Editing Economy of Thailand (section)

==={{anchor|Post-1945}}After 1945===

====1945–1955====
Postwar domestic and international politics played significant roles in Thai economic development for most of the Cold War era. From 1945 to 1947 (when the Cold War had not yet begun), the Thai economy suffered because of the Second World War. During the war, the Thai government (led by Field Marshal [[Plaek Phibunsongkhram|Luang Phibulsongkram]]) allied with Japan and declared war against the Allies. After the war, Thailand had to supply 1.5 million tons of rice to Western countries without charge, a burden on the country's economic recovery. The government tried to solve the problem by establishing a rice office to oversee the rice trade. During this period, a multiple-exchange-rate system was introduced amid fiscal problems, and the kingdom experienced a shortage of consumer goods.<ref name="Nilnopkoon">{{cite web| last=Nilnopkoon|first=Somsak|title=Abstract| url=http://www.thapra.lib.su.ac.th/objects/thesis/fulltext/snamcn/Somsak_Nilnopkoon/Fulltext.pdf|work=The Thai Economic Problems After the Second World War and the Government Strategies in Dealing with Them|publisher=Silpakorn University|access-date=25 August 2012}}</ref>

In November 1947, a brief democratic period was ended by a military coup and the Thai economy regained its momentum. In his dissertation, Somsak Nilnopkoon considers the period from 1947 to 1951 one of prosperity.<ref name="Nilnopkoon"/> By April 1948, Phibulsongkram, the wartime prime minister, returned to his previous office. However, he was caught in a power struggle between his subordinates. To preserve his power, Phibulsongkram began an anti-communist campaign to seek support from the United States.<ref name="สถิตนิรามัย">{{cite web|last=สถิตนิรามัย|first=อภิชาต|title=การเมืองของการพัฒนาเศรษฐกิจยุคแรก 2498–2506|url=http://onopen.com/2006/01/619|access-date=25 August 2012|url-status=dead|archive-url=https://web.archive.org/web/20120512044844/http://onopen.com/2006/01/619|archive-date=12 May 2012}}</ref> As a result, from 1950 onward, Thailand received military and economic aid from the US. The Phibulsongkram government established many state enterprises, which were seen as economic nationalism. The state (and its bureaucrats) dominated capital allocation in the kingdom. [[Ammar Siamwalla]], one of Thailand's most prominent economists, calls it the period of "bureaucratic capitalism".<ref name="สถิตนิรามัย"/>

====1955–1985====
In 1955, Thailand began to see a change in its economy fueled by domestic and international politics. The power struggle between the two main factions of the Phibul regime—led by Police General [[Phao Sriyanond]] and General (later, Field Marshal) [[Sarit Thanarat]]—increased, causing Sriyanonda to unsuccessfully seek support from the US for a coup against Phibulsongkram regime. Luang Phibulsongkram attempted to democratize his regime, seeking popular support by developing the economy. He again turned to the US, asking for economic rather than military aid. The US responded with unprecedented economic aid to the kingdom from 1955 to 1959.<ref name="สถิตนิรามัย"/> The Phibulsongkram government also made important changes to the country's fiscal policies, including scrapping the multiple-exchange-rate system in favor of a fixed, unified system which was in use until 1984. The government also neutralized trade and conducted secret diplomacy with the People's Republic of China, displeasing the United States.

Despite his attempts to maintain power, Luang Phibulsongkram was deposed (with Field Marshal [[Phin Choonhavan]] and Police General Phao Sriyanond) on 16 September 1957 in a coup led by Field Marshal Sarit Thanarat. The Thanarat regime (in power from 1957 to 1973) maintained the course set by the Phibulsongkram regime with US support after severing all ties with the People's Republic of China and supporting US operations in Indochina. It developed the country's infrastructure and privatized state enterprises unrelated to that infrastructure. During this period, a number of economic institutions were established, including the Bureau of Budget, the NESDC, and the [[Thailand Board of Investment]] (BOI). The National Economic and Social Development Plan was implemented in 1961.<ref>{{cite web|title=The National Economic and Social Development Plan|url=http://www.nesdb.go.th/Default.aspx?tabid=402|publisher=Office of the National Economic and Social Development Board|access-date=25 August 2012|url-status=dead|archive-url=https://web.archive.org/web/20120826021254/http://www.nesdb.go.th/Default.aspx?tabid=402|archive-date=26 August 2012}}</ref> During this period, the market-oriented Import-Substituting Industrialization (ISI) led to economic expansion in the kingdom during the 1960s.<ref>{{cite book|last=Unger|first=Danny|title=Building Social Capital in Thailand: Fibers, Finance and Infrastructure|year=1998|publisher=Cambridge University Press|page=61|url=https://books.google.com/books?id=UMlFNn9pcEIC&q=import+substituting+industrialization+Sarit&pg=PA61|isbn=9780521639316}}</ref> According to former President Richard M. Nixon's 1967 ''Foreign Affairs'' article, Thailand entered a period of rapid growth in 1958 (with an average growth rate of seven percent a year).<ref>{{cite web|title=Asia After Viet Nam|url=https://history.state.gov/historicaldocuments/frus1969-76v01/d3|work=Foreign Relations of the United States (FRUS), 1969–1976, Volume 1, Document 3|publisher=U.S. Department of State|access-date=26 August 2012}}</ref>

