Solid Freeform Fabrication Laboratory
Yoon, Chan
April 11 2007
Powder delivery system
Kingdom of Thailand:
Strategies to Achieve Sustainable Economic Growth
Tetsuya Uetake, Hye jin Lee
Overview: Economic Crisis in late 1990s
There were financial liberalization and abolition of
interest ceilings in the early 1990s.
The interest rate kept high.
High interest rate attracted a massive capital inflow.
The US dollar appreciation led Thai baht to be overvalued.
The series of events put downward pressure on Thai baht.
A fixed exchange rate was replaced with a floating one.
A huge amount of capital flowed out of the country.
There was the dramatic depreciation.
Economic recession and the IMF reforms.
Overview: Recent Events in Thailand (2003-2006)
Tsunami severely hit southern coast provinces.
Political unrest in southern areas
Prolonged drought, leading rice crop to fall.
Military coup occurred, exiling the former
Prime Minister Thaksin Shinawatra. Restrictions on foreign investment by the Bank of Thailand.
Recent Macroeconomic Trends: GDP
Real GDP & Growth Rate
0.00
500.00
1,000.00
1,500.00
2,000.002,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Year
Billi
ons
of B
aht
-15%
-10%
-5%
0%
5%
10%
15%
% C
hang
e GDP
GDP Growth
The GDP growth rate has decelerated. There was a slowdown in C and I due to negative internal events and rising interest rate. The high interest rate raised the value of the baht.
GDP/Person 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005(baht) 49474 52009 50829 44951 46487 48212 48837 51009 54131 56521 59016
Recent Macroeconomic Trends: Unemployment & Inflation
Phillip's Curve
0%1%2%3%4%5%6%7%8%9%
0% 1% 2% 3% 4%
Unemployment Rate
Infla
tion
Rat
eYear 1998
The unemployment and inflation have been stable. There is a tradeoff between inflation and unemployment.
Recent Macroeconomic Trends: Exchange Rate
In 1997, Thailand introduced a floating exchange rate system and the baht depreciated dramatically. However, since then, the baht has appreciated because of high interest rates, economic growth, etc.
Exchange rate
37.940.2
44.4
40.137.8
41.4
31.4
25.324.9
43.0 41.5 40.2
05
101520253035404550
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Exch
ange
Rat
e (B
aht/U
S$)
Recent Macroeconomic Trends: Current & Capital Accounts
Before the economic crisis, capital account was in surplus because of high interest rate. After the economic crisis, there was a huge net capital outflow, which led to a capital account deficit. However, in 2004, the capital account became surplus because of recent high interest rate and increasing imports.
Current & Capital Account
-20
-15
-10
-5
0
5
10
15
20
25
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Billi
ons
of d
olla
rs
Capital Account
Current Account
Recent Macroeconomic Trends: Current & Capital Accounts (2)
The dramatic depreciation in 1998 caused a large increase in exports (24%) and decrease in imports (8%). Exports have increased since 2000, but slower than the imports, which caused a current deficit in 2005.
Exports and Imports % Change
-10%
-5%
0%
5%
10%15%
20%
25%
30%
35%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
% C
hang
e Exports
Imports
Recent Macroeconomic Trends: Interest Rate
Before the economic crisis, the interest rate was much higher than other Asian countries. The money supply increased between 1997 and 2004, which led to a decrease in the interest rate. Since 2004, the interest rate has increased due to high country risk.
Interest Rate
14.4%
14.4%
15.4%
12.2%
11.2% 10.9%
13.3% 13.4%
13.6%
9.0%
7.8%7.3% 6.9%
5.9% 5.5%
5.8%
7.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Problems with Current Thai Economy
Bath appreciation
Current account deficit
Short-term investment
Decelerating GDP growth
Recommendations: Short-rum policy (1)
Assumption of a small open economy
Relatively high interest rate
Above the balance of payment
Floating exchange rate
Expansionary monetary policy will stabilize both interest rate and exchange rate, and increase output.
Recommendations: Short-run policy (2)
Increase saving rate
35.4% (1995) → 28.8% (2005)
Maintain government budget surplus
From 1997 to 2002 : deficit → 2003: surplus
Establish legal institutions and capital market
Stabilize the politics : the military coup in 2006
Invest in human capital
Focus on education
Policy Recommendation: Long-run (1)
Human capital
Policy Recommendation: Long-run (2)
Program for International Student Assessment (PISA) Score
2003 Math Science Reading
Hong Kong 558 539 510
Japan 553 548 598
Korea 552 538 534
Macao-China 528 525 498
Thailand 424 429 420
Indonesia 361 395 382
OECD Average 496 500 494The test is conducted by the Organization for Economic Co-operations andDevelopment (OECD), which measures how 15 years old students in morethan 40 countries perform in math, science and reading.Source: "Thailand and Its Knowledge Economy" Arkhom Termpitayapaisithttp://info.worldbank.org/etools/docs/library/233823/PWThailandandIts%20Knowledge%20EconomyPaper06.pdf
Policy Recommendation: Long-run - Solow Model (3) -
Solow Model
Capital per effective worker, k
Output per effective worker, yInvestmentBreak-even Investment
s0 f(k)
f(k)
(δ +n+g)k
k0
y0
s1 f(k)
y1
k1
Top Related