ABSTRACT
However, in 1997, the country experienced its worst economic recession to date, triggered by a foreign exchange crisis, known as the 1997 Asian financial crisis. This financial crisis brought the Thai economy to its knees, forcing the government to devalue its currency (Thai baht, THB) and to seek support from the IMF. Several years later, in the early 2000s Thailand’s economy began a modest recovery, thanks to the then government’s Keynesian approach of stimulating economic activities through public investment in infrastructure projects. This significantly helped to offset depressed spending in the private sector. For example, from 2002-2007,
Thailand’s GDP growth averaged at about 5 percent. However, the global economic downturn in 2008 cut Thailand’s exports severely, which in turn caused its economic growth to fall to about 2 percent. Following the 2008 economic downturn, Thailand’s economy rebounded strongly with GDP growth reaching 7.8 percent and 6.4 percent in 2010 and 2012, respectively. This was in part due to loose monetary policy by the US Federal Reserve, which caused the inflow of capital into Thailand’s bond and equity markets. As the US Federal Reserve slowly unwinds its policy, increased capital outflow from the Thai markets can be expected. This may hinder the country’s economic growth because Thailand has employed debt-funded domestic demand since 2009 to promote economic growth. In 2013, Thailand experienced a mild recession, and in 2014 the Bank of Thailand projected that the GDP may grow a scant 3 percent.
