Consumer spending, mega-projects critical to lift sagging economy, say experts

[webfact]

Consumer spending, mega-projects critical to lift sagging economy, say experts 

By PHUWIT LIMVIPHUWAT
THE NATION

 

 

As Thailand’s economic growth could decline at an alarming rate in the next six months, leading economists have unanimously urged the incoming government to stimulate consumer spending and continue investing in mega-infrastructure projects for the rest of the year.

 

Key financial institutions have been continuously lowering their GDP forecasts for 2019 as the economy looks to be decelerating faster than anticipated. 

 

The National Economic and Social Development Council, Thailand’s top economic advisory body, has adjusted down its GDP forecast from 4 per cent made in February to 3.3 per cent in May. Kasikornbank (KBank) has also lowered its GDP forecast for 2019 from 4 per cent made back in December last year to 3.7 per cent in February and to 3 per cent last week.

 

The ongoing US-China trade conflict was unanimously cited as the key factor driving down growth, as Thailand is in the supply chain of goods that are impacted by the tariffs the US has imposed on China. 

 

In May, the US raised tariffs from 0-10 per cent to 25 per cent on US$250 billion worth of goods from China. Many of these goods include electronic devices whose parts are manufactured in Thailand. This has led to a continuous drop in Thailand’s shipments to China, the Kingdom’s largest trading partner, since the beginning of this year.

 

From January to May, Thai exports to China declined by 8.7 per cent year on year with a value of $11.6 billion, reducing by over a billion dollars from the same period last year, according to the Commerce Ministry. The ministry has since reduced its overall year-on-year export growth target for 2019 from 8 per cent to 3 per cent, compared to last year’s 6.9 per cent growth.

 

However, the ministry’s 3 per cent target is still being viewed as optimistic by various institutions. Economic research units of various commercial banks have estimated that Thailand’s exports will be below 1 per cent. Krungthai Bank and Bangkok Bank predicted that exports would grow by merely 0.8 and 0.5 per cent respectively. KBank predicted that exports would not grow at all.

 

Another key factor contributing to the decline in exports is the appreciation of the baht throughout 2019. From December 31 to July 3, the baht appreciated by 5.2 per cent, making it the strongest currency to appreciate against the dollar in the Asia Pacific region, according to Siam Commercial Bank’s Economic Intelligence Centre.

 

 

The strengthening baht could wipe out as much as Bt66 million off the value of Thailand’s exports this year and cut companies’ profits by about Bt17 billion, according to a research by TMB Analytics.

 

The appreciation of Thailand’s currency is largely due to the country’s strong current account surplus, the high level of foreign currency reserves and arrival of foreign direct investments, said Jittipol Puksamatanan, chief market strategist of Krungthai Bank.

 

Businesses that distribute products locally and import raw materials are expected to benefit the most from the baht’s appreciation, said TMB Analytics. They will gain from an estimated reduction in import material of Bt62 billion, and an increase of 0.3-4.9 per cent in gross profit margin.

 

The final key factor that will negatively impact Thailand’s export figure is the establishment of the EU-Vietnam free trade agreement (EVFTA). Thailand’s trade with the EU has already declined by 7 per cent in the first five months of this year and will continue to decline further throughout the year due to the fact that Vietnam is a key trade competitor of Thailand, according to Aat Pisanwanich, director of the University of Thai Chamber of Commerce’s Centre for International Trade Studies (CITS)

 

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years.

 

To cope with these economic challenges, the Thai government is urged to stimulate domestic spending through various policies such as welfare card policies. Krungthai Bank’s Global Business and Development Group expects the incoming government to inject up to Bt100 billion into the economy to stimulate growth in the second half of this year.

 

“To boost spending, the government should implement immediate measures to stimulate the economy by targeting consumer spending directly,” said Nattaporn Triratanasirikul, Kasikorn Research Centre’s assistant managing director.

 

The incoming government is also urged to continue its investments in mega-infrastructure projects to boost investment sentiment throughout the rest of the year, said Siriporn Suwannagarn, managing director and financial advisory head of KBank’s Private Banking Group.

