1. Economic Boom ( )

2. Sharp fall in world oil prices  less burden on deficits and inflation
Boom ( )
Decade of unprecedented high economic growth: average 9% p.a. (over 10% in )
Sharp fall in world oil prices  less burden on deficits and inflation

3. Lower world interest rates  less debt service burden
Boom ( )
Lower world interest rates  less debt service burden
Japanese Yen revaluation (Plaza Accord in 1985)  influx of FDI from Japan and NIEs

4. Boom ( )
High rise in manufactured exports + income from tourism and labor export + less oil import bill  reduce current a/c deficits up to 1989, but the gap widened afterwards

5. “Structural adjustment” policies (loans from World Bank and IMF):
Boom ( )
“Structural adjustment” policies (loans from World Bank and IMF):
Promotion of exports (esp. manufacturing) and investment in provincial areas

6. “Structural adjustment” policies:
Boom ( )
“Structural adjustment” policies:
Fiscal austerity and debt control
Tariff reductions
Reduce oil and transport subsidies; oil price float

7. “Structural adjustment” policies:
Boom ( )
“Structural adjustment” policies:
Privatization of state enterprises
Liquidation
Share selling (Thai International Air)
Concessions to private sector in telephone, ports, expressways, power, water,…
Tax reform: VAT introduced

8. More export-oriented manufacturing:
Boom ( )
More export-oriented manufacturing:
Relocation from Japan and NIEs: textiles, electronic, shoes, toys, watches, lenses, car parts
Exports of electronic, transport equipment and computer parts surpass textiles and agro-based

9. More export-oriented manufacturing:
Boom ( )
More export-oriented manufacturing:
Still highly dependent on imported materials, components and machines (60%-90% of value)

10. Boom ( )
Financial liberalization in early 1990’s (aim: regional financial hub replacing Hong Kong):
Abandon interest rate ceilings
Deregulate capital flows and exchange control

11. Boom ( )
Financial liberalization in early 1990’s (aim: regional financial hub):
Offshore banking (BIBF) promoting freer flow of international funds
Allow both banks and non-banks to borrow abroad

12. Boom ( )
High economic growth + massive capital inflows led to speculation in real estate and stock market  “bubble”

13. Short-term capital flows were more important than FDI
Boom ( )
Peter Warr: during the boom, more than half of output growth was accounted for by increases in capital stock (both domestic and foreign)
Short-term capital flows were more important than FDI

14. Boom ( )
Peter Warr: Bank of Thailand’s fixed exchange rate and sterilization policy  high interest rate, real appreciation of Baht, attracting short-term capital inflow (exceeding reserves from 1994 on)