Life's tough, but ADB report says Thais faring admirably

Business Asia, July 5, 1999

Thailand has scraped through the region's financial crisis with fewer wounds than expected, with a new Asian Development Bank report finding the crisis has at worst returned most Thais to 1996 levels of income and welfare.

The report, "Assessing the Social Impacts of the Financial Crisis in Thailand", found there was an average improvement in Thai household's welfare from the first half of 1996 to the first half of 1998 due to a 24 per cent rise in household incomes (mainly during 1996-1997).

The report said it had become fashionable to view the crisis in terms of a worst-case scenario, and that pessimism has been fuelled by a lack of hard data and reliance on anecdotal evidence and media reports. It also said the shock of sudden recession after decades of rapid growth caused many Thais to doubt the ability of the social sectors to weather the crisis, and convinced them that their situation must have deteriorated.

The report found that Thai social institutions and groups had reacted well to the changing economic climate. Households were spending less, and there has been substantial migration from rural areas to richer urban areas, especially Bangkok.

In urban areas, half the people found additional work, and schools coped with declining budgets by improving the use of their resources.

Although Thailand's real gross domestic product (GDP) is expected to grow by 1 per cent this year after contracting 8 per cent in 1998, the impact of the crisis has yet to run its full course, and its effect will continue to worsen the report notes

Despite some modest increase in incomes generally, some 6.6 million households said they were worse off in 1998 than in 1996

While wages have fallen back to 1996 levels, unemployment increased from 2.5 per cent to 4.5 per cent in February 1998.

Those employed in the agricultural sector fared better than those engaged in other areas, The construction industry suffered the most, with employment falling 34 per cent by August 1998.

Two million people who did not get: beyond primary school lost their jobs between August 1997 and August 1998. Better-educated people suffered less, but there was a sharp increase in unemployment among university graduates in August 1998 as new graduates entered the labour market. Women and under-30s were also hard hit by falling employment.

The number of Thais in debt increased by 52 per cent to 60 per cent.

The report stressed the need to improve information gathering and databases. However, it said the crisis could be exploited to address long-standing problems.