Firm-level Perspective of Thailand's Low Investment Puzzle

Private investment in Thailand has been standing at a low level since the aftermath of the Asian Financial Crisis until present. Using firm-level data of virtually all registered firms in Thailand during 2001–2013, this paper finds that more than 60 percent of Thai firms have been undertaken negative net investment (invested at a rate slower than the depreciation rate) each year. Our regression results suggest that small firms and large firms have been facing different kinds of obstacles that ultimately led to persistently low investment at the aggregate level. For large firms, low or negative net investments are driven mainly by weak growth prospects and future uncertainties. For small firms, their investments are more likely hindered by supply-side constraints (lack of access to external finance) and negative net investments are driven mainly by inefficiency.