GDP as a measure of
economic growth in Thailand
Tourism versus export sectors
By Jon Fernquest 
Recent
high growth in Thailand's GDP is being driven by growth in exports. Today's article demonstrates how one has to look at the details sector by sector to see the impact of GDP growth.
Electronics and tourism provide an interesting contrast:
"Exports
of electrical machinery and equipment (which include things like integrated circuits) alone accounts for about 9% of
GDP. At first glance, this looks roughly similar to tourism spending at
8% of GDP. But the import content
of electrical machinery is very high. Correspondingly, its total domestic value-added and employment
are relatively low: 0.5 trillion baht and 0.5 million workers,
respectively. By contrast,
value added and employment in sectors related to tourism is on the
order of about 1.2 trillion baht and over 6 million workers."
GDP growth in Thailand's tourism sector: 1. spreads income over more workers, and 2. also allows the more impoverished regions of Thailand to derive benefits from economic growth.
The Thai subsidiary of Delta Electronics has done particularly well recently (Read article).
Electronics goods are important Thai exports to the large markets of US, China, the EU and Japan (Read recent article).
Today's article begins after the vocabulary below:
integrated
- combining things of different types in one effective system
ที่รวมเข้าด้วยกัน
integrated circuits - small electonic computer parts on a chip
a chip, a silicon chip, microchip, Integrated Circuit (IC) - a small piece of silicon with microscopic circuits on it, used in computers (See Wikipedia)
X alone accounts for Y% of Z - X is Y% of Z (without anything else included)
import - to buy or bring in products from another country นำเข้า
content - the parts of a good
import content - the percentage of the parts of a good that are imported into the country before being assembled into the final product
domestic - relating to a person's own country ภายในประเทศ
value-added - the addition to the value of price of a good that occurs at one stage of the production process
employment - the number of people who have paid jobs in a country or economy
contrast - a difference between two things when you compare them ความแตกต่าง
Delta Electronics - a large international electronics company, "founded in 1971, is an international corporation which sells power supplies, video display, and computer software. Delta Electronics has sales offices worldwide and manufacturing plants in Taiwan, India, Thailand, China, Mexico and Europe, and is the world's largest provider of switching power supplies and brushless fans" (See Wikipedia)
integrated circuits - small electonic computer parts on a chip
a chip, a silicon chip, microchip, Integrated Circuit (IC) - a small piece of silicon with microscopic circuits on it, used in computers (See Wikipedia)
X alone accounts for Y% of Z - X is Y% of Z (without anything else included)
import - to buy or bring in products from another country นำเข้า
content - the parts of a good
import content - the percentage of the parts of a good that are imported into the country before being assembled into the final product
domestic - relating to a person's own country ภายในประเทศ
value-added - the addition to the value of price of a good that occurs at one stage of the production process
employment - the number of people who have paid jobs in a country or economy
contrast - a difference between two things when you compare them ความแตกต่าง
Delta Electronics - a large international electronics company, "founded in 1971, is an international corporation which sells power supplies, video display, and computer software. Delta Electronics has sales offices worldwide and manufacturing plants in Taiwan, India, Thailand, China, Mexico and Europe, and is the world's largest provider of switching power supplies and brushless fans" (See Wikipedia)
Opinion
SAY TELL, NINE TEN
GDP growth not indicative of better living
10/08/2010Sethaput Suthiwart-Narueput
Why doesn't it really feel like we are growing at 10%? Like many analysts, we have been revising our GDP forecasts for this year upwards. GDP growth for the first half of the year is probably going to come in at about 10% year-on-year
The question I often get asked by clients is: "If the numbers look so good, why doesn't it feel like we are growing 10%?"
