Thai Economy -- Headed in the Right Direction?

[Scott]

There was a recent thread showing that exports have fallen 5.7% year on year, more than expected.   In your opinion, do you feel the Thai economy is headed in the right direction?  

 

Economics are complicated, so please feel free to leave your opinion of what you see as the positive, negative and what would help keep the economy strong.  

 

For further reading:

 

 

 

[Samui Bodoh]

If I could properly predict where the economy is going, I'd be a truly wealthy man! That said...

 

I chose that the economic situation is a result of/tied to the political situation, and the result of the political situation is that Thailand is now overly reliant on China, much to the peril of Thailand.

 

Let me be clear; I have no beef with China; I lived and worked there, I liked the people very much, I admire the culture and welcome the opening of China to the world (with a bit of trepidation; that is another post). But, one thing that I have learned about China through study and experience is that you NEVER want to put yourself in a subservient position with them and that is what the Junta has done to beloved Thailand.

 

When the Junta took power in 2014, the economy was doing fine, but wasn't exploding. It was inevitable with a military takeover that there would be negative economic repercussions, and there were (I'll let others dig out the stats). The Junta, like all authoritarian regimes, requires economic growth to maintain power; economic slowdown destroys authoritarian regimes as they don't have anything else to hang their hat on.

 

Soooo, the Junta bent over backwards to China in the hope of getting Chinese money flowing into Thailand, and it has. However, the price to be paid, likely for generations, is that now Thailand is dependent/reliant on China for positive economic activity, and both the Chinese and the Thai authorities know it (witness Prawit's grovelling apology a while back, remember the I.O. who profusely apologized for getting punched in the face? Etc. Etc. Etc.).

 

Thailand's economic future depends on choices made; they can either make a serious attempt to woo back Western money and business which will require a serious effort (doubtful), or they can continue to grovel at China and hope that the Chinese don't decide to pull the plug.

 

Either way, Thailand's economic future doesn't look terrible bright; the question is how dim will it be?

 

 

[RotBenz8888]

The only thing I care about is the sky rocketing baht, hope it'll run out of fuel very soon.

[Eric Loh]

What matters are what the Thais think of their economy. According to the Thai Chamber of Commerce, half of Thais surveyed felt that the current economic situation is poor and heading in the wrong direction. Biggest concern is political anxiety that impacts the people and investors' confidence. The coming election is no panacea erasing this anxiety with the constitution and the 20 years strategy locked and handicap any new confidence of good policies. The likely Parliament gridlock and the dire coup warning by the Army Chief add to the political uncertainty and anxiety. Thais feel that the economy is not equally distributed and doesn't match the cost of living. Last year consumer confidence index dropped and most felt that the economy is bad and getting worse. All is not well with the economy last 5 years and looking forward don't seem to see any silver lining. More must be done to erase the political anxiety starting with controlling the power of the military. Then possible some hope. 

[JimHuaHin]

If you follow the Thai government's announcements and believe the Thai government data, the Thai economy is growing great.

 

If you walk around the shopping centres and markets and talk to staff - the economy is in the shit.

 

If you talk to people who work in hotels, most will tell you that there are fewer clients than in last year, and teh year before, .....

 

And if you talk to the average Thai, they will say financially life is a growing struggle.

[fvw53]

Economists can help us to learn about the past ...but I strongly doubt about their ability to predict the future...

 

On October 14, 1997, Robert C. Merton (now McArthur University Professor at the Business School) and Myron Scholes were awarded the Nobel Prize in Economic Science. 
They had devised a method for pricing options, which are financial contracts that were designed to reduce risk.
On the day the prize was announced, Roger Lowenstein writes in When Genius Failed, "Merton, who was teaching a class at Harvard, got a three-minute ovation from his students. 
A little less than a year later, Long-Term Capital Management (LTCM), the flashy Greenwich, Connecticut, firm that both Mertonand Scholes had joined five years earlier--putting their options theories into practice--was hit with losses so severe the Federal Reserve Bank of New York was forced to call an unprecedented emergency meeting of Wall Street's top powerbrokers, who ponied up $3.65 billion to prevent a worldwide financial catastrophe.

[mfd101]

24 minutes ago, JimHuaHin said:

If you follow the Thai government's announcements and believe the Thai government data, the Thai economy is growing great.

 

If you walk around the shopping centres and markets and talk to staff - the economy is in the shit.

 

If you talk to people who work in hotels, most will tell you that there are fewer clients than in last year, and teh year before, .....

 

And if you talk to the average Thai, they will say financially life is a growing struggle.

And as for expats, if they live in Pattaya or Phuket & think things are quiet, then they'll believe anything bad about the economy. And if, like me, you live in southern Isaan on the west-east axis, it's hard to believe anything other than that the economy is booming, and a large number of formerly poor people are driving around on 4 wheels, some very new & smart.

