The Nationwide Economic and Environmental Impacts of Tourism: A Computable General Equilibrium Approach for Thailand

Thai economic conditions considerably depend on the performance of tourism sectors. More than half of the Thai industries are directly and indirectly interdependent with tourism sectors. Given these large economic dependences upon tourism, any internal or external changes that affect Thai tourism could have substantial economy-wide impacts on resource allocation, sectoral outputs, income distribution, macroeconomic variables and the environment. Using computable general equilibrium (CGE) models, the research finds that an inbound tourism expansion in Thailand can stimulate higher real GDP but with a deterioration in the trade balance due to an appreciation in the real exchange rate and an increase in imports of intermediate inputs for manufacturing. However, the current account deficit can decline owing to the extra foreign receipts from net inbound tourism that are large enough to pay off a reduction in the trade surplus. An inbound tourism expansion benefits all household classes in terms of an increase in consumption, utility and income. Within the same income level, households in non-agriculture gain more than households in agriculture. Within the same sector, the benefits are concentrated in high income households rather than low income households. The results point out that an inbound tourism expansion is not a pro-poor or proagricultural household policy as long as the owners of primary factors in agriculture, especially low income agricultural households, do not participate in tourism activities. The simulation predicts an increase in water demand by both agriculture and nonagriculture due to an inbound tourism expansion. With other things fixed, this implies an increase in wastewater discharge as well. The largest increases in piped water use are in manufacturing, indirect tourism, water and wastewater-intensive non-agriculture and domestic-oriented industries. If a major concern is to reduce water use and wastewater discharge, a decrease in piped water subsidy might be an appropriate policy option. Therefore, the effects of a reduction in piped water subsidy when there is an inbound tourism expansion should be further investigated in future research.