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Thailand is one of the most important economic players in Southeast Asia not only is it one of
the outright largest economies in the region but it's also an essential provider of some of the
world's most essential yet underappreciated Goods it's strategically located along the
busiest trade routes in the world and it's become a surprisingly popular Center for a
new age of Labor that's bucking the trend of global migration but the truly remarkable thing
about Thailand is that it's still growing now for developing an industrializing economy this may not
sound too surprising however there are a lot of economies in the world today that should be highly
successful because of endowments natural resources large labor forces great Geographic positions or
just because they have major industries that still aren't Thailand on the other hand has been one of
the most politically unstable countries on the planet over the last century the small country
has averaged about two military coups every 10 years its government has been couped more
times than it's been peacefully reelected which makes managing economic Affairs difficult to say
the least Beyond this the country was one of the most heavily impacted Regional economies
by the Asian financial crisis the GFC and the co pandemic but overall growth Outlook
is still relatively positive so what has made the ti economy so weirdly resilient to these economic
challenges what has been fueling the most recent round of growth and finally are the current set
of challenges going to be as easy to work through once we've done all of that we can put Thailand
on the economics explained leaderboard before we dive in let me share something that keeps me
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drink element.com economic explain or click the link in the description to understand how Thailand
operates economically there are a few historical developments worth mentioning that make it unique
compared to its neighbors aside from a few little invasions here and there the country is the only
Southeast Asian territory to avoid direct colonial rule moreover while acting as a Zone separating
French and British colonies it managed to act as a hub for trade and after the opening of the sez
Canal Thailand became the primary exporter of rice in the region a trend that continues to this very
day although this may appear to be a profitable series of events for both the leadership and the
people of Thailand its economic Prosperity was often separated from the public by technocrats
managing the bulk of exchanges as it continued to industrialize domestic benefits were not yet
realized and this continued to be a trend for decades in fact Thailand's economy as
that exist today really got started in the mid1 1980s when the plaza record depreciated the US
dollar against the currency of the UK France West Germany and especially Japan of course
Thailand was not involved in this deal at all and they didn't even use any of the currencies
directly impacted but this new agreement mostly amongst countries on the other side of the world
changed the kingdom in profound ways the first phase was initiated when Thailand rep pegged
its currency the BART 25 per US dollar in 1984 the goal of the plaza record was to devalue the
dollar in theory it would red Ru the US trade deficit making exports more competitive in an
effort to stabilize trade with Japan either way this also devalued Thailand's native currency
because it was pegged to the US dollar the Accord made the Japanese currency more valuable making
their exports more expensive and therefore less competitive which pushed Japanese manufacturers
to find creative ways to cut costs the Chinese market was still just opening up so Japan started
looking at the Strategic trade advantage Thailand held at the crossroads of the South China Sea
and the malaka straight a channel Prime for shipping between the Indian and Pacific Ocean
this could not have come at a better time as Thailand had been making an effort to
deregulate Industries and open its doors to more foreign investment which played a massive role
in enticing Japanese firms to make the leap and plant factories and operations in the country
trading up the workforce to change them from Farmers to factory workers this also paired
well with and encouraged Thailand to make the leap from agrarian Source efficiency to a model
of exporting the goods it could produce most competitively and importing whatever it needed
with the money it made from selling those goods leading to a range of those long awaited domestic
benefits this process of industrialization also helped agriculture which changed from
pretty basic subsistence farming to relatively mechanized agriculture during this time allowing
more people to put down their farming tools and get higher paying jobs and factories now this
is a story that happened in dozens of countries across the world over the last four decades but
what made the tire economy so interesting is how weirdly resilient it was to the upcoming economic
challenges this can be explained by looking at the events leading up to the Asian financial crisis
for a Time economic changes for Thailand led to a boom in the market with the BART link to the
US dollar at a set rate this link in that foreign investments were more enticing because investors
didn't have to worry about returns being impacted by Foreign Exchange fluctuations that is as long
as the Thai currency remained in line with the US dollar of course there were also other traits
that added fuel to the fire foreign investors could charge relatively High interest rates on
their loans which encouraged institutions to take out loans in their home currency to exchange them
for Thai Bart furthermore borrowers could take out and return loans as a result of Thailand's
acceptance of article 8 of the international monetary Fund in 1990 to open Thailand's Financial
system to the International Community this lending strategy was a way to make pure profit with higher
interest rates on Thailand's Peg currency this meant that there was lots of money flowing into
