Thailand’s Current Economic Data
A country’s GDP (Gross Domestic Product) is typically calculated by totalling all the goods and services produced by that country in a single year, although some organisations use the cumulative annual incomes of all working citizens to calculate GDP.
A steadily increasing GDP usually translates into a rising standard of living, which is accompanied by greater demand for property. This has certainly been the case in Thailand.A part from the downturn caused by the pandemic, this has certainly been the case in Thailand.
Compared with many countries in the region, Thailand has achieved satisfactory GDP growth. In the third quarter of 2022, Thailand’s GDP grew 4.5% year-on-year, which was the most in 5 quarters.
GDP PER CAPITA
This measurement takes the total GDP of a country and divides it by the population of that country. As the standard of living in a country rises, so too does GDP per capita, making it a good indicator of a country’s economic performance.While distribution of wealth is never perfect, overall the Thai population has certainly benefited from the increase in GDP.
After more than doubling during the course of two decades, Thailand’s Per Capita GDP fell 6.42% from 2019 to 2020. It has since begun to recover (up 1.6% in 2021).
HOUSEHOLD DEBT TO GDP
Household debt measures the sum total of home mortgage debt, car loans, student loans, credit card debt, etc. relative to the size of the economy. High levels of household debt can lead to or coincide with economic difficulties, and excessive levels must be addressed.
As an economy matures and incomes rise, debt levels will increase. The ratio of household debt to GDP serves as an early warning sign that the burden of interest payments on debt is becoming too much for a country’s citizens to handle.
Thailand currently has the 27th highest GDP in the world, the 93rd highest Per Capita GDP, but the 10th largest household debt to GDP ratio in the world.
Between January 2020 and January 2021 household debt in Thailand exploded by nearly on-third to 91.7% of GDP. By the second quarter of 2022, this had fallen to 88.9% of GDP.
GOVERNMENT DEBT TO GDP
Government debt, also called public debt (or sovereign debt), refers to money borrowed by a national government and owed to parties inside or outside that country. The debt usually consists of government bonds which are purchased by individuals, corporations or by other foreign governments.
A government that borrows and spends less than it generates in revenue runs a surplus. A country that borrows and spends more than it generates in revenue runs a deficit.
As long as it remains manageable, public debt is a great way for governments to fuel growth and keep their economic engine running. Problems can arise, however, when a country’s borrowing reaches levels that make it difficult to keep up with the interest payments.
If that happens, the perceived risk to investors increases, and they may begin to demand higher yields on the money they have lent the government. So when debt becomes excessively large it generally pushes up interest rates and in extreme cases, when a country can no longer service its debt, it defaults.
Most countries aim for a perfect equilibrium between debt issued and stimulus achieved, meaning the debt must be large enough to achieve the desired economic benefits, while remaining small enough to keep the serving costs as a percentage of GDP manageable, which in turn keeps interest rates in check.
After keeping this ratio below 50% for the better part of 20 years, Thailand’s Debt to GDP rose to 59.61% in 2021. While a substantial increase, it remains perfectly acceptable for an emerging country such as Thailand.
Rising unemployment has never been good for the property market. New property purchases, especially in developments targeting Thai buyers, need a vibrant local economy with good employment prospects. Without income, people are unable to keep up mortgage payments, or even pay for the upkeep on their property. If rising unemployment forces property sales, then there is downward pressure on prices.
Unemployment in Thailand is low. The pandemic saw this rate rise to 2.25% in Q3 2021 – the first time in nearly 15 years it had been higher than 2% – but as of Q3 2022, it was down to 1.23%.
The inflation rate gives us an idea of the pace of any increase in the cost of living.
It is important to keep inflation in check because when inflation is high people tend to spend less. They may also delay or completely put off major purchasing decisions, which slows the economy. Because consumer spending is important for overall economic health, governments want to make sure inflation is contained sufficiently enough to keep people spending.
Global real estate suffers during periods of high inflation because people have less money to spend, and may delay their home purchase. Even though the price of real assets (e.g. precious metals) is going up, any owner trying to sell during a period of high inflation will likely be forced to lower their asking price due to a lack of buyers. High-end properties may partially avoid this scenario.
Inflation in Thailand has generally followed the same trend as the rest of the world, reaching nearly 8% in mid-2022. As of January 2023, it had eased to 5.02%.
MANUFACTURING PRODUCTION INDEX (MPI)
For emerging markets such as Thailand, with its huge manufacturing base, the MPI is an important gauge. This metric usually moves hand-in-hand with others indices, but even on its own the MPI offers clear indications of whether an economy is moving forward. Certainly in Thailand, it is a useful tool for tracking local economic activity.
After falling sharply in 2020, January 2023 saw the manufacturing production index reach its second highest level in recorded history.
FOREIGN EXCHANGE RESERVES
Foreign exchange reserves are the foreign currency held by a central bank, which take the form of paper assets or government securities from other countries, denominated in another currency. Foreign reserves are important insofar as they provide governments with resilience during periods of turmoil, whether internal or in other countries/regions around the world.
Central banks usually diversify their holdings, but the tendency is to hold more US Dollars than other currencies. As China’s economy grows, central banks are increasing their exposure to the Chinese Yuan, instead of the traditional currencies such as the Euro, British Pound, Japanese Yen and the Swiss Franc.
It is generally accepted that the more foreign reserves a country holds, the better it is able to withstand any economic shocks that may transpire. After seeing its foreign currency reserves peak at nearly $260 billion, by September, 2022, this number had fallen below US$200 billion for the first time since 2018. Foreign currency reserves have recovered to stand at US$ 225.5 billion in January, 2023.
THAILAND GOLD RESERVES (IN TONS)
Most central banks stock up on gold in the same way they accumulate foreign reserves.
Generally speaking, a central bank increasing gold reserves points to a stronger economy. Gold has for millennia been regarded as imperishable, and a true store of wealth, so the greater the reserves of a nation, the stronger its tangible wealth and the more likely it is to be resilient in the face of any economic shocks.
When the 1997 Asia Crisis struck, Thailand had $914 million in gold reserves, which had been reduced to $713 million by the following year. Since then, Thailand has been gradually increasing its gold reserves.
The dollar value of the country’s gold holdings currently stands at approximately US$ 14.4 billion, which is the highest it has ever been. Thailand has continued to add to its reserves, and is obviously in a vastly stronger position today than in the run up to the Asia Crisis.