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Southeast Asian Affairs 2005 Thailand's Paradoxical Recovery Peter Warr In Thailand's February 2005 parliamentary elections Prime Minister Thaksin Shinawatra's Thai Rak Thai (Thais Love Thais) Party achieved a sweeping victory. It had already formed the first elected government in Thai history to serve a full four-year term and was now the first individual party to be elected to a full parliamentary majority, and that a massive one.1 The party's electoral success owes much to the Prime Minister's own political skills and much also to the economic recovery achieved under his government. In 2004, for the first time since the Asian crisis of 1997-98, real output per person exceeded its pre-crisis level of 1996 and in this respect Thailand had finally emerged from the economic after-effects of the crisis. In many dimensions, the economy was booming. Despite setbacks from rural drought, panic-producing outbreaks of avian influenza and Severe Acute Respiratory Syndrome (SARS), combined with continued political violence in the Muslim southern provinces, estimated growth of real GDP reached a respectable 6.4 per cent in 2004, only marginally below the 2003 growth rate of 6.8 per cent. Growth for 2005 is expected to be slower, at a little over 5 per cent, reflecting a slowdown in export growth, diminished inflows of foreign direct investment (FDI) and the economic consequences of the tsunami of 26 December 2004. The terrible human costs of the tsunami dominate its economic effects, but the latter are nevertheless significant. Thailand was less severely affected than some other countries with coastlines facing the Indian Ocean, especially Indonesia, Sri Lanka and possibly Myanmar (Burma), but many thousands lost their lives (perhaps between 8,000 and 9,000 out of a regional total approaching 300,000) and entire communities were destroyed.2 Tourism was sharply affected in the short term and some long-term effect seems certain, but the long-term size of these effects remains Peter Warr is the John Crawford Professor of Agricultural Economics and Director of the Poverty Research Centre, The Australian National University, Canberra. 386Peter Warr unclear. Despite the inevitable problems arising from a disaster of this magnitude, the Thai response in assisting the victims was impressive, partly because ofthe good infrastructure already in place, partly because of a relatively effective government response, but also because of the kindness exhibited by ordinary Thai people towards those who suffered, both Thais and foreigners. Thailand's economic recovery is significant and greatly welcome. This chapter examines its features at four levels. The first section describes the overall macroeconomic picture. The paradox is that the recovery is quite different from the economic outcome that Prime Minister Thaksin promised and seemingly planned, both in its rate and its composition. The second section reviews the record of the Thaksin government on poverty reduction relative to its stated goals. Third, we consider the economic origins ofthe ongoing political strife in the country's Muslim south. Do economic circumstances in this part ofThailand help in understanding the nature of this chronic conflict? The fourth section discusses the economic effects of the tsunami of December 2004. Finally, we review future prospects. Macroeconomics3 Thailand's recovery from the crisis demonstrates the resilience ofits market-oriented economy and, to a significant extent, the success ofThaksin Shinawatra's government in restoring economic confidence. The confidence-restoring feature of Thaksin's government lay not so much in the particular actions taken to promote economic recovery as in the fact that to many Thais the government seemed, unlike its immediate predecessors, to be doing something, to be capable of making clear decisions, and to be in control. TABLE 1 Thailand: Rates of growth of GDP and GDP per capita, 1951-2004 D01W^D ? /-r->D ^ Real GDP growth PeriodReal GDP growth* a per capita 1951 to 1986 (Phase I) Pre-boom6.53.9 1987 to 1996 (Phase II) Boom9.28.0 1997 to 1998 (Phase III) Crisis-6.1-7.1 1999 to 2004 (Phase IV) Post-crisis4.43.7 Whole period 1951 to 20046.24.2 Sources: Bank of Thailand: data for 1951 to 1986; and National Economic and Social Development Board: data from 1987. Thailand...


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