Economic and Political Environment of Thailand

This report discusses the economic and political environment of Thailand, including its growth, trade, and political stability. It also provides recommendations for enhancing the performance of the state.

Running head: INTERNATIONAL BUSINESS
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Table of Contents
Introduction:...............................................................................................................................3
Economic and political environment of Thailand:.....................................................................4
Economic environment:.........................................................................................................4
Political environment:............................................................................................................6
Political path for shaping the economy of the country:.........................................................6
Conclusion:................................................................................................................................7
Reference:..................................................................................................................................9

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Introduction:
21st century is the era of globalisation and it has slowly and steadily turning the
global economy towards a more prosperous front and Asian economies during the recent
decades has become the face of the astonishing growth. Among most of the developed
economies Thailand become one of the renowned one due to its fast growth path and positive
account surplus. Though the economy is a newly industrialised state yet it has made itself
placed in the list of highest exporter to the developed countries like USA, Japan, EU and
China. Though the economy has high amount of dependence on the exporting based
economy, it can be arguably one of the most stable and growing economy within the Asian
continent (Santandertrade.Com). Dependence on the agriculture of Thailand is low whereas
main source of the national income comes from the secondary and tertiary sectors. Contrary
to this, it can be seen that the job creation within the domestic economy is largely generated
through the agriculture making the economy a developing one with the headline inflation of
3.02%, economy of Thailand has maintained good amount of growth under a reasonable
market pricing strategy that has made it one of the fastest growing economy in the Asian
region (Coface.com). Considering the south-east Asia, it can be seen that Thailand is the
second largest in the region and the Gross Domestic Product (GDP) per capita is moderate
enough that makes the domestic economy fertile enough to sustainable development in
future. It has moderate amount of population under the poverty line that often influence the
governmental policies. As far as political environment of the economy is concerned, it can be
seen that the economy has stability within the domestic environment, however, some sort of
uncertainty is persistent within the rural and urban areas due to the antagonism and uncertain
political situations. One of the main political issues within the domestic economy of Thailand
can be seen due to the lack of comparative advantage of production in capital based goods
due to the fact that aged population of the economy is highly unskilled. Housing debt is

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almost 79% of domestic GDP that makes it one of the main weakness of the political
situation of Thailand (Blaikie and Piers). Contrary to this, it can be seen that absolute
advantage in production of labour based products has aided the domestic economy to have
good amount of international trade and it has aided the economy to maintain strong external
accounts. This report is aimed to discuss the political and economic environment of Thailand
due to its rapid growth during the last two decades and while doing so it will portray the
economic and political trend of the domestic economy. Moving forward, the report will
portray the political as well economic sustainability in order to provide better understanding
regarding the recent developments of the state. To conclude the report will provide a
summarised overview of its finding and depict some recommendation in order to enhance the
performance of the state while mitigating the drawbacks.
Economic and political environment of Thailand:
Economic environment:
Thailand is the second largest economy within the south-east region of Asia preceded
by Singapore and with and upper middle income status it serves as an economic anchor
between the western developed economies and the Asian developing economies. The state
has comparative advantage that has aided the domestic economy to enhance its performance
depending upon the trade (Guo et al.). Over the year trading has become one of the main
source of income of the domestic economy and it has converted the Thailand’s low income
into a middle income enhancing the standard of living. With 437.11 billion USD of GDP it
stands as one of the subtle economy that has showcased galloping rate of growth during the
last two decades. GDP growth rate during the recent years was as high as 3.2% and it is
expected to face a boom in the coming years depending upon the rise in outsourcing market
(Autio et al.). With lower unemployment rate, economy of Thailand has become a benchmark
economy within the Asian zone which is being followed by all the large economies like

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China, India and others. During 2016, 0.8% of the total labour force was unemployed that
showcased high amount of job creation within the domestic economy (Brown et al.).
Considering the case of the inflation, it can be seen that during 2015, the economy has faced
stagflation, however, with the effective governmental policies domestic economy has
converted the same to a comparatively lower inflation rate as it can be seen from the figure 1.
Figure 1: Economic situation of Thailand
Source: (Coface.com)
As far as source of the national income is concerned, it is largely generated through
the industry and services sectors. Agriculture is accounted for generation of GDP by 8.4%,
whereas secondary and tertiary sector is responsible for 39.2% and 52.4% of national income
respectively (Mathews et al.). with a moderate ease of doing business score Thailand allows
foreign firms to operate within its domestic economy and additionally there are special
economic zone in Thailand that provide foreign firms a level playing ground to operate their
business while providing value enhancement to the domestic firms (Srisomyong et al.).
Economic freedom of Thailand is moderate with a slight biasness towards controlled
environment, over the decades government of Thailand has maintained a good balance.
absolute advantage in production of labour based goods and services has allowed the
economy of Thailand to expand its business and additionally it has transformed the domestic

