Far East: A Look Back At “Thaksinomics” And It’s Lingering Implications

Thailand’s current Prime Minister, Srettha Thavisin, is dealing with a big problem—high household debt. This issue, which affects millions of Thai families, is partly due to economic policies introduced over 20 years ago by former Prime Minister Thaksin Shinawatra. Thaksin’s policies, known as “Thaksinomics,” aimed to improve life for the average Thai person. But, over time, some of these policies led to increased borrowing and debt. Let’s take a closer look at what “Thaksinomics” was, its effects, and how it has contributed to Thailand’s current debt problems.

What Is Thaksinomics?

Back in 2001, Thailand looked like a sure bet for a long period of high sustained economic growth, its economy still plagued by the legacies of the 1997 Asian Economic Crisis and the collapse of the Thai baht that year. Although the nation’s growth rate was gradually climbing, it had yet to restore the pre-crisis mechanisms that had lifted its population from poverty toward prosperity. In addition, increased competition with China for foreign investment and export markets made it harder for Thailand to sustain growth rates approaching those attained in the pre-1997 period.

When Thaksin Shinawatra became Prime Minister in 2001, he introduced “Thaksinomics.” A set of policies focused on improving the lives of rural and low-income Thais was implemented. Thaksin’s government provided easy loans, lower interest rates, and financial support to local communities. For example, he created a “village fund” that offered loans to villagers so they could start businesses, improve their homes, or pay for health and education expenses. Thaksin believed that putting more money in the hands of regular people would make Thailand’s economy stronger. He wanted to support growth from the bottom up, instead of focusing only on big businesses or industries.

Thaksinomics gave many Thais access to money and services they didn’t have before. With the extra funds, families could invest in their children’s education, get better healthcare, and start small businesses. This led to better living conditions, especially in rural areas. In addition, by providing loans to local businesses, the government helped support local economies. Many small businesses were able to grow, which created jobs and increased income in rural areas. Thaksinomics helped Thailand’s economy grow by increasing people’s purchasing power. When people had more money to spend, demand for goods and services went up, which boosted the economy. To Thaksin's followers, the new economic measures are capable of returning Thailand to the pre-1997 glory days of high growth: the Thai economy began accelerating from a growth rate of 1.9 percent in 2001 (the year Dr. Thaksin was elected Prime Minister) to 5.3 percent in 2002, to 6.5 percent in 2003; and perhaps even more importantly, enabling the country to successfully coexist economically with other economies in the world such as China.

However, Thaksinomics would lead to a huge increase in household debt. Easy access to loans encouraged people to borrow more than they could pay back, and over time, many families became heavily in debt. Thailand had encouraged a culture where people relied on borrowing to meet their needs, instead of finding ways to save or earn a higher income. For some, this habit of borrowing became difficult to break, and they continued to rely on credit even after their financial situations worsened. With so many loans being given out, banks took on a lot of financial risk. Some of these loans went unpaid, which hurt the banks. This problem increased during economic downturns when people found it harder to repay their debts. Today, Thailand’s household debt is one of the highest in Asia, and this is a big problem for the economy. 

Prime Minister Srettha Thavisin has recognized that high household debt is a major issue. His government has announced plans to reduce this debt burden by helping people manage their loans and by offering financial education programs. He wants to find ways to support economic growth without creating more debt. This is a difficult task, but it’s one that many people hope will create a stronger and more stable economy for Thailand.

Conclusion

Thaksinomics was designed to help the average Thai person by making loans and resources more accessible. While it achieved some short-term success, it also led to long-term challenges, particularly the high levels of debt that many families still face. Today, the government faces the difficult task of addressing these debt issues while finding ways to help Thai people improve their lives without relying on excessive borrowing. As Prime Minister Srettha tackles this challenge, his decisions will shape Thailand’s economy for years to come.