Giles Ji Ungpakorn
There is no doubt about it; the Thai economy is seriously slowing down. GDP growth in 2014 fell to 0.7%, down from 6.5% in 2012 and 2.9% in 2013. Annual GDP growth at the end of the first quarter of 2015 was 3%, but will it fall off again or recover?
According to Bloomberg, Thai GDP growth is already below that of its neighbours: Malaysia, Philippines and Indonesia.
Investment, a key indicator of economic confidence, shrank by 2% in 2013 and another 2.8% in 2014. Manufacturing output fell by 4.6 % and retail fell by 6.1% in 2014. In May 2015, manufacturing production fell 7.6% over the same month last year, caused by decreasing output in the manufacturing of electronics and cars.
Over 1,300 workers at the Samsung factory in Korat have been sacked. Workers in many auto, auto parts and electronics factories face an uncertain future with redundancies occurring. Sports-wear factories and other textile manufacturers have also been hit.
Domestic sales of small to medium sized motorcars dropped, while sales of luxury Mercedes-Benz cars increased. The rich throughout the world have always increased their wealth during economic down-turns as well as during periods of economic growth.
Inflation fell to 0.1% last year, which is another sign of economic depression. For the first year since 2010 exports fell by 0.5% and imports fell by 8.6%. Thailand is very reliant on exports for economic growth, contributing to 60% of GDP, and the drop in imports reflects the fall in investment for future production.
So is it all the fault of the military junta and the enraged and backward middle-classes who have wrecked democracy and political stability? The drop in tourism is certainly related to this, not to mention the crisis in Thailand’s aviation industry.
The Economist reports that some academics estimate that military coups shave off between 1-2% in annual GDP growth. Added to this factor is the long running political crisis since 2006, caused by the refusal to respect democratic elections by the elites and the middle classes. Despite the fact that pro-military Thai economists ignore the problem of having a military junta and political instability, the World Bank and other economic establishments predict that Thai economic growth will continue to be problematic.
But the main reason why exports have fallen is the fact that Thailand relies on markets in China, Europe and the USA. All these markets have yet to properly recover from the economic recession which started in 2008 and the Chinese economy is getting into deeper trouble. Given the cut-throat competition that arises in these circumstances, Thailand has yet to emerge from a low wage, low investment, export model and cannot therefore compete with neighbouring countries in the region where wages are lower. This was already a problem back in 1997 when the Asian economic crisis broke. Taksin’s government, which won the elections after that crisis, made attempts to modernise the economy, upgrade technology and productivity, and increase domestic spending power. However, this was cut short by the conservative elites who staged 2 military coups against his political parties.
In the agricultural sector, falls in world prices due to global stagnation, have recently been over-shadowed by the Thai drought, leading to some predictions that year on year GDP for agriculture will drop by 3.4%, the sharpest drop in 36 years. The previous Yingluk government had tried to help rice farmers but was severely attacked by the elites and the middle-classes for doing this.
Given the dire global situation, the only other option for the government to expand the economy would be to increase state investment in modernisation and increase the spending power of citizens. But this is an anathema to the reactionary neo-liberals who are now running the show under the military junta. They are violently opposed to large state spending on infrastructure and agricultural price intervention, which they dismiss as just “Taksin-style populism”. They are also against raising the minimum wage by any significant amount; Prayut claiming that it will negatively affect exports.
The junta may decide to ride out all the problems by using military power to further postpone elections. It may also be forced to adopt measures previously used by Thai Rak Thai or Pua Thai governments. Already they have invited ex-Thai Rak Thai economic minister Somkit Jatusipituk to join the dictatorship. But the longer the egotistical buffoons in uniform cling to political power, the more they will further tarnish their reputation among the population.