Thailand – Economic Outlook

Current Economic Situation of Thailand

Economy

Thailand is the second largest economy in the 10-nation ASEAN, following Indonesia. Service is the largest sector of the economy with a GDP share of 55%, followed by 36% in industry, with agriculture constituting 9% of GDP. Major sectors include electronics, car making, transport, storage, communication, tourism, finance and real estate.

The Thai economy expanded by 3.2% in 2016, surpassing the 2.9% increase in the previous year, with an increase of 9.9% in public investment resulting from the government’s stimulus measures. In the same period, the economy also benefitted from a rise in private consumption, which accelerated to 3.1% from 2.2% in 2015. For 2017, GDP growth is expected to grow by 3% due to higher public investment and private consumption as well as a recovery of the export sector.

To yield more concrete results in stabilising the country, the Thai government has accelerated the implementation of national reform, including the “Thailand 4.0” policy in modernising the economy. Ten industries focussed on innovations will be the new growth engines to help create a smart and digital economy, including next-generation automotive, smart electronics, biotechnology, robotics, biofuels, digital, medical and healthcare, and high-income and medical tourism. Aside from improving national broadband network, building SME digital parks, and nurturing innovative start-ups, the government is developing the Eastern Economic Corridor (EEC), which spans the three provinces of Chonburi, Rayong and Chachoengsao. The EEC is designated for developing high-tech industry clusters and becoming a hub for industrial, infrastructure and urban development in ASEAN. The Thai government expects the EEC to draw in 1.5 trillion baht (US$43 billion) worth of investment in infrastructure and industrial projects

The Thai government increased the daily minimum wage rates by an additional five to 10 THB for 69 provinces with effect from January 2017, while retaining the rate of THB 300 per day in the eight provinces of Sing Buri, Chumphon, Nakhon Si Thammarat, Trang, Ranong, Narathiwat, Pattani and Yala. This was the first adjustment in the country’s minimum wage rates since January 2013.

External trade

Thailand is one of the world’s most important electronics manufacturers. Major exports of Thailand include computers and parts, automobiles and parts, machinery and equipment. Its main imports include crude oil, parts of electronics and electrical appliances, chemicals, automobiles and parts. In 2016, Thailand’s exports recorded zero growth due to soft global demand and depreciation of key trading partners’ currencies, yet improving from a 5.6% contraction in 2015. In the same period, import shrinkage also narrowed to 4.7% from 10.6% in 2015 thanks to an increase in import of raw materials and intermediate goods (crudes, petroleum, chemicals, plastics and base metal) and consumer goods.

In 2016, Thailand’s top three trading partners were China, Japan and the US. During the same period, Hong Kong became Thailand’s fourth largest export market.

Investment Policy

Thailand maintains pro-investment policies to encourage foreign direct investment (FDI), which is allowed in all sectors except for projects related to national security, agriculture and fisheries, and mass media, while there is restriction on foreign ownership in specific sectors, such as telecommunications, banking, or insurance, under specific laws.

In Thailand, the principal government agency responsible for promoting investment is the Office of the Board of Investment of Thailand (BOI). To promote inward FDI, the BOI offers a range of tax incentives, including an eight-year CIT exemption and 50% tax reduction for five years after tax holidays, double deduction from the costs of transport, electricity and water supply, a 25% deduction on the cost of installation or construction of facilities as well as exemption of import duty on raw or essential materials imported for use in production for export. Eligible investments include seven sectors, namely agriculture and agricultural products; mining, ceramics and basic metals; light industry; metal products, machinery and transport equipment; electronic industry and electrical equipment; chemical, paper and plastics; services and public utilities.