 

However, infrastructure investment is expected to face major delays in 2019, as hiccups in major infrastructure projects occur and the incoming government facing budget delay issues. For instance, the Transport Ministry plans to invest Bt200 billion in infrastructure projects throughout this year, however, Krungthai Bank’s assessments suggest that only Bt77 billion will actually be spent on projects mainly located in the Kingdom’s central region.

“Our assessments suggest that the Bt77 billion public investment, which accounts for only 0.1 per cent of Thailand’s GDP, will not be sufficient to offset Thailand’s slow economic growth in the second half of this year,” said Mana Nimitvanich, first vice president of the bank’s Global Business Development and Strategy Group.

 

Finally, Thailand should move swiftly to establish a trade deal with the EU, which accounts for up to 10 per cent of its exports. Thailand should also seek further trade opportunities by establishing new trade agreements and finishing the Regional Comprehensive Economic Partnership negotiations by the end of the year, according to the Asean Business Advisory Council.

 

Source: http://www.nationthailand.com/business/30372446

 

-- © Copyright The Nation Thailand  2019-07-08

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[leeneeds]

49 minutes ago, webfact said:

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years.

Given the studious mind set of the Vietnamese and the drive that you can see first hand if you ever visit, I have no doubt their market share will continue to erode Thailands trade , their government  ministers are pro active in all facets of driving GDP, 

unfortunately for Thailand we have a reactionary government who lack drive other than their own selfish standing within their faction, 

Self comes first,

Party second,

country last.

 

"what's good for the country and its people, mr minister ?"

"AAHH well not sure about that, but we will spend money we don't have!, we borrow of the Chinese as they have lots of money, we will then give money to domestic issues lots of money, then we will raise tariffs to reclaim those moneys and more, yes I think good policy to move money around but not gain any wealth"  "DO you think this is a good policy?"

" sure give today! take tomorrow!, been working for years why change",

"how do you pay back the borrowed money?"

" ER umm , well we expect Growth and surplus to cover the interest and the principal amount to be paid back by , by , by sorry I have meeting I have to go".

 

 

[Justgrazing]

1 hour ago, webfact said:

Consumer spending, mega-projects critical to lift sagging economy, say experts 

Tit jobs all round then .. so to speak .. 

Edited July 7, 2019 by Justgrazing

[fforest1]

Mega-projects critical to lift sagging economy, say experts....

 

Please......99.9% of the Thai people are not going to see jack from these mega projects.....These projects will mostly have Chinese management and low cost Cambodian and Burma labors....And the correct Thais will have some very happy Mia Noys....   

Edited July 7, 2019 by fforest1

[Cadbury]

2 hours ago, webfact said:

Consumer spending, mega-projects critical to lift sagging economy, say experts 

Consumers meaning the ordinary people? The only people in Thailand who have money to spend are the elite, politicians and senior military personnel. They should dig deep into their envelopes to help the sagging economy.

As for getting a trade deal with the EU, unfortunately for Thailand Vietnam has stolen the march on them. In any case Thailand is frequently in bad odour with the EU over their fishing industry and it will need more than smarmy talk by the PM to get them to smile favourably on Thailand. 

[Isaan sailor]

Let’s connect the dots on the high Baht:

• USD has seen a downward spiral vs. Baht for over two years.

• BoT confirms they have continuous foreign inflows.

• BoT has record USD reserves.

• Thai government has inked deals with China.

• China holds $1.2 trillion in US debt, maturing every trade day.

• China needs to invest this $$ and seeks high yield and relative safety.

• BoT has high rates.

 

[marcusarelus]

7 minutes ago, Isaan sailor said:

Let’s connect the dots on the high Baht:

• USD has seen a downward spiral vs. Baht for over two years.

• BoT confirms they have continuous foreign inflows.

• BoT has record USD reserves.

• Thai government has inked deals with China.

• China holds $1.2 trillion in US debt, maturing every trade day.

• China needs to invest this $$ and seeks high yield and relative safety.

• BoT has high rates.

 

Another key factor contributing to the decline in exports is the appreciation of the baht throughout 2019.

The strengthening baht could wipe out as much as Bt66 million off the value of Thailand’s exports this year and cut companies’ profits by about Bt17 billion, according to a research by TMB Analytics.

