Thailand Sees Weak Growth, Trade

One of the largest Southeast Asian economies is weakening as trade slows and labor shortages hinder growth.

Thailand is likely to see 3.6% GDP growth in 2015, according to the Asian Development Bank, which revised downward its forecast on weak exports, high domestic private debt, and weakening commodity prices.

One of the largest Southeast Asian economies is weakening as trade slows and labor shortages hinder growth.

Thailand is likely to see 3.6% GDP growth in 2015, according to the Asian Development Bank, which revised downward its forecast on weak exports, high domestic private debt, and weakening commodity prices.

ADB Senior Economist Luxmon Attapich said Tuesday that Thai consumers are troubled and export growth is slowing to 1-2% in 2015. While growth is weakening due to cheaper commodity prices, which hurts Thailand’s commodity-driven export economy, Attapich also noted that the kingdom was seeing stronger political stability and higher public investment, which could cause growth to re-accelerate later in the year.

Additionally, Attapich cited stronger tourism figures and lower oil prices as potential catalysts for further Thai growth.

An Unstable Past

Thailand’s economy has beset by instability over the last decade, as several political coups and floods have hindered growth in the nation. A military coup d’état in 2014 was seen by some analysts as a risk factor in the country’s growth rate, as the governing military was seen as ill prepared and too inexperienced to manage the country’s high growth rate.

More recently, however, political stability as the country establishes a new constitution has strengthened foreign investor confidence.

The International Monetary Fund has upgraded their growth projections for Thai economic growth, while agreeing with the ADB’s assessment that weak demand and high debt loads challenge the country’s growth rate. Additionally, the IMG noted “global financial volatility and protracted slow growth in advanced and emerging economies” remain external risks for the country.

Labor Gap

In a separate study, a lack of sufficient labor threatens Thailand’s economic growth. With an unemployment rate below 1%, Thailand is one of the most fully employed nations in the world, and the country has enjoyed high employment rates throughout the global financial crisis. Still, some analysts say that low-income growth and a lack of skilled labor threaten the nation.

In a new study by SCB Economic Intelligence Center, the research firm found in a survey that over half of firms had trouble finding people for open jobs over a three-month search period, with vocational degree holders the largest shortfall. In total, 23% of jobs requiring vocational degrees go unfilled, according to the study.

Especially concerning for the country’s future growth is its demographic headwinds, as the country ages and the total working-age number of Thais falls. According to the SCB study, after 2018 Thailand will see a decline in its working-age population as historically high birth rates fall. The study also saw that the dependency ratio—that is the number of elderly people relative to working-age people—will double over the next 15 years.

While Thailand is seeing its labor supply contract, other Southeast Asian countries will see their labor supply expand. The Philippines, Indonesia, and Malaysia expect to see their working-age population grow over the next twenty years.