Thailand to fund its expansion which was great but at a certain point the country didn't need
any more investment and all it was doing was driving up asset prices the massive inflow of
hot money risky loans and crony capitalism made Thai banking underregulation when giving loans
to corporations without proper risk assessment and Thailand's connections to the US dollar the system
morphed into an unstable house of cards with three major events that caused it to finally
come toppling down the first was that the USA increased its interest rates in the mid 1990s to
fend off inflation this decision effectively made this Bart exchange method of taking out loans in
one country and giving out loans in Thailand less profitable the rising interest rates ultimately
caused the dollar to appreciate which caused the BART to appreciate as well which led to a fall
in international exports the second was China which finally managed to open its doors enough
to compete on the world stage exporting enough to finally challenge even its more distant neighbors
the third was unprofitable Industries like real estate that couldn't make a return on their
investment at high interest rates the expansion was largely fueled by Investments into land
residential property condos and offices breeding a highly speculative Market in the sector which
made it very vulnerable as the bubble burst loans were defaulted on mass crushing banks that played
the precarious game this didn't bode well for Thailand in the eyes of those putting money into
the machine Asian markets Thailand in particular were now seen as sinking ships and everybody
wanted to jump fast so they were all getting their money back which pushed the Valley of the ti Bart
down in foreign exchange markets but because the value of the currency was pegged the government
had to raise the price back up by selling it to US Dollars still with the metaphor the hole was
now punched and Thailand was forced to get rid of everything in an attempt to stop the sinking
and this was where things got really bad Heming cash as well as International Faith Thailand had
no choice but to raise interest rates in the short term by 25% now in theory when things are running
smoothly this seems like a power move basically if one sees 10% interest rates it might look like a
good investment but if one sees 20% interest rates it starts to look like a desperate attempt to get
money by any means necessary and that's exactly what happened with Tai forign exchange reserves
drained the country's stock market crashed along with other Asian currencies the BART fell sharply
Capital inflows slowed some even reversed by the end of 1997 the BART lost almost half of its value
falling from around 26 to the dollar to 53 by January of 1998 on top of everything unemployment
tripled from 1 1/2% to 4 1/2% which might not sound bad from the perspective of an advanced
economy where unemployment rates are normally around 4% but Thailand has very little social
safety and it also has much Lowery standards which means its rate is normally much lower
in short if it gets this high it's game over for many and people will inevitably experience severe
poverty but out of the chaos that erupted in Asian markets there was a silver lining for Thailand
and it had to do with the way they spent money when times were good much of the Investments the
country received were put towards infrastructure building roads ports construction of electrical
grids airports housing and anything else that the country could think of to improve productivity
this meant that even though the coffers were empty Thailand had many of the tools at its
disposal for a quick rebound and this is is what started the Revival in the early 2000s another
aspect of Thailand's return to growth had to do with its currency which was allowed to float and
fall in value which made exports more competitive once again the country's decision to join the
international monetary fund or IMF in 1949 turned out to be fiscally responsible as well after
paying off loans they were subsequently bailed out of striking two decades in advance of initial
projections and they did this by focusing on the real economy within their borders all while adding
a high level of prudence and general discipline to their export L economy this development in
particular was almost a blessing in disguise as they learned early that a heavy Reliance on
financial institutions and speculation would lead them vulnerable if they were confronting similar
crises by embracing exports they ended up being one of the few imin naations to circumvent Fallen
exposure in the wake of the 2008 Global financial crisis of course nobody completely Dodges the
bullet but it allowed Thailand to bounce back much faster than many of its competitors additionally
as referenced earlier utilizing the malaka straight Thailand's legendary reputation for
rice exports was a godsend and even that is a bit of an understatement see rice is considered to be
an inelastic good meaning that when the price of said changes the quantity demanded doesn't change
that significantly because it's more or less an essential form of sustenance to billions of
people and given the location of Thailand close to a large number of countries that consume rice as
a mealtime staple their sa a necessity there was always going to be a large consumer base eager to
purchase it meaning that even though it may not be the most profitable export it was always going to
be in demand that location is good for more than just competitive global trade too there's also the
environment that comes along with it whether it's the beaches of kosui the Lush landscape of Pep or
partying in Bangkok Tran stands as a cultural mon right for tourism this in conjunction with the
aention improvements in infrastructure has made it a global hotspot but there were and are still
considerable Hoops to jump through to sustain that before the pandemic it was actually the eighth
most visited country on the planet with Bangkok being the most visited city in the world it's
tourism that's earned a spot amongst Thailand's biggest industries accounting for some 20% of