GDP, Gross Domestic
Product - a
measure of economic activity in a country, the value of the country's
output of goods and services. GDP is defined roughly as: GDP =
Household Consumption + Business Investment + Change in
Inventories + (Government Spending - Taxes) +
(Exports - Imports) (See Economist
Glossary)
GDP growth - the rate at which the economy is expanding and at which income is growing and getting bigger
X indicative of Y - X shows that the situation is Y
analysts - experts whose job is to study a situation or industry and make judgements about it for their company or consulting clients
forecasts - what experts say will happen in the future คาดการณ์
revising - changing
revising forecast upwards - increasing the forecast
come in at - arrive at
clients - (formal) customer ลูกค้า
GDP growth - the rate at which the economy is expanding and at which income is growing and getting bigger
X indicative of Y - X shows that the situation is Y
analysts - experts whose job is to study a situation or industry and make judgements about it for their company or consulting clients
forecasts - what experts say will happen in the future คาดการณ์
revising - changing
revising forecast upwards - increasing the forecast
come in at - arrive at
clients - (formal) customer ลูกค้า
The really short answer is that the growth looks good because it is being compared to such a low base or level in 2009.
The level of real GDP for the first half of 2010 is 10 higher than what it was in the first half of 2009, but only 3% higher than the first half of 2008.
We are just back to where we were two years ago.
base
- a place from where an activity can be planned ฐานที่มั่น
compared to such a low base - it started from and grew from a very low level, because of the recession, and so initial growth after the recession will be quite large
compared to such a low base - it started from and grew from a very low level, because of the recession, and so initial growth after the recession will be quite large
The longer and more interesting answer is that it doesn't feel like we are growing at 10% because much of the growth in the headline GDP figures is being driven by exports, and most of that export growth is being driven by a few sectors which do not employ that many people.
Exports of electrical and mechanical machinery and parts, auto parts and the like have been growing sharply, registering growth of over 45%.
These three sectors account for over 40% of our total exports and exports account for well over half of our GDP. It is therefore not surprising that when these sectors pick up, our GDP figures shoot up accordingly. But while these sectors account for the bulk of our exports, they employ less than 2% of our labour force. Therefore, not that many people benefit.
figures
- statistics, numbers describing the economy
export growth driven by Y - increase in exports caused by Y
employ - to have someone work or do a job for you and pay them for it ว่าจ้าง, จ้าง
X accounts for Y% of Z - X is Y% of Z
bulk - large amounts เป็นจำนวนมาก เป็นกุรุศ
the bulk of - most of
X accounts for the bulk of Y - most of Y is X
labour force - the group of all workers in a country or economy
benefit - to get help or an advantage from something ผลประโยชน์
export growth driven by Y - increase in exports caused by Y
employ - to have someone work or do a job for you and pay them for it ว่าจ้าง, จ้าง
X accounts for Y% of Z - X is Y% of Z
bulk - large amounts เป็นจำนวนมาก เป็นกุรุศ
the bulk of - most of
X accounts for the bulk of Y - most of Y is X
labour force - the group of all workers in a country or economy
benefit - to get help or an advantage from something ผลประโยชน์
Numbers can create misleading first impressions. Exports of electrical machinery and equipment (which include things like integrated circuits) alone accounts for about 9% of GDP. At first glance, this looks roughly similar to tourism spending at 8% of GDP. But the import content of electrical machinery is very high. Correspondingly, its total domestic value-added and employment are relatively low: 0.5 trillion baht and 0.5 million workers, respectively. By contrast, value added and employment in sectors related to tourism is on the order of about 1.2 trillion baht and over 6 million workers.
misleading - makes you
believe something that is not true
first impressions - what you think when you first see a situation
misleading first impressions - what you think when you first see a situation is not true
integrated - combining things of different types in one effective system ที่รวมเข้าด้วยกัน
integrated circuits - small electonic computer parts on a chip
a chip, a silicon chip, microchip, Integrated Circuit (IC) - a small piece of silicon with microscopic circuits on it, used in computers (See Wikipedia)
X alone accounts for Y% of Z - X is Y% of Z (without anything else included)
import - to buy or bring in products from another country นำเข้า
content - the parts of a good
import content - the percentage of the parts of a good that are imported into the country before being assembled into the final product
domestic - relating to a person's own country ภายในประเทศ
value-added - the addition to the value of price of a good that occurs at one stage of the production process
employment - the number of people who have paid jobs in a country or economy
contrast - a difference between two things when you compare them ความแตกต่าง
first impressions - what you think when you first see a situation
misleading first impressions - what you think when you first see a situation is not true
integrated - combining things of different types in one effective system ที่รวมเข้าด้วยกัน
integrated circuits - small electonic computer parts on a chip
a chip, a silicon chip, microchip, Integrated Circuit (IC) - a small piece of silicon with microscopic circuits on it, used in computers (See Wikipedia)
X alone accounts for Y% of Z - X is Y% of Z (without anything else included)
import - to buy or bring in products from another country นำเข้า
content - the parts of a good
import content - the percentage of the parts of a good that are imported into the country before being assembled into the final product
domestic - relating to a person's own country ภายในประเทศ
value-added - the addition to the value of price of a good that occurs at one stage of the production process
employment - the number of people who have paid jobs in a country or economy
contrast - a difference between two things when you compare them ความแตกต่าง
While there are clear signs that growth will slow during the second half, growth for the full year will still probably come in somewhere around a nice looking 7%. In 2003, GDP also grew at about 7%. But more of that growth came from domestic demand. As a result, growth probably felt better for most in 2003 than in 2010, even though the GDP growth rates are the same. The composition of growth also matters.