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economy into an export based economy over the years that has provided much amount of
growth (Li et al.).
Political environment:
Thailand is a kingdom and it has constitutional monarchy which is based on
parliamentary democracy. Presently the country is governed by the military led government
that has constrained the liberalisation of the domestic economy. Political power of Thailand
is high and it has lower rank when it comes to the freedom of press making it one of the state
in Asian region which still influence the press to curtail the whimsical power of the
government. political freedom is almost nil within the country, however, civil liberties are
also limited making the Thailand a less desired place to live in (Grote and Ulrike). Manners
and customs are well defined within the domestic framework of Thailand making it one of
the most spiritual country as well. On the other hand, though Thailand a broad history of
multi-party system, yet during the recent years under the military rule they have become
obsolete. However, in the wake of re-election of the government, there is much amount of
fuss among the parties regarding the legislative power of government (Lopez et al.). At
present Thailand has constitutional monarchy and king is the Chief of State who is being
selected by the means of hereditary process. Prime minister is the Head of Government and
holds all sort of executive powers including amendment of the constitution. On the other
hand, domestic economy under the present military rule is highly volatile and uncertainty
within the political environment has hampered the political stability of the country.
Political path for shaping the economy of the country:
Since 2014, political power of the Thailand’s domestic government has been
controlled by the military power that has transformed the domestic economic stability by a
large extent. Under the presence of the military government it can be seen that it is expected
that the economic development of Thailand will face a downfall and the sluggish domestic

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demand in especially within the private investment and a fall in the capacity utilization will
hamper the performance of the domestic economy in the present manner (Stubbs and
Richard). Recent drought and fall in the global growth has also hampered the interest of the
economy of Thailand and it can be seen that GDP during the recent year has been 5 year low
due to the structural bottleneck. Contrary to this, as per the economists, there will be rise in
the GDP post 2019 once the domestic economy starts to overcome from the drought driven
poor performance and new government is elected (Moore et al.). Under the military presence
within the governmental framework, trade partners has lost faithfulness on the economy of
Thailand that has constrained the trade surplus. Whereas, it can be seen that the agricultural
sector of the Thailand’s economy has expanded over the year at a rate of 7.7% owing to the
rise in the price of the agricultural product and additionally recovery from the drought has
provided long run welfare to the farming sector of the state. However, during present date
lack of water management, inability to access to the market and enhanced transportation costs
has deteriorated the overall benefit (Miller et al.). During 2016, economy of Thailand has
expanded at a rate of 3.2% which is a slight development compared to 2.9 % growth rate of
2015, fortified by unrelenting fiscal stimulus, rise in private consumption and growth in the
services exports (Luangaram et al.). Front-loaded fiscal policy is predictable to help preserve
the impetus in public investment. In addition to this, it has been seen that the beginning of the
financial year 2017, the Ministry of Finance has extended the front-loaded fiscal spending by
expediting budget execution due to the rise in the tariff rate during the present date that has
also reduced the trade volume (Phongpaichit et al.). Thus under the fluctuating market
scenario, it can be seen that political unitability within the framework of domestic economy
of Thailand will provide a rough impact on the economic development of Thailand.

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Conclusion:
From the above discussion it has been seen that the domestic economy of Thailand
has positive economic outlook and the economic growth is moderate during the recent years.
Being the emerging market economies within the Asian zone, it has showcased positive
performance towards enhancing the domestic economic and political environment. However,
the report has also found that economy of Thailand is largely dependable upon the
international trade that has made it highly skewed towards the demand of the foreign nation.
In case of fluctuation of the international demand of goods and services, there is high change
that economy of Thailand will face grave consequences. On the other hand, it is also true that,
liberalisation of trading system has allowed the economy to convert the domestic economy
from its long standing public debts. Additionally it has generated large amount of
employment and allowed the large amount of young population to become skilled labour who
can work in various other sectors around the world. In order to enhance the performance of
the domestic economy, it would be ideal for the government of Thailand to enhance the
public expenditure so as to build more amount of public infrastructure that will allow the
domestic economy to enhance their performance and expand the domestic aggregate demand
as well. With higher domestic demand there will be a large amount of shift from the export
dependence to self-reliance within the economic framework of Thailand allowing the state to
become a growing economy with inclusive growth.

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