 

2 comments:

(1) I think it's possible to overestimate the 'dependence on China' issue. As with the Australian economy, there's the basic real & very diverse economy and there's the Chinese icing on top. The icing may be quite thick (in Australia's case) or not that thick at all (in Thailand - take away the Chinese tourists), but the underlying diverse economy is still there beneath.

(2) People here always ascribe too much importance to national governments, and it's the same in Western countries. Governments provide arm waving (known as 'leadership') & they facilitate (or not) ie they stand aside & remove barriers. But the important thing they don't do is: Create wealth. That is done by individuals & groups of individuals cooperating with hard work & sound understanding. The only thing that investors require - both domestically & internationally - is stability ie social & legal predictability. As with civilian governments, these can be provided (or not) by military governments. And very high quality authoritarian regimes (Singapore) can be very stable.

[Pilotman]

I live slap bang in the new EEC.  if appearances are anything to go by, the  future looks very bright indeed.  The government are developing the EEC into the Thai equivalent of Silicon Valley and the signs of that transformation are everywhere, not least in the new road constructions going on, the development of U Tapao Airport and the Mataput Industrial complex.  

[losworld]

41 minutes ago, fvw53 said:

Economists can help us to learn about the past ...but I strongly doubt about their ability to predict the future...

 

On October 14, 1997, Robert C. Merton (now McArthur University Professor at the Business School) and Myron Scholes were awarded the Nobel Prize in Economic Science. 
They had devised a method for pricing options, which are financial contracts that were designed to reduce risk.
On the day the prize was announced, Roger Lowenstein writes in When Genius Failed, "Merton, who was teaching a class at Harvard, got a three-minute ovation from his students. 
A little less than a year later, Long-Term Capital Management (LTCM), the flashy Greenwich, Connecticut, firm that both Mertonand Scholes had joined five years earlier--putting their options theories into practice--was hit with losses so severe the Federal Reserve Bank of New York was forced to call an unprecedented emergency meeting of Wall Street's top powerbrokers, who ponied up $3.65 billion to prevent a worldwide financial catastrophe.

Economics is largely a pseudo science where the ends justify the means.

[DrTuner]

Don't know about the economy, but at least the amount of (paid?) shills is increasing. Maybe it's the Russians at it again.

[losworld]

7 minutes ago, Pilotman said:

I live slap bang in the new EEC.  if appearances are anything to go by, the  future looks very bright indeed.  The government are developing the EEC into the Thai equivalent of Silicon Valley and the signs of that transformation are everywhere, not least in the new road constructions going on, the development of U Tapao Airport and the Mataput Industrial complex.  

Yes get ready for pollution to go through the roof it it continues. Should be real nice.

[Snow Leopard]

If the Baht keeps getting stronger exports will keep falling and tourists will stop coming. A strong Baht hurts millions and helps very few. 

[Eric Loh]

21 minutes ago, Pilotman said:

I live slap bang in the new EEC.  if appearances are anything to go by, the  future looks very bright indeed.  The government are developing the EEC into the Thai equivalent of Silicon Valley and the signs of that transformation are everywhere, not least in the new road constructions going on, the development of U Tapao Airport and the Mataput Industrial complex.  

You can build the infrastructure and that's the relatively easy part but can you attract the investments which will factor in political stability as key component of their investment decision. Not withstanding that you need competent and talented ministers and bureaucrats to come up with a enticing package to attract big corporations to invest. There are lots of competitions in the region including the China's Greater Bay Area which will be Asia's silicon valley and countries in the region building their own investment hubs. All eyeing and laying the red carpets for the precious FDI. 

[scorecard]

4 hours ago, Eric Loh said:

What matters are what the Thais think of their economy. According to the Thai Chamber of Commerce, half of Thais surveyed felt that the current economic situation is poor and heading in the wrong direction. Biggest concern is political anxiety that impacts the people and investors' confidence. The coming election is no panacea erasing this anxiety with the constitution and the 20 years strategy locked and handicap any new confidence of good policies. The likely Parliament gridlock and the dire coup warning by the Army Chief add to the political uncertainty and anxiety. Thais feel that the economy is not equally distributed and doesn't match the cost of living. Last year consumer confidence index dropped and most felt that the economy is bad and getting worse. All is not well with the economy last 5 years and looking forward don't seem to see any silver lining. More must be done to erase the political anxiety starting with controlling the power of the military. Then possible some hope. 

 

Is that your economic analysis or your political analysis? In either case the content is clearly not your writing style, again the deliberate construct of others for a purpose. 

