The “Tom Yam Kung” crisis of 1997 – caused mainly by excessive lending – eventually brought down 56 finance companies, while the authorities intervened in a number of banks. The impact was huge, leading to the laying off of more than 1 million workers in the country.

Yet, all that was incomparable to new challenges caused by the 2008 crisis when a number of US banks collapsed, forcing the US government to inject liquidity into the system.

The US federal debt rose by US$11.3 trillion (nearly Bt400 trillion) from 2008 to 2012, and the impacts of the so-called “Hamburger” crisis spilled over to Europe, Japan and the rest of the world.

Developed countries resorted to relaxed monetary and fiscal measures to prop up their economies, leading to huge excess liquidity, in a situation in which just a tiny amount can create ripple effects.

Aside from the 2008 crisis, “Brexit” – the British electorate’s recent majority vote to leave the European Union – is also expected to bring new challenges, with the impacts expected to be felt for years to come.

In today’s interconnected world, Thailand is not spared from the ripple effects, and the financial sector is the first to absorb irregular movements.

In the year to date, Thailand’s stock index has risen 12 per cent to 1,444.99 points, although this is still far from the pre-crisis level in 1997.

Compared to 19 years ago, when the baht depreciated 100 per cent months after being allowed to float on July 2, the currency unit has regained strength.

This year, the baht has appreciated from 36 to 35.14 per US dollar, as of June 30. Yet, the exchange rate has been volatile in recent years, as the unit averaged about 30 per dollar in 2012 – and 29 the following year.

The export sector, which contributes about 70 per cent of gross domestic product, needs new tactics or it could continue its decline of the past three years.

Following the UK’s Brexit decision, at this stage all agree that the Thai economy is much stronger than it was 19 years ago – and that it is somewhat resilient to external shocks.

Although all the ghosts of the past have effectively disappeared, the country needs to prepare for new ones in their place.

While the weight of external factors is huge, Thailand is being haunted by high household debt, which remains as high as 80 per cent of GDP.

Private investment remains low, given global economic uncertainties and slow public investment.

The export sector, meanwhile, is in bad need of new innovation, in order to reduce its dependence on conventional products that almost any other country can make.

According to a World Bank report, foreign direct investments are likely to remain subdued, reflecting soft external demand and continuing political uncertainty in the Kingdom.

The report, released last month, also highlighted long-term challenges like the ageing issue, which calls for urgent action in terms of raising productivity.

The report coincides with the finding from IMD that although Thailand’s overall international competitiveness ranking has risen two notches in 2016 to 28th among 61 economies, it is among the worst-ranking countries in terms of the quality of education.

At a press conference last week, Kiatipong Ariyapruchya, World Bank Thailand senior country economist, also reckoned that a delay in the government’s mega-projects would be a major risk to the economy – given that public spending is playing a big role in boosting economic expansion.

Of the four main economic engines, the tourism sector is doing well, aside from public spending.

Nevertheless, while the Tourism Authority of Thailand expects a 7-per-cent increase in foreign visitor arrivals, from 29.88 million last year to 32 million in 2016, tourism receipts are expected to increase by only 4 per cent, from Bt2.21 trillion to Bt2.3 trillion.

Prudent management ‘crucial’

Despite all the challenges and structural problems, Bandid Nijathaworn, former deputy governor of the Bank of Thailand, said the Kingdom’s economic strengths would remain intact as long as the country stayed prudent in regard to the build-up of debt, maintained a flexible currency regime, and stayed tuned to financial discipline.

He noted that all the major crises of the past 19 years had stemmed from excessive debt in the public and private sectors, with troubles appearing when insufficient income could be generated to finance that debt.

Bandid also said that crises had tended to be more frequent since the Hamburger crisis, and that all countries needed new economic policies to drive their expansion in light of slow global growth.

“Any country would witness a crisis when the level of debt is far beyond its income. If you want to avoid a crisis, you need to manage your debt well and be financially disciplined. The flexible currency regime will help,” he explained.

In this scenario, he urged the government to be prudent in building up debt when it comes to the financing of mega-projects.

“The infrastructure investment will generate long-term income to the economy. Yet, the return on investment must be taken into account, as that will determine the debt-financing ability. This is the question for the government: how to balance debt-building with economic gains,” he said.

Thailand’s public debt is currently only 44 per cent of GDP, and the country still enjoys a robust current-account surplus, the former central banker said. Nevertheless, external risks are huge and these require the Finance Ministry and the Bank of Thailand to be more prudent, before the risks spark a capital exodus and put pressure on the currency, as happened 19 years ago, he added.