Thailand’s export-driven economy usually vacillates with the global economy because of its dependence on external demand. However, government spending to rebuild infrastructure in the wake of last year’s disastrous flooding has buoyed the Thai economy when other export-reliant economies around the globe have suffered.
Building on this foundation of domestic demand, Thailand looks ready to take advantage of global stimulus packages, both confirmed and hypothetical.
The Chinese government has already enacted stimulus to promote slumping growth on the Mainland. As China is one of Thailand’s largest trading partners, the Southeast Asian economy will likely benefit from the residual effects of such measures.
With the United States and Europe mulling over their own potential stimulus packages, the implementation of such economic catalysts would be a net positive for Thailand’s exports. As a result of stimulus rumors, the Thai baht has strengthened over the past week.
For those considering Thailand, it is imperative to incorporate the political situation into your investment thesis. The country’s political stability is feeble; with an awkward transition in the monarchy looming on the horizon. The government could potentially have trouble maintaining order given the grievances of the so-called “Red Shirt” faction that caused 87 deaths in 2010, and last year’s opposition win in the general election.
The success of the Thai economy, evidently, is contingent upon the health of the global economy. It is probably too early to jump into THD; however, once the euro zone is able to bring some order and/or clarity to its crisis, the Thai economy is well positioned to take advantage of a return to growth.