 

"Thais feel that the economy is not equally distributed..."

 

Is that from your research el or an opportunistic statement?

 

But in reality it's quite true, of course, and also true nothing much is really being done about it right now and nothing much was done about it for decades including in the reign of your idols.

 

There was one occasion when your idol promised everybody will be rich in six months. Nothing happened, the farmers continued to get poorer. 

 

 

 

Edited February 25, 2019 by scorecard

[natway09]

The Thai economy always seems to go well under a Junta.

I have witnessed 3 now. The election could signal a hiccup for the economy.

Please stop blaming Thailand for the strength of the Bht

It is caused by the fact that the world's economists believe that your home currency has devalued because your economy & (or) reserves are weak or threatened

 

 

[Brunolem]

It depends on what you call the right direction. 

 

If the right direction is globalization with massive inequalities (Thailand was recently ranked number one), as prescribed by the Davos crowd, then Thailand is certainly going in the right direction. 

 

The country's ancestral culture, together with its arts and crafts, are disappearing into quicksand, while a few hundred superwealthy Chinese/Thai families own almost all what is valuable in the country, and shop for Rolls Royces while sipping coffee in a shopping center. 

 

Meanwhile, the peasants certainly travel around in brand new pick-up trucks, yet loaded with debt up to the wazoo. 

 

This is the way of today's world economy, and Thailand is proving to be very good at it, hence the strength of its currency. 

 

Now, to be heading into the right direction doesn't necessarily mean to be heading in the good direction... 

[Eric Loh]

3 minutes ago, scorecard said:

 

Is that your economic analysis or your political analysis? In either case the content is clearly not your writing style, again the deliberate construct of others for a purpose. 

 

 

You don’t read well. It’s not my analysis but the Thai Chamber of Commerce. Your full unadulterated adoration of the junta in full display. 

[somo]

The strength of the Thai Baht says it all. Money is coming in indicating the international view that Thailand is in good health overall. In the past decade wages have risen little but prices a lot putting pressure on the average Thai but this has been relieved by loose credit. Anyone can walk into a car showroom and walk out with a brand new car they cannot afford. The Gov also splashes the cash giving infrastructure deals to their friends. This lack of real spending power amongst the majority of Thais is storing problems for the future but hey it has been the same in Europe and US for decades. A crash will come but I would not put money on it happening anytime soon.

[Samui Bodoh]

56 minutes ago, mfd101 said:

And as for expats, if they live in Pattaya or Phuket & think things are quiet, then they'll believe anything bad about the economy. And if, like me, you live in southern Isaan on the west-east axis, it's hard to believe anything other than that the economy is booming, and a large number of formerly poor people are driving around on 4 wheels, some very new & smart.

 

2 comments:

(1) I think it's possible to overestimate the 'dependence on China' issue. As with the Australian economy, there's the basic real & very diverse economy and there's the Chinese icing on top. The icing may be quite thick (in Australia's case) or not that thick at all (in Thailand - take away the Chinese tourists), but the underlying diverse economy is still there beneath.

(2) People here always ascribe too much importance to national governments, and it's the same in Western countries. Governments provide arm waving (known as 'leadership') & they facilitate (or not) ie they stand aside & remove barriers. But the important thing they don't do is: Create wealth. That is done by individuals & groups of individuals cooperating with hard work & sound understanding. The only thing that investors require - both domestically & internationally - is stability ie social & legal predictability. As with civilian governments, these can be provided (or not) by military governments. And very high quality authoritarian regimes (Singapore) can be very stable.

Good post, although I disagree with most of it. ????

 

I'll take your word regarding all the vehicles driving around Southern Isaan, but I have to ask; how many are actually paid for?

 

Regarding comment 1.

The dependence on China led to 20+ years of economic expansion in Australia, but if the current trend of not purchasing coal continues, it might mean years of economic contraction. That is a real world effect, not icing. On the other end of the scale, google the Sri Lankan city of Hambantota; it is essentially now in Chinese hands though the use of dodgy loan deals foisted on SL; it is another real world effect, not icing. Finally, look at the Thai economy. Estimates vary, but tourism accounts for anywhere between 7%-25% of the economy, and China accounts for roughly 33% of that. THAT is economic influence and power, not mere icing. Finally, because there is so much Chinese money now, it means that the Junta can do stupid things and still see economic growth; see the submarines, see the latest purchase of military hardware, see some of the rail lines, etc. And, think of all the deadwood retired military clogging up positions of power in the Kingdom, then imagine the potential if proper people were there. Yes, perhaps the Chinese money is 'icing' but to argue that it has no serious, real world effect is mistaken (IMHO!); the underlying fundamentals of the Thai economy do provide for steady growth, but it is the Chinese money that pays for the frills. And, people like frills.