From the 1970s to 1984, Thailand suffered from many economic problems: decreasing US investment, budget deficits, oil-price spikes, and inflation. Domestic politics were also unstable. With the Vietnamese occupation of Cambodia on 25 December 1978, Thailand became the front-line state in the struggle against communism, surrounded by two communist countries and a socialist Burma under General [[Ne Win]]. Successive governments tried to solve the economic problems by promoting exports and tourism, still important for the Thai economy.<ref>{{cite web|title=พัฒนาการของเศรษฐกิจไทย|url=http://www.siamintelligence.com/development-of-thai-economy/|publisher=Siam Intelligence|access-date=25 August 2012}}</ref>

One of the best-known measures to deal with the economic problems of that time was implemented under General [[Prem Tinsulanonda]]'s government, in power from 1980 to 1988. Between 1981 and 1984, the government devalued the national currency, the Thai baht (THB), three times. On 12 May 1981, it was devalued by 1.07 percent, from THB20.775/US$ to THB21/US$. On 15 July 1981, it was again devalued, this time by 8.7 percent (from THB21/US$ to THB23/US$). The third devaluation, on 5 November 1984, was the most significant: 15 percent, from THB23/US$ to THB27/US$.<ref>{{cite book|author1-link=Yu Tzong-shian|last=Yu|first=Tzong-Shian|title=From Crisis to Recovery: East Asia Rising Again?|page=267|url=https://books.google.com/books?id=NUnVCgAAQBAJ&q=baht%20currency%20basket%201978&pg=PA267|publisher=World Scientific Publishing|access-date=9 January 2016|isbn=9789814492300|date=30 August 2001}}</ref> The government also replaced the country's fixed exchange rate (where it was pegged to the US dollar) with a "multiple currency basket peg system" in which the US dollar bore 80 percent of the weight.<ref>{{cite web|last=หมวกพิมาย|first=อดิศร|title=การเมืองเรื่องลดค่าเงินบาทสมัยพลเอกเปรม ติณสูลานนท์|url=http://www.kpi.ac.th/wiki/index.php/การเมืองเรื่องลดค่าเงินบาทสมัยพลเอกเปรม_ติณสูลานนท์|publisher=ฐานข้อมูลการเมืองการปกครอง สถาบันพระปกเกล้า|access-date=26 August 2012|url-status=dead|archive-url=https://web.archive.org/web/20120926051536/http://www.kpi.ac.th/wiki/index.php/%E0%B8%81%E0%B8%B2%E0%B8%A3%E0%B9%80%E0%B8%A1%E0%B8%B7%E0%B8%AD%E0%B8%87%E0%B9%80%E0%B8%A3%E0%B8%B7%E0%B9%88%E0%B8%AD%E0%B8%87%E0%B8%A5%E0%B8%94%E0%B8%84%E0%B9%88%E0%B8%B2%E0%B9%80%E0%B8%87%E0%B8%B4%E0%B8%99%E0%B8%9A%E0%B8%B2%E0%B8%97%E0%B8%AA%E0%B8%A1%E0%B8%B1%E0%B8%A2%E0%B8%9E%E0%B8%A5%E0%B9%80%E0%B8%AD%E0%B8%81%E0%B9%80%E0%B8%9B%E0%B8%A3%E0%B8%A1_%E0%B8%95%E0%B8%B4%E0%B8%93%E0%B8%AA%E0%B8%B9%E0%B8%A5%E0%B8%B2%E0%B8%99%E0%B8%99%E0%B8%97%E0%B9%8C|archive-date=26 September 2012}}</ref> Calculated from the IMF's World Economic Outlook Database, in the period 1980–1984, the Thai economy had an average GDP growth rate of 5.4 percent.<ref name=WEOD>{{cite web|title=Thailand|url=http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?pr.x=51&pr.y=10&sy=1980&ey=1984&scsm=1&ssd=1&sort=country&ds=.&br=1&c=578&s=NGDP_R%2CNGDP_RPCH%2CNGDPD&grp=0&a=|work=World Economic Outlook Database, Apr 2012|publisher=International Monetary Fund|access-date=26 August 2012}}</ref>

