Economic studies
Thailand

Thailand

Population 69.0 million
GDP per capita 5,902 US$
A4
Country risk assessment
A3
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Synthesis

major macro economic indicators

  2015 2016 2017(f) 2018(f)
GDP growth (%) 2.9 3.2 3.5 3.5
Inflation (yearly average, %) -0.9 0.2 0.6 1.2
Budget balance (% GDP)* 0.1 0.6 -1.4 -1.7
Current account balance (% GDP) 8.1 11.5 9.5 7.5
Public debt (% GDP) 42.7 42.5 42.0 42.0

* 2018 fiscal year: 1st October 2017 to 30 September 2018 (f): forecast

STRENGTHS

  • Diversified and efficient production in fisheries, agriculture (40% of world production of natural rubber), industry (automobile, electronics, agri-foods) and services
  • Regional crossroads open to its dynamic neighbours
  • Strong external accounts
  • Diverse exports: tourism, agri-food products (rubber, seafood, rice, cane sugar, fruits), electronic components, computers and organic chemistry
  • High savings rate

WEAKNESSES

  • Uncertain political situation and antagonism between rural and urban areas
  • Inadequate infrastructures
  • Ageing population and shortages of skilled labour
  • Mid-range positioning and lack of innovation
  • Enduring links between private sector and political milieus (corruption), underground economy
  • High level of household debt (79% of GDP)

RISK ASSESSMENT

Steady and moderate growth in 2018

The National Strategic Plan (2017-2036) places the emphasis on competitiveness through the development of rail, road, airport, and electricity infrastructures. Although the government hopes to attract foreign investors – for the Eastern Economic Corridor in particular –the big public investments in 2018 will likely rely solely on the state. Private investment, whether national or foreign, is likely to remain cautious. Exports of goods and services (71% of GDP) are set to perform well, with the slowdown in China being offset by the economic upturn in other markets.. The automobile sector is set to continue as the second biggest exporting sector, behind tourism.

The contribution of trade to growth is expected to remain slightly positive, despite the increase in imports of capital goods, intermediate products, and raw materials associated with the dynamism of public investment and industrial exports. Household consumption (half of GDP) should remain strong, reflecting the levels of real disposable income, and despite high indebtedness. Slightly higher inflation will likely be counterbalanced by the favourable impact on pay of strong employment and activity in most sectors. In addition, households are also set to continue benefitting from a relaxed budget policy with, specifically, the maintenance of VAT at 7% instead of 10%, at least until the 30th September 2018. Finally, the central bank is expected to hold its key lending rate at 1.5%. In terms of supply, services (55% of GDP), such as hotels, catering, transports, and telecommunications, will benefit from growing numbers of foreign visitors, and agriculture (10% of GDP and 30% of jobs) from growth in external markets. The construction sector will likely gain from the launch of large-scale transport infrastructure projects, although the situation will be more mixed for industry.

 

Resilient financial situation

Vigorous public investment, and, more generally, the accommodating budget policy in the run-up to an eventual election, is likely to lead to a slight increase in the public deficit. There is, however, room for manoeuvre, as tax revenues only amount to 18% of GDP. Public debt, more than 95% held by residents, will remain well below the 60% ceiling defined in the Constitution.

In external terms, the decline in the goods and services surplus (10% of GDP in 2017), caused by increasing imports, will impact on the current account surplus – although this will still remain substantial, as the former will continue to largely exceed the income deficit arising from the repatriation of dividends. Thai investments in other countries (ASEAN, USA and Europe) – both portfolio and direct – in hotels, retail, agri-foods, chemicals, and finance, exceed foreign investments into the country. However the surplus on the balance of payments will probably be large enough to supplement the currency reserves, which amount to approximately ten months of imports, and are greater than the external debt (31% of GDP), which is mainly supported by the private sector. The Thai baht is expected to hold steady against the dollar.

 

Elections delayed by the military

Since the May 2014 coup d’état, the nineteenth since democracy was adopted in 1932, General Prayuth Chan-o-cha, Commander-in-Chief of the armed forces, heads the National Council for Peace and Order (the junta) and, as Prime Minister, an interim government consisting of a 35 member cabinet, a legislative assembly of 200 members, and a Reform Council of 250 members, dominated by the military. The adoption of a new Constitution in a referendum (61% of votes in favour) in August 2016 and its ratification in July 2017 by the new King Maha Vajiralongkorn could lead to parliamentary elections at the end of 2018 or in 2019, but not before the passing of ten organic laws. The new Constitution (twentieth since 1932) reduces the role of universal suffrage in the appointment of the Prime Minister. The Prime Minister will be appointed by an Assembly consisting of 500 elected members and a Senate of 250 members appointed by the military. He is then required to apply the National Strategic Plan which, in addition to improving infrastructures, includes strengthened security, the promotion of social equality, the development of human resources and those of the public sector. Royal powers have been increased – an illustration of the cooperation there is between the military and the king, who succeeded his father, Bhumibol Adulyadej, following a reign of over 70 years. Today, the king is a symbol of continuity and stability in a country that has lived through a large number of coups d’état. With the possible approach of elections, conflict – often used as a pretext by the army to intervene – between, on one side, (the “red shirts” (the rural population of the north, students and workers) and the “yellow shirts” (the royalists, nationalists and urban bourgeoisie of the south) could once again be ignited. The former are represented by the populist Pheu Thai Party, winner of all elections since 2001 and led in turn by the former Prime Ministers, Thaksin and Yingluck Shinawatra, brother and sister, removed in 2006 and 2014 and exiled to escape punishment. The latter are represented by the Democrat Party, conservative and liberal, generally unable to constitute a majority to form a government, but quick to foster street demonstrations in the capital.

