The Foreign Investment Boom, 1987–94

The second boom in foreign capital flows to the Thai economy started in 1987. Its nature was totally different from the ‘loan boom’ analysed in the previous chapter. A first difference was that the level of the capital inflows (as a percentage of GDP) exceeded that of the loan boom (see Figure 3.3 of Chapter 3). A more important difference was that the composition of the capital flows changed radically. Table 3.1 of Chapter 3 showed that in recent years capital flows to the public sector became negligible, so that the entire inflow of funds was directed towards the private sector. In particular, flows of direct and portfolio foreign investment surged to levels never before experienced, and there was also a sharp increase in private sector foreign borrowing. Another difference can be observed in the impact of the capital inflows on the economy. The upsurge in capital inflows was associated with a spurt of economic growth not unlike that experienced during the initial loan boom of 1976–78. But this time the growth spurt was stronger: the years 1987–90 were years of double-digit growth. And, unlike in the earlier period, they were not followed by a growth recession. After the years of double-digit growth, the growth rate decreased in the early 1990s to just over 8 per cent per year. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.