Economic conditions of Thailand vs Ireland

5/24/2018 Economic conditions of Thailand vs Ireland

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Chapter 1 : Economic Background

1.1 Economic background of Thailand

Thailand is a country located in Southeast Asia and was known as Siam until

1939, when its name was changed to Thailand. Thailand is the only country in Southeast

Asia not to be colonised by any European power. Thailand is currently the second largest

economy in Southeast Asia.

From 1990 to 1995, the Thai economy grew at an average rate of 8-9 percent

which proved Thailand to be one of the world's fastest growing economy at the time.

After recovering from the financial crisis of 1997-1998, the Thai economy improved

again and from 2002 to 2007, Thailand's growth averaged around 5 percent.

Thailand's economic growth slowed due to global economic conditions and

political uncertainty in 2009 and again, in 2011, from devastating floods. Due to the

global financial crisis of 2008- 2009, the economy of Thailand contracted yet again.

However, Thailand's economic activity is gradually returning to normal, with quarterly

economic growth rates now closer to levels seen before the global financial crisis hit in

2008. The gross domestic product (GDP) rebounded from the floods at 6.4 percent in

2012 and is highly expected to continue growing at 5.0 percent in 2013.

The industrial and the service sectors serve as the two main sectors in the Thai

gross domestic product. The telecommunications sector as well as other types of services

are emerging as the center for the industrial expansions and economic competitiveness

for the economy of Thailand. Thailand's increasingly diversified manufacturing sector is

also seen as a large contributor to growth. Rice is the country's most important crop, with

Thailand being the world's largest exporter of rice.

However, Thailand's economic progress is not shared equally throughout the

country, with some regions, particularly the North and Northeast, lagging behind the rest

of the country in terms of poverty reduction. Inequalities in terms of incomes and

opportunities have also been persistent.


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1.2 Economic background of Ireland

Ireland is a small, modern, trade-dependent economy. Officially known as The

Republic of Ireland, the country is located in Europe and shares a border with Northern

Ireland, one of the constituent countries of the United Kingdom. Ireland had a period of

extraordinary growth from 1993 to 2007, becoming one of the world's most dynamic,

innovative and globalised economies, with extensive external trade and investment links.

In 2008, partly due to the open nature of its economy Ireland began to feel the

effects of the global economic downturn. Pressure on the economy was significantly

increased by the end of a prolonged Irish property market boom and problems within the

domestic banking system. This led to a period of severe recession and a sharp contraction

in output.

Ireland was among the initial group of 12 EU nations that began circulating the

euro on 1 January 2002. Its GDP growth averaged 6% in 1995-2007, but economic

activity has dropped sharply since the onset of the world financial crisis, with GDP

falling by over 3% in 2008, nearly 7% in 2009, and less than 1% in 2010.

In the wake of the collapse of the construction sector and the downturn in

consumer spending and business investment due to the 2008 recession, the export sector,

which is mostly dominated by foreign companies or individuals, has become a key

component of Ireland's economy. Agriculture, which was once the most important sector,

is now overtaken by the industry and services sectors.

The country is one of the largest exporters of pharmaceutical and software-related

goods and services in the world. There also have been significant efforts to increase the

use of renewable energy in Ireland, particularly in wind power, where a large number of

wind farms are constructed.


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Chapter 2: Analysis

2.1 Gross Domestic Product (GDP) between Ireland and Thailand

Figure 2.1

Figure 2.1 above explains the GDP rate between Ireland and Thailand from the

year 2000 to the year 2011. From the figure above, it is discoved that Thailand, after a

drop in 2001, had a productive growth for up to 8 years, before experiencing a hard drop

from the year 2007 lasting until 2009. Ireland, whose GDP was more stable during the

years 2000 to 2007 had a more serious drop than Thailand lasting from 2007 to 2009.

After 2009, both economies experienced a rapid growth in terms of GDP although

Thailand's was the more higher of the two.

