The State of the Thai Economy and Tourism
Let’s take a quick snapshot look at the Thai economy, especially since the recent news that Thailand’s current account became positive for the first time in four months.
Exports account for more than 2/3 of the country’s GDP. The current account measures the difference between exports and imports, and Thailand traditionally runs a surplus (meaning it exports more than it imports). However, recently low commodity prices (weakening agricultural exports) and high consumer credit (implying strong imports of consumer products) turned the usual positive current account to a negative.
Since the deficit meant that Thailand needed more foreign capital, investors became worried and began moving money out of the country. There was a feeling that the US would begin pulling back from its expansionary policies causing interest rates there to rise, making the US a better place to invest. The Stock Exchange of Thailand (SET) fell more than 25% in a few months from a high of 1643 in May to a low of 1275 in August, while the baht weakened against the US Dollar from 28 in April to 32.3 in September.
The current surplus returning to a surplus had a positive effect. The US Fed announcing the continuation of its massive bond buying pushed US yields down and made emerging markets more attractive. Thus the SET has risen about 8% in the last month to about 1400, and the baht has strengthened against the USD to 31. Longer term, the baht has weakened a little over 1% in the last 12 months (against the USD) while the SET is up 7% in the same time. Exports grew 2.5% while imports declined by the same percentage.
The Asian Development Bank, however, recently cut its forecast for the country’s GDP growth from 4.9% to 3.8%, although 2014 growth was projected at a healthy 4.9%. The Finance Ministry cut the outlook on growth for 2013 to 3.7 percent from 4.5. So while the first half of 2013 showed the Kingdom in a mild recession, the second half figures are starting to show a slight rebound, and if the US economy (along with the Euro Zone and China) can show some signs of growth that should bode well for Thailand.
Although tourism accounts for a larger share of Thailand’s economy than any other Asian nation, it still represents only 6% of GDP. Tourism has been especially strong recently.
Let’s take a long term view, starting from 2001 when Stickman’s weekly column first appeared. At that time tourist arrivals were about 10 million per year. They grew steadily thru SARS, the tsunami, and a coup to 14.5 million in 2007 but then a period of political instability combined with the global economic crisis of 2007/08 caused a flattening of growth and by 2010 arrivals were 16 million. Despite the flooding, tourism has sharply rebounded and arrivals are now being forecast for 2013 at between 25 – 26 million.
Already thru August actual arrivals are 17 million, more than the annual total for 2010, with the high season still to come. Arrivals for the low season month of August were 2.5 million, more than the high season month of December, 2012!
Where do these tourists come from? More than half come from Asia, with (no surprise) China representing the largest bloc. In fact, from January to August 2013 Chinese tourists were 3.2 million (up 88% vs. 2012), by far the largest nationality of tourists to Thailand from anywhere in the world. Compare that figure with Russia (over 1m tourists, +37%), Australia (580k, -4%), the UK (590K, +3%), and USA (535k, +8%). China and Russia are now the growth drivers of Thai tourism replacing Europe. (Total arrivals from the Middle East were actually down 4% to 325k).
Asian visitors tend to stay for shorter periods, seven days vs. 15 for Europeans, but come more often. Interestingly, there is not a lot of difference in per person spending, with the Chinese spending USD155/person/day, Russians USD144 and Europeans the least (USD128).
It is interesting how impressions are often misleading. There has been talk in these pages recently about the major influx of “Arabs” yet according to the numbers arrivals are down from the Middle East. No one seems to complain about the Chinese yet they must be everywhere. <I think it is probably a case that the Arabs have been spotted in areas traditionally popular with Westerners i.e. Nana in Bangkok – Stick>
I had always believed that Asians, especially the Chinese, spent cheaply during their holidays but now I see that they spend more (per day) than Europeans (obviously if the average European visit is twice as many days than Asians then European spending in total will be almost double that of Asians).
A while ago there were many submissions saying that tourism in Thailand will die due to things like the strengthening baht, political instability, higher beer prices and worsening attitudes among bar girls. While it may be true that the bar scene is declining (or possibly just evolving) it is certainly not true that there has been a negative effect on tourism. Tourism is booming and shows no likelihood of slowing down. While the overall Thai economy is still in an uncertain state, reports of its collapse may have been over exaggerated.
Yep, tourist numbers are booming and Thailand as a tourist product is doing extremely well. It will continue to boom, I reckon and the next major milestone will be when 50 million international visitors arrive annually. Around 2020, perhaps? I'd love to know more about how the average daily spend of the Chinese is worked out because with what I see with my own eyes, the Chinese don't spend much on hotels or food…so if these numbers are correct, I guess they are doing a lot of shopping.
What is interesting for some Stickman readers is that every year, sex tourists become a smaller and smaller part of the tourist market. Where once some used to think that they were "needed", I think it's pretty obvious that that is no longer the case…