Thailand: Post-Crisis Rebalancing

Abstract

Since the Asian financial crisis in 1997, Thailand has become highly dependent on exports as the main engine of economic growth. In 2008, the ratio of export to GDP was about 76.5 percent. The global economic crisis triggered by the sub-prime loans debacle in the United States has prompted Thailand to rethink its high dependence on export. This paper examines the options for external and internal economic rebalancing strategies for Thailand. External rebalancing will require Thailand to rely more on regional markets and less on the Western markets for its exports. The paper examines the possibility of promoting greater intra-regional trade and Thailand's regional trade strategies. As for internal rebalancing, the paper emphasizes the need to boost domestic public and private investment in terms of both quantity and quality to narrow the current saving–investment gap, bearing in mind the need to ensure fiscal sustainability. Finally, the paper examines broader rebalancing strategies that will help Thailand to become less dependent on exports. These include the need to (1) improve productivity; (2) increase economic efficiency; (3) deepen the production structure and create new dynamic industries; and (4) generate new growth poles.