The Thai economy grew with the formulation of the first 5-year National Economic Development Plan in 1958. During the 1960s, the country grew by an average of 8 percent annually. In the 1970s the fluctuation of commodity prices, a rise in interest rates, and the 150 percent increase in world oil prices slowed the economy, although it continued to grow at the rate of 6.8 percent annually. Political instabilit—including student uprisings in 1973, 2 military coups, and increased communist insurgency— hindered the government in its adjustment of economic plans and structures to meet the challenges of the next decade. Surprisingly however, the economy continued to perform well in the 1980s with a 7.5 percent GNP growth rate. The year 1986 is significant because of the fall of the excess value of imports over exports to a mere US$301 million compared to the previous year's deficit of US$2.121 billion, indicating a substantial growth of the value of Thailand's exports. This can be attributed to economic adjustments launched by the government.
The first half of the 1990s was marked by similar growth until the Asian financial crisis hit the region. In 1996, real GDP growth rate fell sharply from 8.8 percent in 1995 to 5.2 percent and during the period of the crisis between 1997 and 1998, real GDP growth dropped to-0.43 percent and-10.18 percent, respectively, according to the International Financial Statistics Yearbook. The government spent much of the country's foreign reserves to stabilize the value of the baht, causing the further de-valuation of the currency. The crisis led to a temporary increase in poverty levels in the city and unemployment
|Exchange rates: Thailand|
|baht (B) per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
due to massive lay-offs specifically in the construction and service industries. These unemployed city-dwellers went back to rural areas hoping to find employment, which led to a rise in poverty levels in the south, central, and northeast regions. Thailand's recession also started a domino effect that led to the fall of the economies of its South East Asian neighbors.
There has been a remarkable resurgence in the economy since then, fueled by the US$17.2 billion assistance package given by the World Bank, reforms in the financial sector, and increased foreign investment. For the first time since 1969, the economy posted a positive balance of trade with the value of exports exceeding imports by US$11.485 billion in 1999, according to the International Financial Statistics Yearbook.
The average exchange rate of the Thai baht from 1984 to 1997 was B25 to US$1. However, the baht was devalued by the administration of Prime Minister Prem Tinsulanonda by 8.7 percent in 1981, and again in November 1984 by 14.9 percent, as part of its austerity measures. This devaluation led to the decline in the cost of production, which resulted in increased revenue from exports.
With the onset of the financial crisis, the baht fell from its B25 to US$1 average to B31.36 to US$1 in 1997, and to an all-time low of B41.36 in 1998. The infusion of direct foreign investment in 1998 led to the recovery of the economy and the increase in the value of the baht to B37.81 against the dollar in 1999, which went even higher to B37.349 in January 2000. By 12 October 2000, however, the baht had devalued once more to a 27-month low of B43.27, which threatened to increase inflation . The depreciation was caused by external factors, including weak regional currencies such as the Philippine peso and the Indonesian rupiah, the strong showing of the dollar compared to currencies such as the Euro, and increase in world oil prices which used up the country's surpluses. Internal factors that were identified include weak economic policies and practices and the country's unstable political situation.
The Stock Exchange of Thailand (SET) was established through the passage of the SET Act in May 1974, and began operation on 30 April 1975. The second revision of the SET Act in 1992 produced the Securities and Exchange Act (SEA) which established a Securities and Exchange Commission to serve as the only supervisor of the securities business.