 

Last update : January 2018

Payment

Credit transfer is the main form of payment used by large companies in Thailand. The majority of credit transfers are made electronically and the popularity of this payment method is growing as clearing systems have become more developed.

Cheques are still a popular form of cashless payment in terms of value. They are used by companies and consumers to make a wide range of payments. Post-dated cheques are a common mean of short-term credit.

Nevertheless, cash remains the dominant payment method in Thailand.

Debt collection

Amicable phase

According to the 2015 debt collection Act B.E. 2558 (A.D. 2015), the debtor is an individual person or personal guarantor. The Act was created to regulate collection activities carried out by creditors, or by collection agencies in cases of consumer debt. Commercial debt collection houses are also expected to follow the practices set out within the Act. For example, during the amicable phase, creditors can only communicate with the debtor or other persons as authorised by debtor. Creditors or collection agencies are also limited to identifying themselves with the details of debt to the debtor.

 

Legal proceedings

Thailand’s Judicial Court System comprises three levels:

• The Supreme Court. This is the highest court authority in the country. All of its decisions are final and must be executed. It hears appeals and contests against decisions made by the Courts of Appeal, Regional Courts of Appeals and Courts of First Instance.

• Courts of Appeal. These are divided into Courts of Appeal and Regional Courts of Appeal. Both handle appeals against the decisions or orders made by the lower courts.

• Courts of First Instance. These lower courts comprise the courts in Bangkok, courts in provinces, specialised courts and juvenile and family courts.

A preliminary stage of legal action can be conducted if there is failure to reach an amicable settlement with the debtor. This phase includes communications, negotiations, meetings with debtors, letters of demand and notifying the police in cases where there is a criminal penalty.

 

Ordinary proceedings

If the debtor fails to comply with demand notices, the creditor can file a claim with the Court, depending on the value of the debt:

- If the debt does not exceed THB 300,000 (Thai baht), the complaint must be lodged at the District or Provincial Court

- If the debt exceeds THB 300,000, the complaint must be filed at the Civil or Provincial Court.

Court policy is to screen unnecessary cases from court trial. Most Civil Courts have mediation centres for parties to negotiate and compromise on an arrangement. Once a case has been decided amicably, a compromise agreement is prepared and the court passes judgment in accordance. Each of the parties is responsible for documenting evidence and the burden of proof associated with their case. A judgement is made once the court has considered and weighed the evidence presented by both parties.

The time frame for proceedings with the Court of First Instance can take between one to three years.

 

Enforcement of a legal decision

If the debtor fails to comply with a domestic judgment, the creditor is entitled to apply for the execution of the judgment before the court. This can involve the issuance of an execution decree, delivery of an execution decree to the debtor, issuance of a writ of execution and the seizure and sale of property belonging to the debtor.

Thailand has no reciprocal recognition and enforcement agreements with other countries. Enforcing foreign judgments requires new legal proceedings, where the evidence will be considered and legal defence made available to both parties.

One exception is that Thailand is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1985). International arbitration awards by member countries of the Convention can be enforced if they are already final.

 

Insolvency proceedings

Thailand has legislation on bankruptcy and reorganisation proceedings (Bankruptcy Act B.E 2483).

 

Reorganisation Proceedings
1. Limited Companies, Public Limited Companies and Financial Institutions (Large Enterprises)

A petition can be filed against an insolvent corporate debtor who owes one or more creditors a known sum of THB 10 million (USD 333,000) or more. Once the court has accepted the petition for further proceedings, it appoints a planner to prepare and submit a reorganisation plan to the official receiver within three months. The court may extend this period up to a maximum of two times, for one month from the publication date of the court order appointing the planner. Secured and unsecured creditors must then apply for payment of debts within one month from the date of publication of the order for appointment of the planner. Once the official receiver is in possession of the reorganisation plan, he will convene a meeting with the creditors to consider the proposal. If it is accepted, the court needs to approve it and confirm the appointment of the plan’s administrator. The latter is then responsible for the debtor company’s reorganisation, as set out within the plan.

 

2. SMEs registered with the Office of SME Promotions or other government agencies for conducting business

Petition can be filed against:

- insolvent individuals who owe one or more creditors a known sum of THB million Baht or more;

- insolvent limited partnerships, registered partnerships, non-registered partnerships, groups of persons or other juristic entities who owe one or more creditors a known sum of THB 3 million or more

- insolvent private limited companies owing one or more creditors a known sum of between THB 3 million and 10 million.

In cases such as these, the petitioner should file a petition, along with a proposed plan of not more than three years in length in execution.

 

Bankruptcy proceedings

A creditor can file a bankruptcy petition against a debtor if the latter is insolvent and owes one or more creditors a definitive sum of over THB 1 million (if the debtor is an individual), or owes more than two million Baht (if the debtor is a legal entity).

Once a petition for bankruptcy has been filed, the proceedings normally include hearing the witnesses, temporary receivership of the debtor’s property, the appointment of an official receiver, filing of claims for debt payments by creditors within two months from the publication date of the permanent receivership order, a bankruptcy order against the debtor (if no agreement can be reached with the creditors, issuance of a permanent receivership order, seizure of property, sale of property by public auction and pro rata distribution of the sale proceeds to creditors.

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