Between 1985 and 1994, Thailand was the world’s fastest-growing economy, according to the World Bank, as noted by economist Pasuk Phongpaichit in her 1996 study. World Bank data show that Thailand’s economy grew by an average of 8.6 percent annually between 1985 and 1996.
However, growth slowed after the Asian financial crisis in the late 1990s. By 2024, Thailand’s economy grew by just 2.5 percent, according to the World Bank.
While Thailand’s growth has slowed, Viet Nam has continued to expand at a faster pace. In 2000, Thailand’s GDP per capita was nearly five times that of Viet Nam. By 2024, the gap had narrowed to around 1.6 times.
As a result, although Thailand’s GDP per capita remains higher, Viet Nam is steadily closing the income gap with its neighbor.
Thailand’s Years of Rapid Economic Growth
Thailand’s economic growth began to accelerate in the second half of the 1980s. According to the World Bank’s annual growth data, the Thai economy grew by 4.6 percent in 1985 and 5.5 percent in 1986. Growth then reached 9.5 percent in 1987 before surging to 13.3 percent in 1988.
The momentum continued for several years. Between 1991 and 1995, Thailand’s economy grew by around 8 percent annually before slowing to 5.7 percent in 1996. This period made Thailand one of Asia’s most prominent examples of rapid economic growth.
Economic expansion also increased output per person. Based on World Bank data measured in constant 2015 prices, Thailand’s real GDP per capita rose from US$1,755 in 1985 to US$3,767 in 1996.
In other words, economic output per person more than doubled over eleven years after adjusting for price changes.
The Asian Financial Crisis Changed Thailand’s Trajectory
However, Thailand’s rapid growth did not last.
In 1997, the Asian financial crisis hit Thailand. According to World Bank data, the country’s economy contracted by 2.8 percent in 1997, followed by a sharp 7.6 percent decline in 1998. Over the two years, the economy shrank by around 10 percent cumulatively.
The impact was also reflected in real GDP per capita. After reaching US$3,767 in 1996, the figure fell to US$3,295 in 1998, a decline of 12.5 percent. Thailand took until 2002 to slightly surpass its pre-crisis level. By 2003, real GDP per capita had reached US$4,018.
Viet Nam, meanwhile, maintained stronger growth during the same period. World Bank data show that its economy grew by 9.3 percent in 1996, 8.2 percent in 1997, and 5.8 percent in 1998.
Although Viet Nam’s growth also slowed, its economy continued to expand while Thailand’s contracted.
Viet Nam Is Growing Almost Twice as Fast
The difference between the two economies has become more pronounced since 2000. Based on World Bank real GDP data, Thailand’s economy grew by an average of 3.3 percent annually between 2000 and 2024. Viet Nam recorded an average of 6.3 percent, nearly twice Thailand’s rate.
The contrast was also evident during the COVID-19 pandemic. In 2020, Thailand’s economy contracted by 6.1 percent, while Viet Nam still recorded growth of 2.9 percent. In 2024, Viet Nam’s economy grew by 7.0 percent, well above Thailand’s 2.5 percent.
These differences in growth over the years have helped narrow the income gap between the two countries. According to World Bank GDP per capita data, Thailand recorded US$2,006 per person in 2000, compared with just US$404 in Viet Nam. By 2024, the figures had risen to US$7,387 in Thailand and US$4,717 in Viet Nam.
In other words, Thailand’s GDP per capita increased approximately 3.7 times over this period, while Viet Nam’s rose around 11.7 times.
GDP per capita measures a country’s total economic output divided by its population. It helps compare economic output per person, although it does not represent the actual income received by each individual.
The Challenge of Escaping the Middle-Income Trap
Thailand’s experience reflects a challenge discussed in the World Bank’s World Development Report 2024. The report explains how many middle-income economies struggle to catch up with advanced economies.
Of the 108 economies classified as middle-income at the end of 2023, only 34 had reached high-income status since the 1990s.
The World Bank proposes a phased strategy known as the 3i framework. Low-income economies should focus on investment. Lower-middle-income economies need to add infusion by adopting and spreading technologies and business practices from abroad. Upper-middle-income economies must go further by developing innovations at the global technological frontier.
Thailand once achieved extraordinary growth, but sustaining that momentum has proved difficult. Meanwhile, Viet Nam continues to narrow the income gap through faster economic expansion.
The two countries’ trajectories show that economic success depends not only on how quickly an economy grows during a particular period, but also on its ability to sustain growth over the long term.
