1

“Thailand: Escaping the Middle-income Trap”

Porametee Vimolsiri

Deputy Secretary-General

Office of the National Economic and Social Development Board (NESDB)

The 2nd OECD-AMRO Joint Asian Regional Roundtable

20 July 2013, Singapore

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0

20

40

60

Thailand

Singapore

Malaysia

Indonesia

Economic Performance

Business Efficiency

Government EfficiencyInfrastructure

Source: IMD

IMD Ranking 2012

Thailand’s Global Economic Ranking

51st Largest Area

13th Largest Tourist Receipts

19th Largest Agricultural Output

20th Largest Manufacturing Output

1st Largest Hard Disk Drive Producer

1st ASEAN Largest Automobile Producer

1st ASEAN Largest Electronic Appliance Producer

23rd Largest Economies by Purchasing Power

34th Largest Economies

37th Largest Services Output

Thailand Economic Strength

GDP Growth (%) Avg. 1961-2010

World 3.49

China 8.24

Indonesia 5.40

Korea 7.21

Malaysia 6.45

Philippines 4.09

Singapore 7.89

Thailand 6.38

Source: WTO

Thailand export share continued to increase.

In 2008, Thailand is the 24th export rank in world.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

%Share

Indonesia

Malaysia

Thailand

Viet Nam

3Source: NESDB

Thailand’s GDP growth

-7

-5.2

-2.8

5.9

12

9.2

6.6

3.8 3.2 2.73.7

-8.9

0.4

4.43.1

18.9

-2.5

1.93

4.1

2.2

-0.8

1.11.9

0.5-1

2.4

-10.5

10.3

3.11.5

3.6

-15

-10

-5

0

5

10

15

20

Q1 2009 Q2 Q3 Q4 Q1 2010 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4

%yoy %qoq(SA)

2010 Q2

Political unrest

2011 Q2

Impact of Tsunami

in Japan

2010 Q3

Slowdown of Trading

partners’ economies

2010 Q4

Flood in Thailand

2012 Q2- Q3

Trading partners’ Economic Slowdown

2011 Q3/Q4

Severe flood

= -2.3 = 7.8 = 0.1 = 6.4

2012 Q4

Global Economic

Recovery

4

Agriculture

9%Mining

2%

Manufacturin

g

39%Electricity, Gas

and Water

Supply

4%Construction

2%

Trade

13%

Hotels and

Restaurants

4%

Transportation

10%

Other

17%

Diversification is among the Strength of Thai Economy

US

10%

EU

9%

Japan

10%

ASEAN5

16%

CLMV

8%China

12%

Other

35%

Source: NESDB

GDP Structure

Export Share by Destinations

Source: NESDB

Source: MOC

Source: NESDB

Real GDP Growth: Expenditure Side

Growth (% YOY)2011 2012

Year Year Q1 Q2 Q3 Q4

Consumption 1.3 6.7 2.4 5.6 6.7 12.2

- Private 1.3 8.8 2.9 5.3 6.0 12.2

- Public 1.1 1.1 -0.2 7.4 9.8 12.1

Investment 3.3 13.3 5.2 10.2 15.5 23.5

- Private -8.7 8.9 -9.6 4.0 13.2 31.1

- Public 7.2 14.6 9.2 11.8 16.2 21.7

Export 9.5 2.9 -3.2 1.1 -2.8 19.0

Import 13.7 6.2 4.3 8.6 -1.8 14.7

GDP 0.1 6.4 0.4 4.4 3.1 18.9

Real GDP Growth: Production Side

Growth (% YOY)2011 2012

Year Year Q1 Q2 Q3 Q4

Agricultural 4.1 3.1 3.4 1.8 8.3 0.8

Manufacturing -4.3 7.0 -4.3 2.8 -1.1 37.4

Construction -5.1 7.8 0.8 6.9 9.8 14.1

Trade 1.8 5.2 4.1 5.4 4.0 7.6

Hotel & Restaurant 7.4 11.5 5.6 8.6 7.0 25.4

Financial 13.3 6.6 6.4 5.5 4.8 9.9

GDP 0.1 6.4 0.4 4.4 3.1 18.9

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Economic Stability

Internal Stability External stability

181.6

3.1

-3

-1

1

3

5

7

9

11

0

40

80

120

160

200

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

TimesInternational Reserves (bn USD)International Reserves/ST External Debts

3.1

-4.0

1.0

6.0

11.0

16.0

-4,000

0

4,000

8,000

12,000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2009 = 21,895.8 2010 = 10,023.6 2011 = 5,888.6 2012 = 2,728.0