clear
- easy to see and understand
clear signs that Y - things that you can easily see, that show you that Y is true or that Y will happen
demand - the need and desire to buy goods and services by households and businesses
composition - the way that something is formed form separate parts การรวมตัวกัน การประกอบเข้าด้วยกัน
matters - is important
clear signs that Y - things that you can easily see, that show you that Y is true or that Y will happen
demand - the need and desire to buy goods and services by households and businesses
composition - the way that something is formed form separate parts การรวมตัวกัน การประกอบเข้าด้วยกัน
matters - is important
GDP growth makes for good headlines. But what matters much more for people and their standard of living is what happens to their wages. In the United States, they fret increasingly about a jobless recovery: GDP is growing but employment is not.
In Thailand, the problem is one of "wageless growth": GDP grows, but wages do not. It is quite striking how wage and productivity growth in Thailand have substantially lagged in the region. Without wage and productivity growth we will not be able to see sustainable improvements in living standards.
headline - the title
at the beginning of a newspaper article that tells you what it is about
(See Wikipedia)
makes for good Y - can be used to create good Y
makes for good headlines - can be used to create good headlines
standard - acceptable level of quality or achievement มาตราฐาน
standard of living - quality of life in a society or group of people as measured by income, access to health care and education, income inequality and poverty, life expectancy, etc (See Wikipedia)
wages - the amount of money earned per hour by a worker
fret - to worry วิตกกังวล
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
jobless recovery - when the economy gets better after a recession but there are few new jobs and many people are still unemployed
striking - very noticeable, different, and unusual เด่นชัด
wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
productivity - producing more with the same amount of inputs (labour, energy, etc) การผลิตสินค้า
lag - delay
X lags Y - X happens after Y
substantially lagged in the region - happened in the region long after it happened in other places
sustainable - able to be successfully continued for a long time ยั่งยืน, ถาวร
living standards - same as "standard of living" above
makes for good Y - can be used to create good Y
makes for good headlines - can be used to create good headlines
standard - acceptable level of quality or achievement มาตราฐาน
standard of living - quality of life in a society or group of people as measured by income, access to health care and education, income inequality and poverty, life expectancy, etc (See Wikipedia)
wages - the amount of money earned per hour by a worker
fret - to worry วิตกกังวล
recovery - when the economy gets better (more jobs, higher incomes) การฟื้นฟูสภาพ
jobless recovery - when the economy gets better after a recession but there are few new jobs and many people are still unemployed
striking - very noticeable, different, and unusual เด่นชัด
wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
productivity - producing more with the same amount of inputs (labour, energy, etc) การผลิตสินค้า
lag - delay
X lags Y - X happens after Y
substantially lagged in the region - happened in the region long after it happened in other places
sustainable - able to be successfully continued for a long time ยั่งยืน, ถาวร
living standards - same as "standard of living" above
Focusing too much on GDP distracts us from the things that really matter: people's welfare and living standards. Even the amount of rainfall we get in a year probably does a better job as a summary measure of people's welfare in aggregate in Thailand, than does GDP. Nearly 40% of the labour force still works in agriculture.
