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24 September 2018

Thailand Reforms Putting Country on Path to Growth

After suffering extensive flooding 2013, Thailand recovered by increasing its minimum wage and improving infrastructure in affected areas. Strong exports and tourism have enabled Thailand’s economy to grow by 3.9% in 2017. Projections call for an increase in GDP of 4.2% and 4.0% in 2018 and 2019 respectively. More reforms are needed, however, as Thailand’s workforce is rapidly aging. This combined with low birth rate means that Thai’s impressive gains in economic growth are at risk.

The present government policies are favorable for continued stability and growth, but Thailand faces the challenge of an aging workforce. This reduction in workforce will undercut the current trajectory of the country’s GDP if nothing is done to mitigate the problem. Not only does this mean fewer workers, but also it means that the average worker will have less experience. Raising the retirement age and attempting to harness the labor potential of the rural areas are some goals that proposals have targeted. The participation of women in the workforce, while relatively high compared to other countries, still trails that of men. One way that has been proposed to deal with this is to provide more child care services. Providing such services would free up women to enter the workforce and also make those are already in the workforce more productive as child care services helps them miss work less. Investment in technology has also been proposed to help alleviate the aging of the workforce through increased productivity.

The government implemented a new e-payment system that makes tax collection much more efficient. This should help fund Thailand’s public investment in infrastructure that is part of the Thai National Development Plan. Thailand hopes to spur private investment and to bolster the competitiveness of the country. Past policies of the government have favored the growth of credit. Current policies by the Bank of Thailand have worked to limit personal loans and credit cards. Household debt is still presently very high, but moderation has been seen in the spending of Thais. The private debt peaked in 2015, at a little over 80% of the GDP, and has been on a steady decline ever since.

Tourism and manufacturing are the two biggest elements of Thailand’s GDP growth. With increased investment in infrastructure and technology, the manufacturing sector could benefit greatly and prove to be a great reason for international investors to invest in Thailand. The automotive and electronics sectors of Thailand’s manufacturing base are particularly strong and public policy is in place to upgrading that base, as well as providing resources for the expansion into new types of manufacturing. Robotics, biotech and aerospace are other sectors the government is interesting in providing investment.

Investing in Thailand can be done through ADRs and stocks, as well through ETFs. One of the most popular ways for US traders to gain exposure to Thailand is through the iShares MSCI Thailand Capped ETF (NYSE: THD) fund. Popular ADRs include Siam Commercial Bank (SMUUY), Advanced Info Service PCL (AVIFY), and Bangkok Bank (BKKLY).

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