Thailand: Social Impact Of The Crisis

1999

Professor Peter G. Warr

What did the economic crisis mean for poverty incidence and inequality in Thailand? For systematic study of these matters, the periodic Socio-Economic Surveys (SES) conducted by the Thai government's National Statistical Office (NSO) provide virtually the sole source of reliable information that can be compared over time. A household expenditure survey was conducted periodically prior to the 1970s. The present form of the survey began in 1975/76, another was undertaken in 1981, and since 1986 surveys have been conducted every two years.

In the past, delays of two years or more normally elapsed between the collection of the SES data and the public release of poverty incidence estimates. For example, poverty incidence estimates based on the 1996 SES (prior to the crisis) were released only during 1998. Since the next round of the SES was conducted in 1998, delays of the above magnitude would have meant that survey-based data on the impact that the crisis had on poverty incidence would not have been available until the year 2000. The crisis greatly increased the urgency of this information, however, and special efforts on the part of the Development Evaluation Division of the National Economic and Social Development Board (NESDB) have generated preliminary poverty incidence and inequality estimates, based on the SES results for the first two quarters of 1998.

The estimate of poverty incidence for the first quarter of 1996 was 11.8 percent of the population and for the second quarter it was 10.6 percent. The corresponding quarterly estimates for 1998 were 13.0 and 12.4 percent of the population, thus implying a 1.2 percent and 1.8 percent increase, respectively, in the proportion of the Thai population whose incomes fell below the poverty threshold. Combining these two estimates suggests approximately a 1.5 percent increase in poverty incidence over this two year period.

This increase suggests that since 1996, on balance, approximately one million Thai people moved from real incomes above the poverty threshold to incomes below it. The long term trend of declining poverty incidence in Thailand was thus interrupted by the effects of the economic crisis, but the increase from 1996 to 1998 must be viewed in perspective. The post-crisis level of poverty incidence was still significantly below its level in 1994 and 20 percentage points below its level a decade before.

Although many observers have commented that inequality in Thailand should have declined as a result of the crisis, because its effects were more concentrated on the rich than the poor, the preliminary SES results do not confirm this view. The data reveal a small increase in inequality, indicating that, on average, the poorer segments of the population were affected more severely by the crisis than the richest segments. The Gini index of inequality of real incomes in Thailand (higher numbers mean greater inequality) rose from 47.4 in 1996 to 48.2 in 1998. The crisis thus reversed the trend of declining inequality in Thailand which had been evident since 1992. The share of the poorest one fifth of the population in total incomes fell marginally, from 4.4 percent in 1996 to 4.3 percent in 1998. The income shares of the second poorest, third poorest and the fourth poorest one fifth of the population also declined. The income share of the richest one fifth rose from 55.3 percent in 1996 to 56.2 percent in 1998. Clearly, if these data are correct, the poor and middle income groups were affected more severely by the crisis that the rich and this outcome is greatly surprising and troubling.

WATCHPOINT: The social impact of the crisis appears likely to outlasts its immediate economic effects.

 

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