distract - prevent
someone from doing the task they are currently working on and focused
on
the things that really matter - the most important things
welfare - living in good conditions (with health, wealth, and happiness) ความสะดวกสบาย, ความมีสุขภาพดี, สวัสดิภาพ
measure - a quantity that shows how big or small something is
summarize - a short description of a long thing
summary measure - a measure that describes something in a very short way
aggregate - total amount
X in aggregate - the total amount of X
the things that really matter - the most important things
welfare - living in good conditions (with health, wealth, and happiness) ความสะดวกสบาย, ความมีสุขภาพดี, สวัสดิภาพ
measure - a quantity that shows how big or small something is
summarize - a short description of a long thing
summary measure - a measure that describes something in a very short way
aggregate - total amount
X in aggregate - the total amount of X
The person who helped the US Department of Commerce develop the system of national income accounts and thereby gave birth to GDP (or more precisely, its predecessor GNP, the gross national product) in the 1940s was Simon Kuznets. He was keenly aware of its shortcomings. In his address to Congress, he stated that the "welfare of a nation can scarcely be inferred from a measure of national income" such as GDP.
income
- money that people receive from work or some other source, used for
household consumption and savings
national income accounts - (See Wikipedia)
national - a citizen of a particular country ประชาชน
precisely - exactly อย่างเที่ยงตรง,อย่างถูกต้อง,อย่างแม่นยำ,อย่างแน่นอน,อย่างละเอียด
predecessor - what came before
Gross National Product (GNP) - measure of economic acticity in an economy, "the market value of all goods and services produced in one year by labour and property supplied by the residents of a country," GDP has now replaced as the main indicator of economic activity (See Wikipedia)
Simon Kuznets - the economist who invented the idea of GNP and who won the 1971 Nobel Prize in economics (See Wikipedia)
aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ
keenly aware - know very much that something is true
shortcomings - faults and weaknesses that a person or thing has
address - a formal speech คำปราศรัย
infer X from Y - determine that X is true based on knowing that Y is true (if Y then X)
X can scarcely be inferred from Y - you really cannot guess that Y is true if you know X
national income accounts - (See Wikipedia)
national - a citizen of a particular country ประชาชน
precisely - exactly อย่างเที่ยงตรง,อย่างถูกต้อง,อย่างแม่นยำ,อย่างแน่นอน,อย่างละเอียด
predecessor - what came before
Gross National Product (GNP) - measure of economic acticity in an economy, "the market value of all goods and services produced in one year by labour and property supplied by the residents of a country," GDP has now replaced as the main indicator of economic activity (See Wikipedia)
Simon Kuznets - the economist who invented the idea of GNP and who won the 1971 Nobel Prize in economics (See Wikipedia)
aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ
keenly aware - know very much that something is true
shortcomings - faults and weaknesses that a person or thing has
address - a formal speech คำปราศรัย
infer X from Y - determine that X is true based on knowing that Y is true (if Y then X)
X can scarcely be inferred from Y - you really cannot guess that Y is true if you know X
Unfortunately, many politicians and policy-makers are not as perceptive as Kuznets. GDP growth has become an end in itself. When talking about how an economy is doing, the first thing they typically refer to is GDP growth. But other indicators are equally if not more relevant for an economy's well-being.
policy
- a set of plans or action agreed on by a government, political party,
business, or other group นโยบาย (See Wikipedia)
policy-makers - officials in government who create a government's policy
typically - usually; normally อย่างเป็นแบบฉบับ
relevant - directly connected and important to what is being discussed or considered ที่เกี่ยวข้อง, ที่เกี่ยวข้องโดยตรง
well-being - when people are in a good or satisfactory state (being happy, safe, healthy, with enough money to live comfortably)
policy-makers - officials in government who create a government's policy
typically - usually; normally อย่างเป็นแบบฉบับ
relevant - directly connected and important to what is being discussed or considered ที่เกี่ยวข้อง, ที่เกี่ยวข้องโดยตรง
well-being - when people are in a good or satisfactory state (being happy, safe, healthy, with enough money to live comfortably)
Why doesn't the country's productivity and wage growth get equal billing with GDP growth? Why don't we pay as much attention to our education indicators as our quarterly GDP numbers? It is as if we were assessing a company based only on its earnings growth without looking at whether the growth is really sustainable, whether it is being driven by one-off items or too much debt.
