Why is the Thai economy a 'tiger that never roars'?

Once considered the new "tiger", Thailand's economy is increasingly lagging when political turmoil, slow signing of trade agreements, aging population.

In the midst of everyone talking about rebuilding the global supply chain, India, Vietnam and Mexico received the most attention. Meanwhile, Thailand is often not mentioned.

Four decades ago, the country leapt forward at a time when China was just beginning to revive its economy. Global automakers pour so much money that the Southeast Asian country is dubbed the "Detroit of Asia" (the capital of car manufacturing for the region).

At the time, Thailand stood out for its political stability in the midst of a region still struggling to weather the ravages of war. Low volatility exchange rates and attractive tax regime are added points. By 1990, the country was experiencing double-digit growth, with a column in the New York Times declaring it the next "tiger economy".

The portrait of King Rama IX is placed in front of the Royal Palace in Bangkok (Thailand). His reign (6/1946-10/2016) saw great economic development, but the country's competitiveness soon weakened before his death in 2016. Photo: Bloomberg

However, that exciting period seems to have long passed. More than 30 years and three military coups later, Thailand cannot escape its status as a middle-income country. The country continues to pursue an export-led strategy and still attracts foreign direct investment (FDI) reaching 50% of GDP in 2017. But overall, Thailand has lagged behind.

Once ahead of China in terms of per capita income, Thailand is now overtaken and the gap between the two countries' GDP per capita could soon double. According to World Bank data from 2022, China's average income stands at $12,720 compared with Thailand's $6,909.

There are many reasons to explain why Thailand has become a "tiger that never roars". Most prominently, the political infighting between a military-backed faction in Bangkok and pro-democracy parties, often backed by business magnate and one-time prime minister Thaksin Shinawatra, has taken its toll . .

The focus on power struggles is said to have distracted Thailand from setting and implementing long-term development goals. Legal uncertainty and ownership restrictions are the main complaints of investors.

Trade is a prime example of this. While most of its neighbors have signed or are implementing trade agreements, Thailand is short of breath. Negotiations with the European Union ( EU ) were interrupted by the 2014 coup and have only restarted this year. Meanwhile, Vietnam signed an agreement with the EU four years ago. Similarly, when a wide range of economies joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Thailand remained on the sidelines.

This has consequences. Thailand attracts less FDI than its regional competitors Vietnam, Malaysia and Indonesia. Last year the country had the slowest growth rate among Southeast Asia's major economies.

Governance issues are also emerging in the Thai financial market with a series of recent corporate scandals. This affects the reputation of the country.

The failure to scale up production more decisively has left nearly a third of the workforce still in agriculture, far higher than the nearly one-quarter percentage in China. Thailand's heavy reliance on tourism has also taken a toll on Thailand due to the pandemic.

In recent times, the problem of political stability in this country is still open. It's been almost two months since the pro-democracy coalition won a majority in the lower house, but no new government has been formed. Doubts remain whether the coalition's candidate for prime minister, Pita Limjaroenrat , can take the helm of the government.

Kriengkrai Thiennukul, president of the Federation of Thai Industries, said that has left most businesses frozen in new investment decisions until clearer instructions are given from the new government. This adversely affects the economy in the context of weak exports.

Not to mention, the current demographics don't favor Thailand. Of the 67 million inhabitants of the land of the Golden Temple, about 12 million are elderly. That becomes a burden as the country's manufacturing industry increasingly relies on a workforce that has to handle new and complex technologies.

Manu Bhaskaran, founding partner of Centennial Asia Advisors, a policy consulting firm in Singapore, said: "Thailand's bottom-up micro-economy has thrived in the past, but we I don't see the same kind of entrepreneurial and entrepreneurial energy in the tech space as Vietnam and Indonesia."

Xiao Gu (according to Bloomberg )