Thailand’s economy has crossed a tipping point with the country beginning to be losing global interest, said a new research report from the Kiatnakin Phatra Financial Group (KKP).
Relocation of production bases, falling direct investment, and a slowdown in the export sector show that Thailand no longer stands out among other countries in the global economy, said Lattakit Lapudomkarn, KKP economic analyst.
KKP has noticed continual stock sell-offs in Thai market from foreigners since 2015, a year after Prayut Chan-ocha led military coup.
According to the report, between 2016-2019, Thailand only received around 10 per cent of foreign investment coming into the region whereas between 2005 to 2007 that number was closer to 30 per cent.
KKP noted that despite impressive export growth after the pandemic, “Thai exports are expanding at a much slower pace than other peers.”
The central bank, last month, upgraded the country’s export growth forecast for 2021, to 17.1 per cent growth year-on-year from the previous 10 per cent.
Meanwhile, the Joint Standing Committee on Commerce, Industry and Banking said it expects exports to be “the only active engine” for the economy for the rest of the year.
Local businesses looking elsewhere
Thai businesses and investors have also begun focusing on overseas markets rather than the one at home, according to the new report.
“The current increase in investment outflows reflects the Thai economy’s fragility, leading investors to invest in foreign assets that give greater returns,” said Lattakit.
As per data from the first quarter of 2021, Thais have increased their investment in foreign stock markets to the highest level in 10 years, totaling about 300 billion baht.
Foreign direct investment from Thai firms has also risen.
KKP stated that there were structural problems leading Thailand to lose its competitive edge in the global economy:
– The current key export products including electronics, automobiles, agriculture, and petrochemical will likely be outdated and face a downturn in demand.
– Thailand lacks cutting-edge infrastructure and mostly serves as a labor source for overseas manufacturers.
– The country’s economic institutions do not support long-term growth, and corruption concerns keep international investors at bay.
The way out
According to Lattakit, “the private sector can help boost the country’s competitiveness but the government must be ready to help.”
The solutions are as follows:
1. Improving the quality of manufacturing facilities
2. Expanding market size
3. Enhancing Infrastructure
4. Encouraging transparent economic institutions.