summary

Introduction

According to the World Bank, Thailand was the world's fastest-growing economy in the decade 1985–94. Real gross domestic product (GDP) per capita increased at an average rate of 8.2 per cent a year.

From 1987 to 1990, the GDP recorded real annual growth rates of 9.5, 13.2, 12.2 and 11.6 per cent. Since then, the pace has levelled out to the 8–9 per cent range, but the momentum of growth remains strong.

This spurt has transformed the Thai economy. In the early 1980s, Thailand could still justifiably be viewed as an agrarian economy, with crops playing the major role in exports. By the mid-1990s, Thailand belongs to the club of NIEs (newly industrializing economies), with computer and electronic parts topping the list of export products.

This article looks at three aspects of this phase of growth and its consequences for the Thai economy in the mid-1990s. Rapid growth has wrought large changes in the structure and dynamics of the Thai economy. The first section traces the major patterns.

Secondly, Thailand now figures in the debates over Asian industrialization, and the special features of the “Thailand case” bring new elements to the debate. In brief, the World Bank has argued that “second-tier NIEs” such as Thailand have grown by following the Bank's structural adjustment policies; by courting direct foreign investment; by creating a favourable environment for exporters without intervening directly in the capital market; and by refraining from positive industrial policy-making. Several other economists, particularly those associated with UNCTAD (United Nations Commission on Trade and Development), have countered that governments in these countries have in fact played an important and effective role through interventionist industrial policies and active restructuring of the markets for capital and labour. The second section looks at the recent changes in these two markets in Thailand.

Thirdly, the speed and special character of Thailand's growth have given rise to doubts about the country's capacity to sustain the current momentum.