WHAT A YEAR

Thailand 2017 | DIPLOMACY | YEAR IN REVIEW

Since the military took power in 2014 following a wave of anti-government protests, the new government has sought to bolster trade ties and soothe the worries of investors.

Thailand is Southeast Asia's second-largest economy after Indonesia, with GDP hitting USD395.282 billion in 2015. The nation's economy is built on its exports, especially from the industrial and agricultural sectors, with 75.6% of GDP generated by the goods leaving Thai shores. The economy grew 2.8% in 2015 and is expected to grow at around 3% in 2016 following an upward government revision from 2.5% at the end of the first quarter. Diving further into the details, exports were worth USD212.1 billion in 2015, down 5.7% YoY. Thailand also slashed its import bill in the same year, down 11.3% to USD177.5 billion. This resulted in an improved trade balance for the country at a time when the new government is betting its short- to medium-term growth largely on state financing of a program of infrastructural development projects. This is also backed up by sizable monetary reserves, which, at USD44.901 billion or 29.4% of GDP in 2014, were 26th highest in the world. The political uncertainty of 2014, as the military seized power from a civilian government accused of widespread corruption, did not impact consumers, with CPI at 1.89% over that year and falling 0.9% in 2015. For 2016, the Bank of Thailand expects inflation to remain in negative territory. And in a strong sign that the current government, which is planning to hand power back to the people in due course, has remained investor friendly, Thailand actually upped its FDI over 2015 by 7%, making it, together with Malaysia, the 8th most popular foreign investment destination in the Asia Pacific. The Global Competitiveness Report ranked Thailand 25th in the world for the strength of its investor protection and 25th for the efficiency of its financial market development.

On the political front, the Thai public ratified a new constitution at a referendum in early August 2016. The legal changes allow the Senate to jointly vote for the prime minister along with the House of Representatives and strengthen the hand of the military.

One of the main economic developments over the last year, on December 31, 2015, was the coming into effect of the ASEAN Economic Community (AEC). The AEC binds members of ASEAN, the Association of Southeast Asian Nations, closer together economically. The bloc of nations have an estimated consolidated GDP of around USD7.6 trillion and the community will make Thailand an even more attractive destination for companies looking to do business in the region. Moving forward, however, Thailand's trade experts will shift their attention to possible inclusion in the TPP, a controversial economic zone that the country currently sits outside. Thailand is concerned that joining the TPP could harm its competitiveness with its neighbors that are also members, although staying outside will mean its exporters suffer from higher tariffs than some regional competitors and therefore be at a disadvantage when trading with lucrative nations like the US. Another concern is the intellectual property aspect of the TPP, which allows for longer patent and copyright restrictions and could harm local R&D.

Elsewhere, in June 2015 Thailand hosted the Cobra Gold military exercise, which includes 28 states including Japan, Singapore, and South Korea along with observers from China, Russia, and South Africa. Cobra Gold was set up by the US and has been hosted yearly since 1982. The US had limited its involvement following the change of government, but 2015 saw a full return.

It was also an eventful year for Thailand's lucrative tourism industry. The country received 24.8 million tourists in 2014, a number that grew to just under 30 million in 2015, making it the second most popular destination in the region after China. The sector has not been without its challenges, however. In August 2015 a bomb exploded at the Erawan Shrine in Bangkok, killing 20 people. This was followed the following August by a series of blasts that killed four people at some of the country's top tourism destinations. Going forward, the developments could impact arrivals in the short to medium term.

Finally, and in a particularly uplifting moment for the Thai people in 2016, His Majesty King Bhumibol Adulyadej celebrated the 70th anniversary of his accession to the throne in 2016, making him the world's longest-reigning living monarch. Official celebrations began on June 9, 2016 and will continue until June 9, 2017.