Economic studies
Thailand

Thailand

Population 69.6 million
GDP per capita 7,807 US$
A4
Country risk assessment
A3
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 4.1 2.3 -5.5 3.6
Inflation (yearly average, %) 1.1 0.8 -0.4 1.8
Budget balance (% GDP)* -2.5 -2.0 -6.0 -5.5
Current account balance (% GDP) 6.4 7.0 4.2 4.6
Public debt (% GDP) 42.1 42.4 50.5 56.4

(e): Estimate (f): Forecast *Fiscal year 2021 from 1st October 2020 to 30th September 2021

STRENGTHS

  • Regional hub; long coastlines; proximity to fast-growing Asian markets
  • Strong external accounts and substantial foreign exchange reserves
  • Richly endowed in agricultural resources (natural rubber, rice and sugar cane)
  • Diversified exports: tourism, machines, car parts, electronic components, agri-food products, fish and shellfish

WEAKNESSES

  • Inadequate infrastructure
  • Ageing population and shortage of skilled labour
  • Uncertain political situation; antagonism between rural and urban areas
  • High corruption perception and large informal economy
  • High household debt levels

RISK ASSESSMENT

Gradual growth recovery

Thailand's economic growth contracted sharply because of COVID-19. The main reason was the decline in exports of goods and services (60% of pre-crisis GDP), which were hit by softer global demand, supply chain disruptions and border closures. In 2021, economic growth should gradually resume. Exports are expected to recover in line with the economic upturn and rising external demand, while remaining constrained by economic uncertainties.

Tourism (20% of GDP, 21.5% of employment and 21% of exports) was severely impacted by the mobility crisis triggered by COVID-19. In 2021, it should recover as travel restrictions are eased, but will not return to pre-crisis levels as, with the virus still present, obstacles may remain. The manufacturing sector, which is integrated within regional and global value chains, notably for electronics and automobiles, was likewise rocked by the crisis and the decline in domestic and external demand. In 2021, it is expected to rebound with the recovery.

Household consumption declined (50% of GDP). It was already affected by high debt levels (80% of GDP in Q1 2020) and also had to contend with rising unemployment (3% in 2020 against 1% in 2019). However, the government implemented significant fiscal measures (9.6% of GDP), including health measures as well as social and economic aid (financial support for households, businesses and sectors hardest hit by the crisis) that will continue to be implemented in 2021 and that should help next year’s recovery. Investments, which contracted sharply because of the crisis, are expected to recover strongly despite the uncertain economic and social environment. Thailand is planning for public-private partnership investments worth USD 33 billion between 2020 and 2027, in order to boost its economy over the long-term. The plan includes 92 projects, 18 of which are focused on infrastructure. Furthermore, the Eastern Economic Corridor, a development plan aimed at creating a vast industrial and technological cluster in an area southeast of Bangkok and that is a government priority, will continue to attract foreign investment.

 

Current account surplus and public deficit

The current account balance, which is traditionally positive due to a high trade surplus, showed a smaller surplus because of COVID-19, as the decline in exports affected the trade balance, which then reduced the current account surplus. While the trade balance remained in surplus, the services balance showed a deficit for the first time since 2014, notably due to the downturn in tourism. In 2021, it is expected to grow only modestly, without returning to its pre-crisis level because of the weak tourism sector, which is not expected to fully recover because travel restrictions have not yet been lifted. Growth in goods exports will be affected by the moderate recovery of some of Thailand's partners, such as the United States, which continue to be severely impacted by the health crisis. However, the external situation will remain strong, with recurring current account surpluses helping to fuel official reserves, which stood at over 12 months of imports in 2019. This will support the exchange rate and enable the baht to be resilient.

The public deficit widened in 2020 due to increased spending and lower revenues following the health crisis. In 2021, it will remain high since government revenues will only gradually recover and additional spending to address the crisis will continue to act as a drag. Public debt increased but remains at relatively low risk: it is almost entirely denominated in Thai baht and contracted over the medium- to long-term.

 

Demonstrations are testing the government

Thailand has been a constitutional monarchy since 1932. It is plagued by chronic political instability and numerous army-led coups. Since the beginning of 2020, the country has seen a series of student-led demonstrations, which have been further exacerbated by the crisis. The mass protests are the largest since the 2014 coup d'état that led to the appointment as prime minister of Prayuth Chan-o-cha of the pro-military Phalang Pracharat (PP) Party. Following disputed elections in 2019,. Prayuth Chan-o-cha remained in power. The protests began in response to the constitutional court's decision to dissolve the Future Forward Party founded by Thanathorn Juangroongruangkit, a young politician. His party had 81 seats in the lower house. This decision allowed the government to strengthen its majority in the house (270 of the 500 seats). The protestors’ main demands include reforming the monarchy, including the monarch’s status, and rewriting the 2017 constitution, which gives broad powers to the 250 senators chosen by the army. They are also calling for parliament to be dissolved and for the prime minister to resign. With the authorities refusing to make concessions, protests are continuing, despite being banned, and may be more severely repressed.

 

Last updated: February 2021

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). (Latest amendment in 2018, B.E. 2561)

 

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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