According to the figure above, both countries had their lowest point in terms of

GDP in 2009 with Ireland having a negative GDP of -5.5% and Thailand having a

slightly better drop of -2.3%. The reason for this sudden drop in both countries was the

global financial crisis which lasted from 2008 to 2009. Thailand's export-driven economy

was hard-hit by the global financial meltdown and there has been a severe decline in

production in the Thai economy since the beginning of 2009. The floods, which struck in

the second half of 2011, damaged key industries across the country, including agriculture


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and manufacturing, and brought on a sharp drop in output, with GDP growth for the

fourth quarter of year 2011 dropping to -8%. Meanwhile, Ireland's severe drop during the

financial crisis was due to a crash in the real estate market and underdeveloped public

financial management and anti-corruption systems and adoption of poor policies

including a corporate tax system that fostered non-tradable goods and services through

the construction industry. This led to an expansion of credit and a property bubble which

petered out in 2007. Irish banks, already over-exposed to the Irish property market, came

under severe pressure in September 2008 accentuating the situation. Economic activity

dropped sharply in 2008 and the country entered into a recession for the first time in more

than a decade and is struggling to recover since.

Thailand's highest point in terms of GDP was in the year 2010, where it grew

7.8% while Ireland's highest point was in the year 2005, where it grew to 5.9%. Ireland's

high growth was attributed to the Celtic Tiger period. During that time, Ireland

experienced a boom in which it was transformed from one of Europe's poorer countries

into one of its wealthiest. The causes of Ireland's growth was due to state-driven

economic development; social partnership between employers, government and unions;

decades of investment in domestic higher education; targeting of foreign direct

investment; a low corporation tax rate; an English-speaking workforce, and membership

of the European Union which provided transfer payments and export access to the Single

Market. Meanwhile, the Thai economy posted a recovery in 2010, growing at 7.8% on

the strength of its exports, which surged by 28%.To offset weak external demand and to

shore up confidence, the Abhisit administration introduced two non-budgetary stimulus

packages worth $43.4 billion focusing in key sectors such as mass transit and

transportation, irrigation, education, public health, and energy to mitigate the harsh

effects of the Crisis of 2008-2009.


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2.2 Comparison between the Unemployment rate in Thailand and Ireland and

its reasons.

Based on the graph above, both countries show distinct patterns regarding

unemployment. It is evident that the unemployment rate for Ireland is markedly higher

compared to Thailand's unemployment rate. Ireland's unemployment rate was rather flatand stable in the beginning, from 2000 to 2007, but it began to rise in 2007 and that rise

has not stopped. In contrast, the unemployment rate of Thailand is rather flat and

unchanging. This denotes that Thailand's economy is able to provide enough jobs for its

labour force compared to Ireland.

Thailand's highest unemployment rate was 2.6% in 2002. This was caused by a

variety of factors, mainly political unrest and environmental issues such as floods. The

decline in the agricultural industry is another significant factor of unemployment in

Thailand. On the other hand, Ireland's unemployment rate was 14.4% in 2011. The high

rate of un employment in Ireland can be traced to the global financial meltdown in 2008-

2009. The global crisis caused widespread chaos in the Irish economy with many people

getting laid off. The crisis has also caused an astounding flight overseas by young


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workers. The class collaborationist policies of the Irish trade unions have led to a sharp

generational break with the older workers signing deals with the bosses to preserve

their jobs at the expense of job security for younger workers.

On the contrary, Thailand's lowest unemployment rate was 0.7% in 2011. The

country aces underemployment. Besides, the demography of the country is unbalanced,

with Thailand having a low birth rate and a larger portion of older workers compared to

younger workers. This also indicates that youth employment is a serious issue for

Thailand. Presently, the unemployment rate for people aged 40 or above is less than 1%.

This highlights the fact that there is a labor force supply-demand mismatch among the

young adult labor force. Meanwhile, Thailand has a low minimum wage level, which

may discourage job seekers from entering the labour force. On the other side of the

picture, Thailand's low unemployment rate denotes that the country is receiving a lot of

foreign investment which in turn helps to boost the economy, thereby reducing the

country's unemployment rate. Ireland's lowest unemployment rate was a record low of

3.7% in 2001. At the time, the country was in its 'Celtic Tiger' phase where its economy

was booming. There was increased investments from overseas companies and the level of

employment in the country was high. Besides, Ireland's open market policy and a low

corporate taxation rate was an incentive for foreign investments. Moreover, the country

had an increase in productive capacity, thus producing a larger share of output. The

investments opened up many job opportunities for workers, thereby decreasing the

unemployment rate.


