Thailand Economic Monitor The World Bank has released its latest Thailand Economic Monitor, noting that the economy has rebounded from the severe floods but that it continues to be affected by the slowdown in the global economy. The World Bank looks for 2012 GDP growth in Thailand at 4.7 percent, with inflation steady at 3 percent.
Tourism receipts recovered quickly after the floods and growth continues at about 10 percent. The floods also did not affect flows of foreign direct investment, which continued to be strong. In part this is due to the diversification by Japanese and European investments. The report notes that private investment will likely continue growing at close to 10 percent. This is due to greater FDI entering the country, as reflected in BOI applications and approvals.
With the relaxation of the Bank of Thailand's rules for investing abroad, Thai direct investment has increased since the last quarter of 2010, with ASEAN as the main market. "In addition, the prospects from the ASEAN Economic Community 2015 prompt firms to increasingly invest abroad in order to maintain their competitiveness." Looking out over the coming year, the projection is for 5 percent growth in GDP and 5.5 percent growth in exports. The domestic demand which helped buoy the economy in 2012 is expected to maintain its momentum throughout this year, while at the same time the Thai Government will spend about THB60 billion in water resource management projects. The Government will spend about 2.4 percent of GDP on its major policy programs in 2013, which is down from the 5.5 percent that was spent in 2013. Recognizing the decreased percentage of public investment, the Thai government is "formulating a 7-year infrastructure infrastructure investment program in the amount of Bt2 trillion. The investments will be mostly for land transport infrastructure." Beginning in 2013 the minimum wage in all provinces of Thailand was increased to THB300 per day, representing a nationwide 22.4 percent increase over 2012. From 2001 to 2011, the annual average increase in the minimum wage was 2.5 percent.
This has led to an increase in annual average wages, although with no increase in the unemployment rate. It should be pointed out that the World Bank does note that the "minimum wage increase prior to 2012 were small and below inflation rates, which translated into a fall in real minimum wages over time." In line with the goals of the Thai Government, the report states that developing higher skills is imperative for both higher incomes and living standards, and for the country to maintain sustainable growth. "With higher-skilled individuals in the labor force, Thailand would be able to engage in higher value-added production and remain competitive and grow inclusively." Thailand Investment Review notes that the new BOI investment promotion policies that will be finalized and released later this year will work to support companies that enhance the skills of Thai workers and rely less on labor intensive manufacturing. Thailand is committed to emerge from the so-called middle-income trap and become an upper income country that is knowledge-based and with increasingly higher standards of living. It will remain an investor's choice within the fast growing Asia region.