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Executive Summary
Map
I. Recent Economic Developments
II. Short and Medium-Term Economic Prospects and Policy Issues
A. Government Strategies
B. Growth, Investment, and Savings
C. Revenue, Expenditure, and the Fiscal Outlook
D. Inflation, Monetary Policy, and the Financial Sector
E. The External Sector Outlook
>> F. Medium-Term Risks and Uncertainties
III. Selected Policy Issues
Country Economic Review: Thailand : II. Short and Medium-Term Economic Prospects and Policy Issues

F. Medium-Term Risks and Uncertainties

51. Thailand is a relatively open economy, with aggregate trade25 of 107 percent of GDP, and technology exports occupying a significant share of exports. In the event the US economy has a recession and the Japan economy stagnates in 2001,26 Thailand’s economy could be seriously affected. Moreover, the spillover effects from the slowing of other Asian economies will adversely affect Thai exports. As a larger net importer of fuel, high oil prices would be a concern for Thailand. Over the next few years, Thailand’s growth prospects will be influenced decisively by the global economic trend.

52. The high level of public debt could potentially become a major source of vulnerability over the medium term. Although public debt is currently manageable, in the context of protracted slow growth, sustained deficits could become problematic and debt service costs could escalate. While liquidity in Thailand is currently ample, low interests are not guaranteed in the future and interest increase could create fiscal stresses. Faster growth expected in 2002 and onward could ease financing pressures, but if downside risks were to eventuate, the ratio of public debt to GDP could climb further.

53. Incomplete financial and corporate restructuring is another major risk over the medium term. Incomplete restructuring prevents the banking system from playing its critical financial intermediation role and reduces the flexibility and dynamism of the economy. Unless further structural reforms are carried out, the financial sector will remain weak and vulnerable, and medium–term economic growth will not be improved. In addition, Thailand’s weak national competitiveness27 cannot be improved if structural reforms stall.

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  1. Defined as the ratio of exports plus imports to nominal GDP.
  2. IMF forecasts 1.3 percent growth in 2001 and 2.2 percent in 2002 in the US. The Japanese economy may slip into a recession, as the projected growth rate is contracting by 0.5 percent in 2001 and growing by 0.2 in 2002. Global GDP growth will be 2.6 percent in 2001 and 3.5 percent in 2002. The forecasts exclude the assessment of the impact of the terrorist attack on 11 September 2001. World Economic Outlook (advanced copy), IMF, September 2001.
  3. Thailand slid from 35th last year to 38th this year out of the 49 countries according to a survey in terms of competitiveness, by International Institute for Management Development. Bangkok Post, 26 April 2001. For a review on competitiveness in Thailand, see ADB. 1997 . Thailand Country Economic Review. Manila.
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E. The External Sector Outlook 		Next>>
III. Selected Policy Issues