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2.3 The comparison of Inflation Rate (GDP Deflator) and its reasons.

According to the graph above, there are many ups and downs in the inflation rate

of Ireland and Thailand. During the years 2000 to 2003, Thailand's inflation rate fell

while Ireland's inflation rate rose. In 2003 to 2006, both Ireland showed a stable inflation

rate while Thailand's rose. In 2008, the rate of both countries fell sharply until the point

of deflation, in 2009. After that, the rate of both countries rose sharply again.

Both Thailand and Ireland faced a negative inflation rate in the year 2009 or, to

put it more simply, both countries faced deflation in those years. The inflation rate of

Ireland in 2009 was negative 1.7%. The reason given was the global financial meltdown

of 2008-2009. In Ireland, the recession caused consumer prices to fall sharply. Besides,

the bursting of the domestic housing market also aggravated Ireland's economy, causing

deflation since Ireland uses the Euro as its currency. Meanwhile, the inflation rate of

Thailand in the same period is negative 0.846. This negative value was also caused by the

impact of the global economic downturn. Thailand's domestic consumption and exports

-3

-2

-1

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Ireland

Thailand


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the increase in prices of agricultural products are limited. Commodity prices like pork,

chicken and eggs, rice, rubber and shrimp and other important agricultural prices also

fell.

Ireland had its highest inflation rate in 2002 while Thailand had its highest

inflation rate in 2008. In 2008, the inflation rate of Thailand was up to a point of 5.5%.

The inflation rate of Ireland in 2002 was 4.7%. This was mostly caused by labour and

skills shortages in the country, inadequate competition in some sectors: especially in the

non-traded sector, and an increase in taxation rates. Meanwhile, inflation in Thailand was

caused by increasing oil and food prices. Besides,high volatility from oil and commodity

prices has significantly lowered the purchasing power of consumers, which also

contribute to the inflation in Thailand. The declining strength of the Baht, Thailand's

currency is also seen as a factor of inflation.


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2.4 Comparison of the Economics Activities(by sectors) between Thailand and

Ireland and its reasons

Ireland's economic activities are divided into three sectors, all of which contribute

greatly to the country's economic growth. The primary sector constitutes 5% of Irish

GDP and 8% of Irish employment. The main economics recourse of Ireland are large

pastures, especially at the midland and southern regions. In 2004, Ireland exported

approximately 7.15 billion euros of cow and beef , dairy products, mainly to the United

Kingdom, but the rate of exports is expected to decline.

The secondary sector constitutes 46% of Irish GDP, but only 29% of the labor

force. Textile companies like Fruit of the Loom once constituted a major part in this

sector but it is now largely dominated by multi-national companies such as Dell, Intel and

IBM. The secondary sector contributes many products to Ireland's exports such as

computers, drugs, confectionery, beer, high quality glass and crystal, software and

machinery and 25% of Europes computer parts. Over the last decade construction has

become a major component of the economy, currently constituting 9% of economic

activity. A recent downturn in the residential property market sentiment, combined with

the cyclical nature of construction has highlighted the over-exposure of the Irish economy

to construction, which now presents a threat to the country's economic growth.

The tertiary sector constitutes 49% of Irish GDP and 64% of Irish employment.

The tertiary sector is by far the largest driver of modern Irish economic growth. It is

made up of several industries such as accountancy, legal services, finance and stock

broking, catering, and tourism. Many US firms located their European customer service

operations in Ireland due to the availability of a young, highly educated, English speaking

workforce. Recruitment agencies also play a major role in this sector, connecting

qualified work candidates to business clients looking to hire in these areas. The Irishtourism industry attracts over five million visitors annually and employs over 100000

staff. The IFSC in Dublin created some 14,000 jobs in the 1990s, all in the high-value

finance and legal sectors. The hospitality and retail sectors are quite large there are

hundreds of domestic and foreign retail firms in Ireland, and many cafe and restaurant

firms operate in Ireland ,such as McDonalds, Starbucks, Burger King and Subway.