CA Balance (Mil USD) CA/GDP (%)

3.2

1.8

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2008 2009 2010 2011 2012

Headline CPI Core CPI

Headline CPI2009=-0.9

190.0

0.50.0

0.5

1.0

1.5

2.0

2.5

0

200

400

600

800

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Unemployed persons (Th persons) Unemployment Rate

Source: Bank of Thailand, Ministry of Commerce, National Statistical Office

Headline CPI2008=5.5

Core CPI2008=2.3

Headline CPI2010=3.3

Headline CPI2011=3.8

Headline CPI2012=3.0

Core CPI2009=0.3

Core CPI2011=2.4

Core CPI2010=0.9

Core CPI2012=2.1

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Stage of Development & Current Thailand Position

Low Income High IncomeMiddle Income

Stage I

Monoculture, subsi

stence

agriculture, aid

dependency

Stage II

Simple

manufacturing

under foreign

guidance

Stage III

Have supporting

industries, but

remains Under

foreign guidance

Stage IV

Management

technology

mastered, can

produce high

quality goods

Stage V

Full capability in

innovation and

product design as

global leader

Glass ceiling for ASEAN countries (Middle income trap)

Vietnam

MalaysiaThailand

KoreaTaiwan

Japan, US, Germany

France Italy

Arrival of manufacturing FDI

Agglomeration

Technology absorption

Creativity

Pre-

industrialization

Initial FDI

absorption

Internalizing

parts & components

Internalizing

skills & technology

Internalizing

innovation

Source: NESDB

7

Medium-term Development Challenge

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1962

1966

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

2022

2026

USD

Lower Middle Income Country

High Income Country

Upper Middle Income CountryPro

jec

tio

n

Current (per cap)

GNI = $4420GDP = $5382

Source: NESDB, World Bank

Thai GNI per Capita

Target : 1. Maintain GDP growth at 5-6 % 2. Achieve GNI per capita of 12,000 USD

(Atlas method) by 2030

TFP and TFP Growth

Annual Change in TFP, 1985-2007

TFP

2007, U

S=

100

8

Medium-term growth strategy will emphasize investment to improve

productivity/quality, competitiveness, and long-term potential growth

-2

0

2

4

6

8

10

12

14

2 4 6 8 10 12

Av

era

ge

In

ve

stm

en

t G

row

th 2

00

0 -

20

11

Average GDP Growth 2000 - 2011

China

India

Indonesia

Singapore

Malaysia

Philippines

Thailand

Korea

Taiwan

Source: IMF

Justifications for investment stimulation

• Strengthen domestic demand to reduce the impacts from global slowdown

• Increase long-run growth potential

• Reduce logistic costs

• Support economic restructuring

Agricultural TFP

Efficiency in manufacturing production

High mobility service sector

Regional connectivity

• With the rapid expansion of private investment, the bottleneck is likely

• Countries with lower GDP per-capita normally have higher rate of capital accumulation

Subscribe: Jul 5, 2004Effective: Jan 1, 2005

Japan

Thailand

Under the Negotiation

Under the Negotiation

Leveraging Regional Integration

Subscribe: April 19, 2005Effective: Jul 1, 2005

Subscribe: Oct 9, 2003

Effective: Sep 1, 2004

Subscribe: June, 2006Effective: Nov 1, 2007

Subscribe: Nov 19, 2005Effective: Dec 31, 2011

KoreaChina

ASEAN AEC2015

Subscribe: Feb 27, 2009

Effective: Jan 1, 2010

Subscribe: Aug 13, 2009Effective: Jan 1,2010

Subscribe: Apr 11, 2008

Effective: Jun 1, 2009

Subscribe: Nov 29, 2004Effective: Jan 1, 2006

Subscribe: Feb 27, 2009Effective: Mar 12, 2010

EU

India

Peru

Chile

New Zealand

Effective: Dec 29, 2002

Effective: Oct 1, 2003

Bahrain

Australia

Source: Ministry of Commerce

Human Capital /

Quality of Life /

Knowledge / Fairness

Infrastructure /

Productivity/ Research

& Development

1. Growth andCompetitiveness

Towards greater

per capita income

Towards InequalityReduction

Towards environmental friendly

TowardsBalanced

and improved

Public Sector Management

Legal

Framework2.Inclusive

Growth

3. GreenGrowth

Thailand’s Country Strategy

4. Internal Process

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1. Growth & Competitiveness 2. Inclusive Growth

