- Erik Offerdal, Kalpana Kochhar, Louis Dicks-Mireaux, Jianping Zhou, Mauro Mecagni, and Balázs Horváth
- Published Date:
- December 1996
Thailand’s growth performance during the past three decades has been remarkable by any yardstick. Like most low-income developing countries, Thailand was severely affected by the external shocks of the late 1970s and early 1980s. Unlike many developing countries in which these shocks proved to be highly destabilizing, however, Thailand showed remarkable resilience. Price stability was quickly restored, and the Thai economy emerged from this period with a strong recovery in growth and investment in an environment of overall macro-economic stability (Figure 1). This paper examines Thailand’s macroeconomic and structural policies and the evolution of growth and investment, with a view to understanding the main factors that led to this successful outcome.
Figure 1.Selected Economic Indicators
Sources: International Monetary Fund, International Financial Statistics (various issues); World Bank, World Debt Tables (various issues); and IMF staff estimates.
The next section discusses the main factors underlying Thailand’s long-term growth performance, factor accumulation, and productivity trends, in the context of cross-country econometric studies. The paper then focuses on the behavior of key macro-economic variables in response to the shocks of the late 1970s and early 1980s, during the ensuing adjustment period in the first half of the 1980s, and during the surge in capital inflows in the second half of the 1980s. It also previews the major macro-economic and structural policy responses to these shocks. Next, the paper undertakes a detailed examination of the role of policies—fiscal, monetary, exchange rate, and structural—in the adjustment process.1 A detailed econometric study of private investment behavior in Thailand is provided in the appendix.