Impact of exchange rate, inflation and GDP per capita on tourism revenue: A case study in Thailand

Chan, Zhi Xuen and Choo, Zhiwei and Ng, Eunice Yan Ling (2025) Impact of exchange rate, inflation and GDP per capita on tourism revenue: A case study in Thailand. Final Year Project, UTAR.

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Abstract

Thailand's economy depends heavily on tourism, which is one of the primary sources of foreign exchange revenue in the nation. However, changes in macroeconomic factors like GDP per capita, inflation and exchange rates frequently have an impact on the performance of the tourism industry. The purpose of this study is to look into how these three important factors affect Thailand's tourism industry in the short and long term between 1993 and 2023. This study employs econometric methods such as the Granger Causality test, Autoregressive Distributed Lag (ARDL) model, Error Correction Model (ECM) and Augmented Dickey-Fuller (ADF) test to ascertain the relationships between the variables using annual time series data obtained from the World Bank. By making goods and services comparatively cheaper for international tourists, exchange rate depreciation generally increases Thailand's competitiveness as a travel destination, boosting inbound tourism income. However, high inflation reduces this benefit by raising tourism-related expenses, decreasing demand and making Thailand less competitive in terms of pricing when compared to nearby travel destinations. In the meantime, it has been demonstrated that GDP per capita and tourist revenue are positively correlated, indicating that higher income levels promote more discretionary spending on travel-related activities. When implementing strategies to increase Thailand's resilience against external economic shocks, governments, tourist stakeholders, and business owners can all benefit from the insightful information this study offers. This research advances our understanding of how macroeconomic factors interact to influence revenue from tourism in a developing but tourism-dependent country like Thailand by covering research gaps and combining GDP per capita, inflation, and exchange rates into an overall analytical framework.

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