gross domestic product in 2019 Thailand earned 90 billion from domestic and international tourism
but the pandemic caused revenues to crash to $24 billion in 2020 surprisingly though even with this
loss of foot traffic and the gradual recovery Thailand is still doing okay there are a large
number of Travelers who visit Thailand and can't help but stay for long periods of time the country
has become a hot spot for digital Nomads who are attracted to the country for its low cost of
living good internet and relatively Pro business culture its growth has been slower than in the
1980s and 1990s but that's potentially a sign of things being more stable and sustainable after all
a rapid rise in GDP is not often indicative of lasting prosperity of course it's easy
to assume that this might turn into an all too familiar situation where foreign workers and
other buyers flood in to make large Acquisitions while locals sacrifice affordability to favor
foreign participation but Thailand appears to have that handled the country is very welcoming
and accommodating a foreign workers and even foreigners who want to set up their own businesses
in the country or buy a home but there are severe limitations on things like property ownership not
used as a primary residence this tends to create just enough incentive for foreign participation
while not giving up Sovereign wealth sectors significantly the nomads get the pleasure of
particip in a growing Market while the tie people get to feed off the largest slice of the pie it's
a method that theoretically provides Universal benefits to all and this could be a big win
for Thailand because these people bring a lot of money to the local economy and also spread their
technical knowledge in something being dubbed reverse brain drain so with so much going for
it Thailand could be the economy to watch in the region as China is currently struggling
with the same problems that they've already dealt with three decades ago but there is one thing
Thailand does have a bit of a coup problem there are many with the most recent occurring in4 14 and
there have been 19 since 1932 now this would kill most economies as tourists would be too scared to
travel their businesses would be too scared to operate without constant paranoia and investors
would be worried about the next government seizing power just to take their assets away but and this
is a big butt in Thailand this hasn't really happened because it has an elite coup culture
in fact the country is so used to coups at this point that has just become the expectation and
most Industries operate in the country with the understanding that if a new government wants to
seize power they can't mess things up too badly this may seem incredibly odd from an outside
perspective but this is essentially how it all works Thailand's interventionist pattern has
been reinforced by the special status of the king and the royal family who have been protected by
the Army at any cost defending the institution of the monarchy which is officially considered
the Pinnacle of Thailand's sacred and secular life is the primary requirement of National
Security because of this all military coups that have occurred in Thailand during this time
have hinged on public approval which protects the monarchy particularly when it comes to dismantling
oligarchies and vast fortunes the recalibration of economic power is almost inevitably a post coup
outcome going right back to 1932 the coups will most likely continue to occur but it basically
ends up being an isolated feudal Skirmish for the approval of a family they've generationally deemed
to be sacred and Untouchable effectively leaving foreigners and most citizens to conduct business
as usual to maintain the status quo and for this reason and many others Thailand is a bit of an
economic Paradox one with many lessons for the rest of the world if nothing else its handling
of skilled migration into a still relatively poor population is something that puts other far more
established countries to shame how much of this me method can be applied to one's respective country
is Up For Debate but for the Tha economy at least for now everything seems to be on the right track
at least until the next coup comes along okay now it's time to put Thailand on the economics
explained leaderboard starting as always with size the country has a GDP of just over half
a trillion dollars making it the fourth largest economy in Asia behind only Indonesia Japan and
of course China and this makes it a major global economy by size alone and it gets a seven out of
10 that GDP is spread out over a population of 71 million people which means despite its
strong nominal figure it only has a GDP per capita of $6,990 or roughly half the global
average this is improving for all of the reasons we explored in this video but for now Thailand
is still early on the development process and it gets a three out of 10 stability and confidence
is not great while it's home to the world's most considerate political coups they do still have
an impact on regular economic functions throw in ongoing issues with corruption and a reliant on a
few select Industries and the country can't get more than a five out of 10 growth has been very
strong while not as rapid as the first wave of industrialization in the 1980s the country has
still almost doubled its economic output over the last decade that's even after the crash in
tourism caused by the global pandemic and Industry that's recovering quickly and should be reflected
in next year's output figures even still for now it gets a 9 out of 10 industry is strong and
impressively diverse the country is still a large agricultural power but it also exports a range of
relatively Advanced products it doesn't however have much in the way of its own homegrown global
companies or Industries and its heavy Reliance on tourism means it can only get a 6 out of 10
altogether that gives Thailand an average score of 6 out of 10 exactly in line with
Bangladesh and the Philippines two of its closest Regional Rivals you should be able to
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