Thai Economy Sees Improvement Due to Increased ASEAN Integration
The level of Thailand’s imports and exports has expanded for the first time since April 2013. In year-on-year (YoY) comparisons, both imports and exports have increased. In the Ministry of Finance’s most recent report, June YoY comparisons show the total value of exports is up by 3.9 percent with improvements in both intra-ASEAN and European trade. After signs of slowing this past year, producer and consumer confidence appear to be improving now as well.
Improvements in the Thai economy were, in part, spurred on by the ASEAN Economic Community’s (AEC) promise to “transform ASEAN into a region with free movement of goods, services, investment, skilled labor, and freer flow of capital.”
Thailand has led this process of economic integration and, since 2010, has benefited from the near elimination of tariffs between Indonesia, Malaysia, the Philippines, and Singapore (the original ASEAN-5).
Compared to Singapore, Thailand still has a relatively low base in terms of digital infrastructure but this is rapidly changing and improvements will have a significant impact on education, financial services and manufacturing. In Thailand and Malaysia, where labor costs are higher, this will contribute to the more sophisticated manufacturing capabilities needed to offset these costs.
Thailand will also have to improve its value-adding operations if it is to magnify the recent upswing in trade figures and, in the long term, this will be dependent on the AEC’s success in implementing economic integration. Still, Thailand is well positioned to benefit from the growth in a more unified market.
Thailand already has a strong record on integration in the global economy, ranked a respectable 36th on the MGI Connectedness Index and a strong 12th in the Goods category, which quantifies participation according to flow intensity and share of world total. Indeed, Thailand is exempt from many of the vulnerabilities which McKinsey highlights across the ASEAN region. While Thailand has moderate restrictions placed on the levels of foreign ownership of equity in new investment projects, for instance, it has some of the highest levels of access to manufacturing.
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