Major Economic Indicators

Latest Developments

• The Thai government lifted its state of emergency in and around Bangkok on 24 April 2009, 10 days after the "redshirts" of the United Front of Democracy Against Dictatorship (UDD) dispersed.
• The financial tsunami and the recent political turmoil have dealt a blow to Thailand's economy. In April, the Thai Finance Minister said the economy could contract by 5% in 2009.
• In response to the financial tsunami, the Thai government announced two stimulus packages worth a total of Bt145 billion (US$4.1 billion) in January 2009, with measures including boosting infrastructure spending and tax relief.
• To combat the negative effect of recent political turmoil on Thailand's tourism sector, which accounts for 6% of Thailand's GDP, the Tourism Authority of Thailand plans to spend up to Bt600 million (US$16.9 million) to revive the image of Thailand as a tourist destination.

Current Economic Situation

Domestic Economy

Thailand is the second largest economy in the 10-nation ASEAN. In 2008, Thailand's GDP reached US$273.2 billion (up 2.6% in real terms from 2007), second only to Indonesia (US$512 billion) but above all other ASEAN members.

The Lehman Brother's debacle in September 2008 has sparked off a global economic downturn, and Thailand is not spared in the current downturn. In the last quarter of 2008, Thailand's real GDP was down by 4.3%. Private consumption growth slowed to 7.6% in Q4 2008 from 11.4% in Q3 2008, with the decline entrenched into 2009. According to the private consumption index compiled by the Bank of Thailand, it fell by 7.1% year-on-year (YoY) in February 2009.

Thailand's unemployment rate has risen from a low of 1.1% in September 2008 to 1.9% in February 2009. However, this is still considerably lower than the 4.4% recorded in 1998, when Thailand was hit by the Asian financial crisis.

In response to the financial tsunami and ailing economy, the Thai government is stepping up fiscal spending to stimulate the economy. The government announced two stimulus packages worth a total of Bt145 billion (US$4.1 billion) in January 2009, with measures including boosting infrastructure spending and tax relief.

External Trade

Thailand is a trade-dependent nation, with exports accounting for about 65% of its 2008 GDP.

In 2007, major export items of Thailand included 1) computers and parts, 2) automobiles and parts, 3) integrated circuits, and 4) rubber. During the same period, major import items included 1) crude oil, 2) industrial machines, 3) chemicals and 4) integrated circuits.

In 2007, major sources of imports to Thailand were Japan (20.3%), China (11.6%), the US (6.8%); while major export destinations were US (12.6%), Japan (11.9%) and China (9.7%).

Thailand is a member of ASEAN, which has signed an agreement with China with a view to setting up a China-ASEAN Free Trade Area (CAFTA) by 2010. A concrete step towards establishing CAFTA came in November 2004, when China and ASEAN hammered out the Agreement on Trade in Goods (TIG) to remove tariffs on a range of agricultural and industrial products. The TIG agreement which covers tariff-lines representing more than 95% of China-ASEAN trade took effect from July 2005. The Trade in Services Agreement also came into force in July 2007.

In November 2007, a free trade agreement (FTA) between Thailand and Japan came into effect. The Agreement allows 97% of Japanese exports to Thailand and 92% of Thailand's exports to Japan to be tariff-free within 10 years.

In addition, Thailand has FTAs with Australia, New Zealand and India.

Foreign Direct Investment

Thailand welcomes foreign investment in all sectors except for projects related to national security, agriculture and fisheries, and mass media. The Thai Civil and Commercial Code was amended and came into force in July 2008. Investment-friendly measures in the amended Code include: enabling company registration to be done in one day instead of nine days previously, and reducing the minimum number of shareholders from seven to three.

Thailand's FDI amounted to US$9.8 billion in 2008, with Japan, the EU, Taiwan, Singapore, the US and Hong Kong as major investors. Major foreign companies investing in Thailand in recent years include Chery Automobile (the Chinese mainland), Mitsubishi (Japan), Toyota (Japan), Tata Motor (India), Chevron (US), and Ricoh (Japan).


Trade Policy

Purported to meet its WTO tariff reduction commitments, Thailand has been reducing its tariff rates and the number of items subject to import tariff. On 1st January 2005, the government significantly reduced import duties on a wide range of items: raw materials reduced from 7% to 1%, intermediate products from 12% to 5% and finished products to 10%.


Hong Kong's trade with Thailand

Thailand is Hong Kong's 15th largest export market and the 9th largest import source. In line with global trade contraction, Hong Kong's exports to Thailand were down 31.8% to US$689 million YoY in the first quarter of 2009, while imports from Thailand were down 32.5% YoY to US$1,355 million. As such, Hong Kong ran a trade deficit with Thailand amounting to US$666 million in the first three months of 2009.

For the first quarter in 2009, major exports to Thailand included parts and accessories of office machines / computer (US$110 million, 16% share, -47.5% YoY), telecommunications equipment (US$92 million, 13.3% share, -32.5% YoY), electrical apparatus for electrical circuits (US$52 million, 7.6% share, -40.3% YoY), semi-conductors (US$50 million, 7.2% share, -26.5% YoY), and pearls and precious stones (US$47 million, 6.8% share, -26.4% YoY).

For imports from Thailand in the same period, major items included: computers (US$277 million, 20.4% share, -46.6% YoY), semiconductors (US$219 million, 16.1% share, -38.4% YoY), telecommunication equipment and parts (US$107 million, 7.9% share, -21.5% YoY), parts and accessories of office machines / computers (US$57 million, 4.2% share, -16.4% YoY), and rice (US$56 million, 4.1% share, +16.9% YoY).

Trade between China and Thailand through Hong Kong also suffered, with China-origin goods destined for Thailand slumping faster than Thai-origin goods for the Chinese mainland market.

Re-exports of China-origin to Thailand were down 31.7% YoY to US$510 million. Major items included parts and accessories of office machines / computers (US$107 million, 21% share, -48.4% YoY), telecommunication equipment and parts (US$77 million, 15.2% share, -28.8% YoY), and electrical apparatus for electrical circuits (US$47 million, 9.2% share, -39.9% YoY).

For re-exports of Thai-origin to China, they reached US$949 million in the first quarter of 2009, down 11.7% YoY. Major items included computers (US$379 million, 39.9% share, +10.4% YoY), semiconductors (US$210 million, 22.1% share, -4.3% YoY), and telecommunication equipment and parts (US$57 million, 6% share, -32% YoY).

Hong Kong-Thailand bilateral economic relations

In 2008, Hong Kong FDI projects in Thailand worth US$853 million were approved by Thai authorities. Major industries included chemicals and papers, services, textiles and garments, electric and electronic products.

Despite an economic downturn, Thai visitors to Hong Kong in the first quarter of 2009 still managed to post a 3.3% YoY increase, from 95,657 in Q1 2008 to 98,781 in Q1 2009. In 2008, Hong Kong attracted a total of 403,301 Thai visitors, an increase of 4.2% YoY from 387,219 in 2007.