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Agriculture remains a major economic activity in Thailand contributing 10

percent of Thailands GDP. Maize is a major economic crop in Thailand and is grown by

more than 320,000 farming households in Thailand. Thailand was one of the biggest

agriculture reliance country. The country was able to stay competitive in the word due to

it's comparative advantage of utilizing it's great land scape and weather which provide

great nourishment. The agriculture alone contributed roughly 1.26 trillion Baht to its

country's GDP. However due to the severe change in the world climate and the rising of

temperature, Thailand has to struggle to survive this ordeal. Thailand's economy took a

big hit from the flood during the end of 2011. The damage done to Thailand's agricultural

sector was so massive that Thailand is no longer the world leading agricultural country.

Tourism asserts a superior influence to Thailand's economy than any other Asian

nation. Many tourists come to Thailand because of the country's beaches. Tourists are

attracted to the country because of its many diving sites, sandy beaches, hundreds of

tropical islands, archaeological sites, museums, exceptional flora and bird life, palaces, a

huge amount of Buddhist temples and several World Heritage sites. Besides, a sharp

escalation in tourism from other Asian countries has funded largely to Thailand's

economy. Consequently, the Baht has grown in strength compared to most other

currencies in the past.

Another main economic activity of Thailand is the automotive industry. Thailand

is already the world's second largest pick-up truck market after the U.S. and ASEAN's

largest automotive market and assembler. By 2004 automobile production had reached

930,000 units, more than twice as much as in 2001. Automakers active in Thailand

include Toyota and Ford. The development of the automotive industry has also led to a

boom in domestic steel production. These supportive industries are tremendously

important in distinguishing Thailand as the leading vehicle supplier in Southeast Asia.

With over 700 OEM auto parts suppliers and 1,000 in supporting industry together

employing more than 217,000 workers. Thailand is fast becoming a center for automobile

manufacturing for the Association of Southeast Asian Nations (ASEAN) market.


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2.5 Import and export activities between Thailand and Ireland

Main Imports in Thailand Main Exports in Thailand

Raw materials and intermediate goods Manufactured goods

Chemical Machinery and equipment

Consumer goods Agricultural goods

Main Imports in Ireland Main Exports in Ireland

Electrical machinery and components Pharmaceuticals

Fuel Organic chemicals

Motor vehicles Data processing equipment and software

Thailand's main imports consists mainly of raw materials and intermediate goods

with around 56 percent of total imports. Thailand's main import partners include Japan,

United States and China. Thailand uses the raw materials and intermediate goods it

imports in the process of improving living standards of its citizens and also to attract the

attention of travelers who contributes to the country's burgeoning tourism industry.

Thailand also imports chemicals for the purpose of improving its many sectors such as

manufacturing, agriculture, medicine, electronics and others. Besides, Thailand import

consumer to ease a product shortage problem since Thailand faces a shortage of water

and lack of food due to uncertain environmental and political conditions.

The main exports of Thailand are manufactured goods and agricultural products.

The United States is Thailand's largest export market and second-largest supplier after

Japan. Manufacturing has become Thailand major industry today because of the many

acres of land allocated for manufacturing purposes. Moreover, exports of machinery andequipment is a source of revenue to Thailand. Thailand exports machinery and equipment

to improve their technology. Agricultural goods are also an important export of Thailand.

Major agricultural products include rice, rubber, sugarcane, soybeans etc.


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Import play an important role in the Irish economy. The main imports of Ireland

are electrical machinery and components. Ireland imports electrical machinery to increase

their income. Ireland also import fuel since fuel is a limited resource in Ireland. Hencethe price of fuel is regulated at constant intervals to control demand. Besides, Ireland also

imports motor vehicles, food medical products and others.

Agriculture accounts for about 80 per cent of Irish exports with dairy products,

beef and veal comprising half of the volume. Ireland is the biggest beef producer in the

European Union and the fourth largest in the world. The country is one of the largest

exporters of pharmaceuticals and software-related goods and services in the world.

Pharmaceutical products are a main export because incentives offered by the government

such as low corporate tax rates and strong intellectual property laws encourage

pharmaceutical companies to locate their operations in Ireland. Ireland also exports data

processing equipment and software and organic chemicals.

