Thailand Economic Analysis

After the coup, once again, the economy of Thailand suffered from its politics. From the last quarter of the year 2006 (Q4/ 2006) through the year 2007, Thailand was under the military junta regime - led by General Surayud Chulanont, who was appointed as the Prime Minister in October 2006. The GDP growth rate slowed down from 6.1 percent (YoY), 5.1 percent (YoY) and 4.8 percent (YoY) in the first three quarters to 4.4 percent (YoY) in Q4/ 2006.[1] Moreover, Thailand's ranking in the IMD Global Competitiveness Scoreboard significantly fell from the 26th in 2005 to the 29th in 2006, and then to the 33rd in 2007. Thaksin's plan for massive infrastructure investments was never mentioned again until 2011 when his younger sister, Yingluck Shinawatra, came into office. In 2007, however, the Thai economy grew by 5 percent. On 23 December 2007, the military Government held the 2007 general election. The pro-Thaksin People's Power Party, led by Mr.Samak Sundaravej, won a landslide victory over Mr.Abhisit Vejjajiva's Democrat Party - which is usually recognized as Thaksin's 3rd landslide victory in the country's general election.

However, under the People's Power Party-led Government, the country fell into political turmoil. When this was combined with an impact from the U.S. financial institution crisis in the last two quarters of year (Q3-Q4/ 2008), the Thai GDP growth rate in 2008 slumped to 2.5 percent. Before the People's Alliance for Democracy (PAD) or the Yellow Shirts reconvened in March 2008, however, the Thai GDP grew by 6.5 percent (YoY) in the first quarter of the year (Q1/ 2008). In addition, Thailand's overall ranking in the IMD World Competitiveness Scoreboard rose substantially from the 33rd in 2007 to the 27th in 2008. Things began to get worse when the Yellow Shirts occupied the Government House of Thailand in August 2008. On 9 September 2008 the Constitutional Court delivered a decision disqualifying Samak Sundaravej from his prime ministership. Mr.Somchai Wongsawat, Thaksin's brother-in-law, succeeded Samak Sundaravej as the Prime Minister of the Kingdom on 18 September 2008. Around this time, in the U.S., the financial institution crisis hit its peak while the Yellow Shirts were still in the Government House - impeding the Government to work on a regular basis. As a result, the GDP growth rate dropped from 5.2 percent (YoY) in Q2/ 2008 to 3.1 percent (YoY) and -4.1 percent (YoY) in Q3-Q4/ 2008. Even worse, from 25 November, to 3 December 2008, the Yellow Shirts - protesting against Mr.Somchai Wongsawat's prime ministership - seized the two Bangkok airports (both Suvarnabhumi and Don Muang), which severely hurt Thailand's image and economy. On 2 December 2008, the Thai Constitutional Court delivered a decision dissolving the People's Power Party, which also meant ousting Mr.Somchai Wongsawat from his prime ministership.

By the end of 2008, the coalition government - led by Mr.Abhisit Vejjajiva's Democrat Party - was formed. "Legitimacy of the Abhisit government has been questioned since the first day that the Democrat party took the office in 2008 as it was allegedly formed by the military in a military camp". As a result, the Government became under pressure from not only a negative impact from the U.S. financial institution crisis but also the Red Shirts - who denied Mr.Abhisit Vejjajiva's prime ministership and called for a fresh election to be held as soon as possible. However, Mr.Abhisit Vejjajiva had rejected the call until he decided to dissolve the parliament for a fresh election in May 2011. In his first year of administration (i.e. in 2009), Thailand saw a negative growth rate for the first time since the 1997 financial crisis. In 2009, the Thai GDP grew by -2.3 percent- reflecting a huge impact from the U.S. financial institution crisis on the Kingdom. In 2010, however, the country saw a sharp rebound with the growth rate of 7.8 percent. In the first half of 2011, when the political situations in the country were relatively calm, the Thai GDP grew by 3.2 percent (YoY) and 2.7 percent (YoY) in Q1-Q2/ 2011, respectively. Under his administration, albeit with a sharp rebound in 2010, Thailand's ranking fell from the 26th in 2009 to the 27th in 2010 and 2011. In addition to this, with regard to infrastructure, the country's competitiveness has become worse and worse since 2009.

In the 2011 general election, the pro-Thaksin Pheu Thai Party won a landslide victory over the Democrat Party once again. Thaksin's youngest sister Ms.Yingluck Shinawatra succeeded Mr.Abhisit Vejjajiva as the Prime Minister of the Kingdom. Elected in July, the Government - led by the Pheu Thai Party - began its administration in late August. No sooner had Yingluck come into office than she found that some parts of the country had already been flooded; furthermore, many of the rest were soon going to be inundated. From 25 July 2011 to 16 January 2012, Thailand confronted the historic flood covering 65 out of the Kingdom's 77 provinces. As of December 2011, according to the World Bank, the total damages and loss were reported to stand at THB1.425 trillion (USD45.7 billion approx.). As a result, the GDP growth rate of 2011 fell sharply to 0.1 percent - with a contraction of 8.9 percent (YoY) in the last quarter (Q4/ 2011) alone. Even worse, the country's overall ranking of competitiveness, according to the IMD World Competitiveness Scoreboard 2012, fell from the 27th in 2011 to the 30th in 2012.