# _Stellar Growth_

Thailand’s economic record is impressive by any standards. Since 1960, the economy expanded in constant 2000 prices from under $9 billion to over $140 billion. Gross national income per capita rose almost six fold, increasing from $332 in 1960 to $2276 in 2003 (Figure 2.A). Thailand’s average annual per capita growth rate of 4.6 percent was at least 0.9 percent higher than any of the averages of income country groups (Figure 2.B).<sup>1</sup> Out of the 96 countries with available data, this was worldwide the seventh best performance, which lifted Thailand in the per capita income ranking from 72<sup>nd</sup> to 48<sup>th</sup> place. Setting aside city states and islands (Singapore, Malta and Hongkong) and mining economies (Botswana), only Korea and China have grown faster than Thailand over the last four and a half decades. Among the group of ASEAN countries, Thailand’s long term per capita growth rate exceeds Malaysia’s by 0.7 percent, Indonesia’s by 1.1 percent, and the Philippines’ by 3.3 percent (Figure 2.C). Thailand’s record stands out also for another reason: per capita growth rates were consistently positive from 1961 until 1997 (Figure 2.D). By comparison, Korea, Malaysia, Indonesia and the Philippines experienced between one to five years of negative growth over this period.

While Thailand’s growth was generally high, it is possible to separate five major episodes since the early 1960s (Figure 2.E). The decades of the 1960s and 1970s was the period of import-substitution policies, implemented primarily through trade tariffs and investment incentives. Real per capita GDP growth averaged 4.8 percent, lower than growth in Korea, Singapore and Taiwan, but higher than growth in Malaysia, Indonesia and the Philippines. The second oil price shock trigged a devaluation in the peg against the US dollar and led Thailand to change course and adopt export orientation. In line with a sluggish global economy, the growth rate dropped to around 3.4 percent (Figure 2.E). Due to a combined export- and investment boom, it sharply recovered to 8.1 percent from 1987 to 1996 – this was worldwide the second highest growth rate after China.

Thailand was hit by the 1997/98 Asian crisis earlier and harder than neighboring countries. Real per capita growth turned negative at -6.6 percent in 1997 and 1998. Supportive macroeconomic policy and external demand fostered an economic recovery since 1999, although the rebound was initially weaker than in Korea and Malaysia (Figure 2.F). Growth increased from 3.9 percent in 2000 to 5.4 percent in 2004, averaging 4.2 percent since 1999, supported by higher investment due to rising capacity utilization and lower interest rates, favorable crop prices and, most of all, expanding exports.

> 1 The World Bank classifies economies according to 2004 GNI per capita, using the Atlas method. The groups are: low income, $825 or less; lower middle income, $826 - $3,255; upper middle income, $3,256 - $10,065; and high income, $10,066 or more.  Thailand’s GNI per capita in 2004 was $2,440.  For example, relative to OECD high-income countries, Thailand’s per capita income level increased from 3.6 percent in 1960 to 8.1 percent in 2003. In terms of purchasing power parity, it rose from $1,990 in 1975 to $7,175 in 2003, or from 13 percent to 27 percent relative to the income level of OECD high-income countries.

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