20%

15%

8%

5%

Top Import Countries in

Thailand

Japan

China

UnitedStatesMalaysia

12%

10%10%

9.50%

Top Export Countries in

Thailand

China

Japan

UnitedStatesMalaysia

23%

16%14%

7%

5%4%

Top exports countries in Ireland

United States

United

KingdomBelgium

Germany

France

34%

12%

5%6%

4%

Top Import Countries in Ireland

UnitedKingdomUnitedStatesGermany

Netherlands

China


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Chapter 3 : Conclusion

3.1 Describe the current Economic Problem / Challenges faced by the chosen

countries and recommend ways to overcome them.

Thailand's economy has shown steady improvement over the years and this

growth is expected to continue. The economic growth of Thailand has seen a lot of ups

and downs in the past and there are fears of more turbulence in the future. The political

problems being faced by Thailand for the past few years have also dented the countrys

image slightly and many investors have become more cautious before investing in

Thailand.

One of the problems Thailand faces is the mismatch between older and younger

workers in the Thai economy. This problem will likely cause Thailand's economic growth

to slow since younger workers are not getting jobs as they leave university. Thailand also

has a low minimum wage level compared to other countries. With barely enough money

to support their families, Thais may turn to other illegal activities in order to support

their families. This will cause a large drop in GDP. As the older generation retire, the

country will have a lack of skilled labour, thereby reducing the country's GDP in terms of

output. Therefore, the Thai government should set aside certain quotas for young workers

in its job market so that there is no lack of a skilled workforce. Besides, the minimum

wage level in the country should be increased so that it can serve as an incentive for

aspiring workers.

The other major challenge to the Thai economy is tourism. Thailand was one of

the most popular Southeast- Asian country for tourists especially those from the West.

However, ongoing political and environmental problems have caused a negative impacton the tourism industry. Therefore, Thailand should maintain its tourist-friendly status by

promoting more of its natural, historical and cultural wonders. Thailand could also

implement flood control programs so that the country will not be excessively affected by

periodic floods.


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The Irish economy is in deep water at the present moment since the country has

not fully recovered after the financial meltdown of 2008-2009. After several years of

high growth, the Irish economy went into recession. It's economy was once regarded as

one of the most successful in the world, but after the recession, there was a substantial

rise in government borrowing causing a banking crisis and worsening the economy

further.

There were two main factors behind this. Firstly, favourable demographics gave

rise to an increase in the number of workers entering the labour market. After the

recession, there was a massive exodus of young Irish workers to other countries. These

young workers were forced to leave because there was not many jobs available for

them. The economic crisis soon spelled out into increasing inflation in Ireland causingthe economy to drop. Since Ireland is an open economy, the government should regulate

the output of the country. Besides, structural reforms should take place in its economic

sectors in order to increase the employment rate. Efforts should be made to encourage

more competition in sheltered sectors, such as the legal professions, for the purpose of

bringing down costs and making Ireland more competitive. Healthy competition

between businesses and sectors within the economy may stimulate consumer and

overseas confidence and also lead to a better regulation of output, thus making the

economy expand.

Other factors also contributed to this story. Ireland was once an attractive

location for inward investment with the coming of the EU single market. Many foreign

countries, especially the United States invested in Ireland. These investments helped

boost Irish exports. When the international financial crisis started in 2008, Irish banks

were left vulnerable and exposed. With falling property prices, banks began to suffer

huge losses on their loans. With business and consumer confidence evaporating, Irish

banks began to experience deposit outflows. In order to overcome this hurdle, Ireland

should introduce a financial banking strategy in order to improve its banking sector.

This may eliminate unimportant investments and curtail risky borrowing to certain

quarters, thereby shoring up consumer and business confidence and also increasing the

country's GDP.


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REFERENCES AND APPENDICES

http://www.centralbank.ie/publications/Documents/09RT12.pdf

http://www.esri.ie/irish_economy/

http://www.tradingeconomics.com

http://en.wikipedia.org/wiki/Republic_of_Ireland

http://en.wikipedia.org/wiki/ Economy of Thailand

http://www.jri.co.jp/english/periodical/economic/AERe200003unemploy/

http://www.theglobaleconomy.com/compare-countries/#

www.indexmundi.com/

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