====1985–1997====
Concurrent with the third devaluation of the Thai baht, on 22 September 1985, Japan, the US, the [[United Kingdom]], [[France]], and West Germany signed the [[Plaza Accord]] to depreciate the US dollar in relation to the yen and the [[Deutsche Mark]]. Since the dollar accounted for 80 percent of the Thai currency basket, the baht was depreciated further, making Thailand's exports more competitive and the country more attractive to foreign direct investment (FDI) (especially from Japan, whose currency had appreciated since 1985). In 1988, Prem Tinsulanonda resigned and was succeeded by [[Chatichai Choonhavan]], the first democratically elected prime minister of Thailand since 1976. The [[Cambodian-Vietnamese War]] was ending; Vietnam gradually retreated from Cambodia by 1989, enhancing Thai economic development.

After the 1984 baht devaluation and the 1985 Plaza Accord, although the public sector struggled due to fiscal constraints, the private sector grew. The country's improved foreign trade and an influx of foreign direct investment (mainly from Japan) triggered an economic boom from 1987 to 1996. Although Thailand had previously promoted its exports, during this period the country shifted from [[import substitution industrialization|import-substitution]] (ISI) to [[export-oriented industrialization]] (EOI). During this decade the Thai GDP (calculated from the IMF World Economic Outlook database) had an average growth rate of 9.5 percent per year, with a peak of 13.3 percent in 1988.<ref name=WEOD /> In the same period, the volume of Thai exports of goods and services had an average growth rate of 14.8 percent, with a peak of 26.1 percent in 1988.<ref name=WEOD />

Economic problems persisted. From 1987 to 1996, Thailand experienced a [[Current account (balance of payments)|current account]] deficit averaging −5.4 percent of GDP per year, and the deficit continued to increase. In 1996, the current account deficit accounted for −7.887 percent of GDP (US$14.351&nbsp;billion).<ref name=WEOD /> A shortage of capital was another problem. The first [[Chuan Leekpai]] government, in office from September 1992 to May 1995, tried to solve this problem by granting Bangkok International Banking Facility (BIBF) licenses to Thai banks in 1993. This allowed BIBF banks to benefit from Thailand's high-interest rate by borrowing from foreign financial institutions at low interest and loaning to Thai businesses. By 1997, foreign debt had risen to US$109,276 billion (65% of which was short-term debt), while Thailand had US$38,700 billion in international reserves.<ref name="Chutipat">{{cite web|last=Chutipat|first=Weraphong|title=วิกฤตการณ์ต้มยำกุ้ง ตอน "6 สาเหตุ ที่ทำให้….. ประเทศไทยเข้าสู่..วิกฤต !!"|url=http://www.doctorwe.com/variety/20120522/1279|access-date=26 August 2012|url-status=dead|archive-url=https://web.archive.org/web/20120603020910/http://www.doctorwe.com/variety/20120522/1279|archive-date=3 June 2012}}</ref> Many loans were backed by real estate, creating an [[economic bubble]]. By late 1996, there was a loss of confidence in the country's financial institutions; the government closed 18 [[Trust company|trust companies]] and three [[commercial bank]]s. The following year, 56 financial institutions were closed by the government.<ref name="Chutipat"/>

Another problem was foreign speculation. Aware of Thailand's economic problems and its [[currency basket]] exchange rate, foreign speculators (including [[hedge fund]]s) were certain that the government would again devalue the baht, under pressure on both the [[Spot market|spot]] and [[forward market]]s. In the spot market, to force devaluation, speculators took out loans in baht and made loans in dollars. In the forward market, speculators (believing that the baht would soon be devalued) bet against the currency by contracting with dealers who would give dollars in return for an agreement to repay a specific amount of baht several months in the future.<ref>{{cite web|title=How the baht was 'attacked'|url=http://thanong.tripod.com/11282001.htm|access-date=26 August 2012}}</ref>

