In the first quarter of 2009, Thailand suffered as its heavily-relied exports and tourism incomes fell sharply as the Thai economy was hit by deep global economic recession. The fall consequently discouraged household consumption expenditures and investment. The sharp drop in exports of goods and services and the decline in private consumption and investment, contributed to largest GDP contraction in 10 years.

The government is implementing a major fiscal stimulus programme, totaling 1.4 trillion baht (US$40 billion) over the next three years. The government has also continued with a list of policies aimed at increasing the spending power of low-income households.  

In July 2009, Finance Minister Korn Chatikavanij, announced that the government had extended for a further six months a package of subsidies that was initially introduced by the government of Mr. Samak Sundaravej in mid-2008. Under the subsidy programme, the government waives or reduces utility charges for low-income households, and offers free bus rides in Bangkok for the poor and free third-class train travel nationwide.

According to Minister Korn, the programme cost the government 12 billion baht (US$354 million) in the previous six-month extension period. In early July the government also handed out the final instalment of 150,000 cheques, bringing the total to nearly 9 million people. Most of the cheques, which are worth 2,000 baht (around US$58) each, were handed out ahead of the Songkran (Thai New Year) holiday in early April. The cheques were given to various groups (mainly civil servants, members of the social security fund, and employees in state-owned enterprises and private schools) earning less than 15,000 baht a month.

The latest available data on private consumption and investment show that Thailand’s economy remains in the state of stagnation. Vehicle manufacturers complain that they do not receive enough government assistance. However, the Thai government remains focused on its flagship policy - the eco-cars initiative, which aims at encouraging major carmakers to produce small and fuel-efficient cars in Thailand.

On the other side, the manufacturing industry picks up and the overall employment was still up on a year-on-year basis in April, rising by 1.2%, owing to growth in agriculture and several segments of the services sector.

Sources: The Economist Intelligence United Limited 2009; Office of Economic and Social Development Board - “Economic Outlook 2009” Report.