Economic studies
Thailand

Thailand

Population 69.1 million
GDP per capita 6,591 US$
A4
Country risk assessment
A3
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Synthesis

major macro economic indicators

  2016 2017 2018 (e) 2019 (f)
GDP growth (%)* 3.2 3.9 4.6 3.9
Inflation (yearly average, %) 0.2 0.7 0.9 0.9
Budget balance (% GDP) 0.6 -0.9 -0.6 -0.5
Current account balance (% GDP) 11.7 11.2 9.1 8.1
Public debt (% GDP) 41.8 41.9 42.0 41.0

(e): Estimate. (f): Forecast. *Fiscal Year 2019 from October 1 2018 – September 30 2019 (budget balance not including disbursement spending on state owned enterprises).

STRENGTHS

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

WEAKNESSES

  • Uncertain political situation; 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 politicians (corruption), underground economy
  • High level of household debt

RISK ASSESSMENT

Strong growth supported by public investments

GDP growth is expected to remain strong in 2019. Household consumption (half of GDP) will grow by 4.5%. The adverse effects of high household debt (above 75% of GDP) and sluggish real wage growth on consumption will be offset by recovering consumer confidence, low interest rates, low inflation and the yet-again deferred increase of the VAT rate (from 7% to 10%) until September 2019. Private investment, both foreign and national, will continue to be dimmed by investors’ fears of instability and regional competition. Public investments are therefore stepping in via the National Strategic Plan (NSP) 2017-2036, which aims to enhance competitiveness through the development of rail, road, airport, and electricity infrastructures. The construction sector will therefore show a strong performance in 2019. Through investment, the government also aims to increase growth potential by accelerating the transition towards a service economy (currently 55% of GDP), starting with upgrades of the automotive and electronics industries. The service industry will continue to perform well, notably thanks to tourism-linked demand. Tourism will contribute largely to GDP growth, even if it will continue to be challenged by the decline in Chinese tourists, following a boat accident which led to 41 Chinese casualties (Chinese tourists count for nearly a third of tourism in Thailand). External demand will also drive growth, as slowing Chinese demand will be compensated by other markets: exports of goods and services are set to pass 70% of GDP in 2019. The automotive sector is the biggest sector for exports of goods.

The central bank plans to maintain the policy rate at 1.5%, targeting growth and inflation. However, a pickup in private investment is needed for growth rates to accelerate strongly while inflation remains below the brackets of the central bank’s inflation target of 1 to 4%, especially given that the 0.9% growth of prices is mostly due to rising oil prices.

 

Resilient financial situation

Thailand is far from reaching the constitutionally-imposed limits of 60% of GDP for public debt and of 3% of GDP for budget deficit. Public debt remains contained: although approximately 20% of it is externally held, it is almost entirely denominated in baht and with medium- to long-term maturity. Public expenditure will continue to focus on addressing social challenges, including poverty, child-care assistance and a pension reform. Most of the planned infrastructure investments, such as the Eastern Economic Corridor or the linkage of the Andaman Sea to central Thailand, will be carried out via SOEs. Including these investments in the budget balance would bring the deficit to 2.5% in 2019.

Global monetary tightening triggered depreciation pressures on emerging markets’ currencies, but the baht is expected to hold steady against the US dollar. Thailand has a strong external position and buffers, with foreign reserves representing over nine months of imports. The current account will remain in surplus, although it will deteriorate on the back of higher commodity prices, which means that Thais are investing more abroad than foreigners invest in the country.

 

Elections delayed by the military

Since the country’s nineteenth coup d'État in May 2014, a Constitution institutionalises dominant military power and increases the power of the King. Parliamentary elections were promised after ratification but were postponed six times and rescheduled for February 2019. Currently, the Commander-in-Chief of the army, General Prayuth Chan-o-cha, governs as Prime Minister via a junta called the National Council for Peace and Order (NCPO). The Constitution limits political campaigning rights in the run-up to the elections and leaves a lot of control to the military, whatever the outcome of the elections. In addition to nominating Senate members, the junta retains the reins of policy making via the NSP, as all governments are constitutionally bound to carry out this development strategy until 2037, otherwise risking impeachment. General Chan-o-cha is the favoured candidate. His main opponent would be the yet-to-be-announced candidate of the Puea Thai party, which has won all elections since 2001 and represents the “red shirts” electorate. The billionaire Thaksin Shinawatra is the party’s charismatic leader. He was Prime Minister until the 2006 coup, followed by his sister until the 2014 coup. They are both in exile to avoid jail sentences for corruption charges. Public protests, repressed by the army, between the “red shirts” (Northern rural population, students and workers) and the “yellow shirts” (royalists, nationalists and Southern urban bourgeoisie) are still commonplace. Elections may again be postponed until the junta is assured of winning the vote, but could be held in February for fear of public unrest.

Upon the United States’ withdrawal and the promise of organised elections in 2019, Japan agreed to support Thailand’s planned 2018 application for membership to the CPTPP.

 

Last update : February 2019

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 BE 2558 (AD 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 BE 2483).

 

Reorganisation Proceedings
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.

 

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 1 million 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 THB 2 million (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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