[[File:USD to Thai Baht exchange rate.webp|thumb|290px|
{{legend|#00247D|[[United States dollar|USD]] / [[Thai baht|Thai Baht]] [[exchange rate]] |outline=#EF3340}}
]]
In the government, there was a call from Virapong Ramangkul (one of Prime Minister [[Chavalit Yongchaiyudh]]'s economic advisers) to devalue the baht, which was supported by former Prime Minister Prem Tinsulanonda.<ref>{{cite web|title="ดร.โกร่ง" กุนซือเศรษฐกิจ 7 สมัย 7นายกฯ กับชีวิตเรือนน้อยในป่าใหญ่|url=http://www.matichon.co.th/news_detail.php?newsid=1345708723&grpid=01&catid=&subcatid=|publisher=Matichon Online|access-date=26 August 2012|url-status=dead|archive-url=https://web.archive.org/web/20130526204449/http://www.matichon.co.th/news_detail.php?newsid=1345708723&grpid=01&catid=&subcatid=|archive-date=26 May 2013}}</ref> Yongchaiyudh ignored them, relying on the [[Bank of Thailand]] (led by Governor Rerngchai Marakanond, who spent as much as US$24,000&nbsp;billion – about two-thirds of Thailand's international reserves) to protect the baht. On 2 July 1997, Thailand had US$2,850 billion remaining in international reserves,<ref name="Chutipat"/> and could no longer protect the baht. That day Marakanond decided to [[Floating exchange rate|float]] the baht, triggering the [[1997 Asian Financial Crisis]].

====1997–2000====
[[File:Asian Financial Crisis EN vector.svg|thumb|Countries affected by the [[1997 Asian financial crisis]]]]
The Thai economy collapsed as a result of the [[1997 Asian financial crisis]]. Within a few months, the value of the baht floated from THB25/US$ (its lowest point) to THB56/US$. The [[Stock Exchange of Thailand (SET)]] dropped from a peak of 1,753.73 in 1994 to a low of 207.31 in 1998.<ref>{{cite web|title=โล่งแผนคุมบาทไม่เอี่ยวกระทบหุ้น SET ติดปีก ดัชนีดีดบวก 14 จุด|url=http://www.manager.co.th/StockMarket/ViewNews.aspx?NewsID=9530000143191|publisher=Manager Online|access-date=27 August 2012|archive-date=1 November 2012|archive-url=https://web.archive.org/web/20121101152259/http://www.manager.co.th/StockMarket/ViewNews.aspx?NewsID=9530000143191|url-status=dead}}</ref> The country's GDP dropped from THB3.115&nbsp; trillion at the end of 1996 to THB2.749&nbsp; trillion at the end of 1998. In dollar terms, it took Thailand as long as 10 years to regain its 1996 GDP. The unemployment rate went up nearly threefold: from 1.5 percent of the labor force in 1996 to 4.4 percent in 1998.<ref name="Thailand">{{cite web |title=Thailand |url=http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weorept.aspx?sy=1995&ey=2007&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=24&pr1.y=13&c=578&s=NGDP_R%2CNGDP_RPCH%2CNGDPD%2CTX_RPCH%2CLUR%2CBCA%2CBCA_NGDPD&grp=0&a= |access-date=27 August 2012 |work=World Economic Outlook Database |publisher=International Monetary Fund}}</ref>

A sharp decrease in the value of the baht abruptly increased foreign debt, undermining financial institutions. Many were sold, in part, to foreign investors while others went bankrupt. Due to low international reserves from the Bank of Thailand's currency-protection measures, the government had to accept a loan from the [[International Monetary Fund]] (IMF). Overall, Thailand received US$17.2&nbsp;billion in [[aid]].<ref>{{cite web|title=Recovery from the Asian Crisis and the Role of the IMF|url=http://www.imf.org/external/np/exr/ib/2000/062300.htm#box1|publisher=International Monetary Fund|access-date=27 August 2012}}</ref>

The crisis impacted Thai politics. One direct effect was that Prime Minister [[Chavalit Yongchaiyudh]] resigned under pressure on 6 November 1997, succeeded by opposition leader [[Chuan Leekpai]]. The second Leekpai government, in office from November 1997 to February 2001, tried to implement economic reforms based on IMF-guided [[Neoliberalism|neo-liberal capitalism]]. It pursued strict fiscal policies (keeping interest rates high and cutting government spending), enacting 11 laws it called "bitter medicine" and critics called "the 11 nation-selling laws". The Thai government and its supporters maintained that with these measures, the Thai economy improved.

In 1999, Thailand had a positive GDP growth rate for the first time since the crisis.{{citation needed|date=October 2023}} Many critics, however, mistrusted the IMF and maintained that government-spending cuts harmed the recovery. Unlike economic problems in Latin America and Africa, they asserted, the Asian financial crisis was born in the private sector and the IMF measures were inappropriate. The positive growth rate in 1999 was because the country's GDP had gone down for two consecutive years, as much as −10.5 percent in 1998 alone. In terms of the baht, it was not until 2002 (in dollar terms, not until 2006) that Thailand would regain its 1996 GDP. An additional 1999 loan from the Miyazawa Plan made the question of whether (or to what extent) the Leekpai government helped the Thai economy controversial.