get equal billing with - get
promoted as much as, get as much publicity as
indicator - a measure or number that shows or describes a condition or situation (See glossary)
education indicators - measures that show how well education is doing or performing
assessing - looking closely at all the details to make a judgement
one-off items - items that only happen one time
debt - an amount of money that you owe หนี้
indicator - a measure or number that shows or describes a condition or situation (See glossary)
education indicators - measures that show how well education is doing or performing
assessing - looking closely at all the details to make a judgement
one-off items - items that only happen one time
debt - an amount of money that you owe หนี้
The issue is not just an academic one about coming up with a better indicator or measure. Many already exist. The reason this matters is because what we focus on affects the actions and policies we choose. If the shareholders of a company focus on short-term earnings growth above all else, then the CEO will probably choose to take on a lot of debt and cut R&D expenditure and the like. Similarly, our excessive focus on this year's GDP growth leads to policies which tend to emphasise short-term stimulus (e.g. handouts and freebies) over longer-term measures to sustainably increase our productivity and wages (e.g. investment in physical and human capital.
All of which means we will probably continue to see growth which looks a lot better than it really feels.
The author [Sethaput Suthiwart-Narueput] is with the SCB Economic Intelligence Center. The opinions expressed are entirely his own and not those of SCB or its affiliates. He can be reached at sethaput.suthiwartnarueput@scb.co.th .
issue
- a problem that needs to be considered ประเด็น
issue - an important subject that people discuss or argue about ประเด็น
academic - 1. a teacher who teaches in a university or college, 2. only in the realm of ideas and theory, not practical
the issue is not just an academic one - the issue is not just something that people debate in universities, it is important in the real world
academic - someone who teaches at a college, or who studies as part of their job นักวิชาการ
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
focus - think about and work on one thing (rather than waste time on many), concentrate time and attention on one thing ให้ความสำคัญ
expenditure - spending money
and the like - and similar things (things that are almost the same)
excessive - too much มากเกินปริมาณที่พอดี
tend - to be likely to behave in a particular way or have a particular characteristic มักจะ
emphasise - to stress something such as an idea, fact or detail; to explain why something is important เน้น
stimulus - means "fiscal stimulus"
fiscal stimulus - temporarily increasing government spendingo or cutting taxes to get the economy moving and growing again after a recession
handouts - things given to people for free สิ่งที่หยิบยื่นให้ฟรี
freebies - free things
measures - actions taken to deal with a problem มาตราการ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
physical - real things that can be touched and seen (not just an idea or legal right)
capital - money invested in a business (See glossary)
physical capital - machines and equipment used to produce goods in factories (what people normally think of when they hear the word "capital")
human capital - all of the combined skills, experience and knowledge of workers in an economy, "the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience" (See Wikipedia)
affiliates - companies connected with in some way with a larger company
issue - an important subject that people discuss or argue about ประเด็น
academic - 1. a teacher who teaches in a university or college, 2. only in the realm of ideas and theory, not practical
the issue is not just an academic one - the issue is not just something that people debate in universities, it is important in the real world
academic - someone who teaches at a college, or who studies as part of their job นักวิชาการ
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
focus - think about and work on one thing (rather than waste time on many), concentrate time and attention on one thing ให้ความสำคัญ
expenditure - spending money
and the like - and similar things (things that are almost the same)
excessive - too much มากเกินปริมาณที่พอดี
tend - to be likely to behave in a particular way or have a particular characteristic มักจะ
emphasise - to stress something such as an idea, fact or detail; to explain why something is important เน้น
stimulus - means "fiscal stimulus"
fiscal stimulus - temporarily increasing government spendingo or cutting taxes to get the economy moving and growing again after a recession
handouts - things given to people for free สิ่งที่หยิบยื่นให้ฟรี
freebies - free things
measures - actions taken to deal with a problem มาตราการ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
physical - real things that can be touched and seen (not just an idea or legal right)
capital - money invested in a business (See glossary)
physical capital - machines and equipment used to produce goods in factories (what people normally think of when they hear the word "capital")
human capital - all of the combined skills, experience and knowledge of workers in an economy, "the stock of competences, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience" (See Wikipedia)
affiliates - companies connected with in some way with a larger company
(Source: Opinion, SAY TELL, NINE TEN, GDP growth not indicative of better living, 10/08/2010, Sethaput Suthiwart-Narueput, link)