3. Green Growth

Restructuring Production and Service Sectors

Agriculture

Reducing Social

Inequality

- Developing Quality of Life/Improving Healthcare

- Developing Welfare System

Creating Opportunities &

Income for SMEs & Community Economies

- Education

Reform

- Skill Development

for Labor

- Promoting Access

to Justice

- Creating Good

Governance

Building Knowledge on ASEAN

4. Internal ProcessGreen Growth

Natural Resources

Management

Eco-Industrial

Cities

Eco-friendly Fiscal Policy

GHG Emission Reduction

Climate Change Budget

Process Reform

Development of under-utilized Public

Sector Assets

Security Improvement

Political Reform

Legal Reform

Public Sector Reform

Human Capital

Development in Public

Sector

Tax Reform

Industry Tourism/Service

Regional Connectivity

Competitiveness Development

Urban/Spatial Development

Infrastructure Energy R&D

Country Strategy

1212

3. Infrastructure and Logistics development

4. Human resources

development

5. Improvement of laws, rules

and regulation

6. Building awareness, understanding and realization of being ASEAN

7. Security

8. Increase urban potentiality as to link opportunity

from ASEAN

1. Increase competitiveness

of products, services

, trade and investment

2.Improvement of quality of life and

social protection

VisionThailand is strong

country member who will corporately

support the betterment of people

in ASEAN

STRATEGY TOWARDS ASEAN COMMUNITY IN 2015• Connectivity• Rules/Regulations of transport of goods /passengers

• English skill• Skilled labor/skilled businessman• Standard of labor skill• Education curriculum• Corporate connection wt ASEAN members

• Obligation• Trade facilitation

• Benefit protection of the nation

• Awareness to every parties

• ASEAN knowledge• Culture of ASEAN’s country members

• International corporation• Crime/disaster• Border areas management• Good governance

• Capital City• Industrial town• Border trade town

• Productivity• Standard of services product

• Market

• Labor Protection• Social welfare• Working environment

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Country Strategy

Human Capital

/ Quality of Life

/ Knowledge /

Fairness

Infrastructure /

Productivity/

Research &

Development

1. Growth and Competitiveness

Towards

High

Income Country

Towards

EconomicEquity

Towards

Sustainabl

e Economy

Towards Good

Governance in Public

Sector

Legal Framework2.Inclusive Growth 3. Green Growth

Water Resource Management

~10,300 Mil. USD

Infrastructure Development

~70,000 Mil. USD

High-speed Train

Railway Improvement

Road Network

Major Investment Plans

Major Investment Plans

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High Speed Train

Metropolitan Rail System

Dual Track Rail system

Key Infrastructure Project Development

Network in 2029: The total length is

495 km., with 308 stations, covering

the area of 680 sq.km. with 5.13 mill.

population (EIRR = 19.67%)

Total length : 1,915 km

Total investment: 15,300 Mill.USD

No of route: 4 routes

- North (Bang Sue-Chiang Mai)

- North-East (Bang Sue-Nong Kai)

- East (Makkasan-Rayong)

- South (Bang Se-Huahin)

Total length : 768 km

Total investment: 2,590 Mill.USD

No of route: 5 routes

- Chachoensao-Kaeng Khoi

- Lop Buri-Nakhonsawan-Makabao-Thanon

Chira Junction

- Thanon Chira Junction-Khonkaen

- Nahkonpathom-Hauhin

- Prachuap Khiri Khan-Chumphon

Mode Budget(bn USD)

Share of Total Budget

Rail Transport 49.76 77%

Road Transport 12.94 20%

Water Transport 0.46 0.7%

Air Transport 0.89 1.4%

Border Facilities 0.41 0.6%

Total 64.46 100%

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