The Impact of the 1997 Crisis on
Thailand's Rural Sector

Evidence from Agricultural Household Survey Data

EXECUTIVE SUMMARY

This report investigates the impact of the 1997 economic crisis on Thailand's rural sector, with special emphasis on how the poor were affected. The analysis is based on two successive surveys of more than 1,600 households carried out, respectively, during the 1995/96 and 1998/99 crop years. The report integrates these farm-level data on consumption and production with a discussion of aggregate output and input prices and other aspects of the macroeconomy.

The main findings of the analysis are as follows:

  • There is little sign of a massive urban to rural migration, although there appears to have been a slowdown in rural emigration.
  • Although net remittances declined for all but the richest households, the poor are less reliant on remittances than the rich. However, overall off-farm income (inclusive of remittances) declined for the poor, but not for the rich.
  • The central region performed much better in terms of consumption and income compared to both the north and northeast, with the north particularly hard-hit.
  • The poor have borne the brunt of the crisis, their expenditures and income (farm and off-farm) falling both in real terms and relative to those of the rich. These findings are consistent with the fact that the poor derive most of their income from the labor market (which did badly) rather than from farming (which generally did well), whereas the situation is reversed for richer farmers.
  • Evidence of a credit crunch is absent; no large decline in outstanding loans is found in the data.
  • Richer households did much better in terms of farm profits and yields than poorer households, and households in the central region did much better than those in the north and northeast. Although it is difficult to account for the meager performance of poor farmers, these households in any case rely much more on their off-farm earnings and other sources of income.

The key policy conclusion drawn from this analysis is that interventions that influence farmgate prices or enhance the availability of credit will probably have limited impact on the poor. By contrast, well targeted social programs designed to fill gaps in the safety net will do more to alleviate rural poverty.