 

Regarding comment 2.

I actually agree. However, a good government allows the populace to build the economy. In Thailand, the military government interferes so much that it actually does some harm by placing its people in all the regulatory positions and by placing too much emphasis on 'security'. And, it can do that because it is propped up by Chinese money. China knows this, and I am sure that the Junta knows it as well; see Prawit's embarrassing public grovelling, see the Thai IO's grovelling apology for getting punched in the face by a Chinese tourist, see the mango and sticky rice 'greeting', etc, etc, etc.

 

Chinese icing, once a population and/or a government gets hooked on it, is a very powerful tool of influence. And, getting the proverbial albatross off your back is not an easy task...

 

 

[Pilotman]

32 minutes ago, Eric Loh said:

You can build the infrastructure and that's the relatively easy part but can you attract the investments which will factor in political stability as key component of their investment decision. Not withstanding that you need competent and talented ministers and bureaucrats to come up with a enticing package to attract big corporations to invest. There are lots of competitions in the region including the China's Greater Bay Area which will be Asia's silicon valley and countries in the region building their own investment hubs. All eyeing and laying the red carpets for the precious FDI. 

most of the companies that I see in Mataput appear to be Chinese and Japanese Thai joint ventures, such as the Siam Japan Steel Company.  I think that the Thais have it covered.  We underestimate the solidarity of the South East Asian countries at our (the west's) peril.  

[Eric Loh]

5 minutes ago, Pilotman said:

most of the companies that I see in Mataput appear to be Chinese and Japanese Thai joint ventures, such as the Siam Japan Steel Company.  I think that the Thais have it covered.  We underestimate the solidarity of the South East Asian countries at our (the west's) peril.  

I do get your point about ASEAN and their free trade AFTA agreement. Investments in ASEAN will get the benefits of no tariffs and a 636 million customers. However each countries will also want FDI to provide employment and new technologies. Thailand will have to find the type of investments that will fit well in their economic strategy and find ways to attract them to invest. Maybe automobile where Thailand has a good head start and supporting suppliers network and resources which other ASEAN countries may not have that eco-system. That's why the talent and vision of the leaders will be put in question. Certainly we can't find that in generals like Prayut and Prawit. 

[mfd101]

1 hour ago, Snow Leopard said:

If the Baht keeps getting stronger exports will keep falling and tourists will stop coming. A strong Baht hurts millions and helps very few. 

Well, a strong baht keeps imports cheaper than they otherwise would be. Which helps not just 'rich people' but also the slowly increasing Thai middle classes, who also consume imported goods.

 

But yes, some things will suffer with a strong baht. Tourism is an obvious example. If there is enough suffering, the baht will fall ...

 

Conclusion: Any large modern or even semi-modern economy is immensely complex. At any one time, some things are going up, some things are going down, and some things are stable. The economists' figures are just averages of activity & complexity over time. We don't have anything better to go on for the big picture.

[USMC RETIRED 2015]

36 minutes ago, mfd101 said:

Well, a strong baht keeps imports cheaper than they otherwise would be. Which helps not just 'rich people' but also the slowly increasing Thai middle classes, who also consume imported goods.

 

But yes, some things will suffer with a strong baht. Tourism is an obvious example. If there is enough suffering, the baht will fall ...

 

Conclusion: Any large modern or even semi-modern economy is immensely complex. At any one time, some things are going up, some things are going down, and some things are stable. The economists' figures are just averages of activity & complexity over time. We don't have anything better to go on for the big picture.

That doesn't work here in Thailand as most imports are highly taxed which makes a strong baht useless and only affects tourists, exports and the expat community.  I can't believe there aren't more companies screaming about the strong baht.  Compared to Vietnam, Cambodia, Indonesia, Philippines; what makes the baht so special?  Those currencies are very weak in line with a flat world economy, but the Baht is steaming along at a near all time high.  The USA had the Baht on the manipulation watch list 2 years ago, I hope they investigate further what the Thai government is doing to keep it propped up.

[BestB]

Impossible to give an opinion based on articles posted in Thai visa because each week new article in contraction of a previous one with reference to some Thai guru.

 

i can only comment from what I see as a business owner and a long term resident in Thailand and economy is going down the drain.

 

tourisn wise they keep chasing Chinese, only Buddha knows why because 2-3 years ago they were chasing and prosecuting companies which cater to Chinese . This year they giving them a red carpet.

 

exports can not possibly grow when baht is so strong while other currencies are dropping.

 

whats next? 

 

Plenty of empty shopfronts in the heart of tourist zones, usually impossible to get a shop, now plenty to chose from.

 

long standing restaurants are closing down.

Edited February 25, 2019 by BestB