 

 

 

[hotchilli]

4 hours ago, fforest1 said:

Mega-projects critical to lift sagging economy, say experts....

 

Please......99.9% of the Thai people are not going to see jack from these mega projects.....These projects will mostly have Chinese management and low cost Cambodian and Burma labors....And the correct Thais will have some very happy Mia Noys....   

Exactly what I was thinking.... Laos, Cambodia, Myanmar will soon have the Chinese controlling their economies... pulling the government strings like puppets as they see fit.

Vietnamese are far more street wise.. they will stand their ground and compete.

Thailand will ask the Chinese to fund everything... which means nothing will filter down to the consumer.

The rich elite will get the kick-backs and keep smiling while the workers suffer the most.

What I'm wondering is what will Thailand do when all the manual workers go back to their countries of birth to work in newly built modern Chinese factories.

Thailand will fail miserably.

[marcusarelus]

4 hours ago, fforest1 said:

Mega-projects critical to lift sagging economy, say experts....

 

Please......99.9% of the Thai people are not going to see jack from these mega projects.....These projects will mostly have Chinese management and low cost Cambodian and Burma labors....And the correct Thais will have some very happy Mia Noys....   

The wife's an engineer on an infrastructure project.  They use Thai equipment operators and Thai welders and Thai engineers and Thais make the concrete and it is shipped in Thai owned and operated trucks.  Thai companies are the sub contractors and they are inspected by the general contractor so she sees most of what's going on.  

Edited July 8, 2019 by marcusarelus

[Geoffggi]

Thailand has just been through a series of actions that got rid of plenty of spending Farangs now you are complaining that they are no longer spending here, do you realise exactly what it is that is best for the country, just for once forget about your personal feelings and requirements and consider others ......

[Krataiboy]

Consumer spending, mega-projects critical to lift sagging economy, say experts

 

Household debt in Thailand (see below) is already threatening to get out of control. Wouldn't it make more sense simply to rein in the soaraway baht?

 

 

 

 

[NCC1701A]

8 hours ago, webfact said:

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years

"Charlie didn't get much USO. He was dug in too deep or moving too fast. His idea of great R&R was cold rice and a little rat meat. He had only two ways home: death, or victory."

 

 

[RichardColeman]

8 hours ago, webfact said:

Consumer spending debt, mega bribeable-projects critical to lift sagging dire economy, say experts somebody

 

[RichardColeman]

8 hours ago, webfact said:

Consumer spending, mega-projects critical to lift sagging economy, say experts 

Think I can safely say that the lady I buy my 60 baht Kababs from has less money in her pocket now due to farang leaving and tourism down to actually go out and spend and really does not give a hoot about a roundabout in the middle of nowhere

[Inepto Cracy]

Domestic debt and corruption is what is killing Thailand as an ecconomy. Do the officials in high places actually know what is going on, or are they just singing birds in a cage?

[Isaan sailor]

Thailand is slowly collapsing because of the high Baht.  Tourists, exports and expats will diminish as BoT holds onto high interest rates in order to attract foreign hot money.

[Srikcir]

10 hours ago, webfact said:

“Our assessments suggest that the Bt77 billion public investment, which accounts for only 0.1 per cent of Thailand’s GDP, will not be sufficient to offset Thailand’s slow economic growth in the second half of this year,”

The counter argument to Chinese government's experience with a policy of more investment in infrastructure to boost economic growth:

• the actual costs of building infrastructure are systematically underestimated. The effect of cost overruns is exacerbated by shortfalls in forecasted stream of future benefits—direct or indirect. Consequently, a typical infrastructure investment yields a negative net present value—i.e. a net drag on the economy.
• what the macroeconomists appear to be measuring is correlation not causation between higher infrastructure spending and economic growth.

Solution:

• the lifetime cash flow profile of a proposed infrastructure project ought to be adopted such that only infrastructures that yield net present value in terms of demonstrable user fees or a direct increase in tax revenues should be built. (I note that many of Prayut's infrastructure projects were accelerated by Article 44 Orders that bypass such economic analyses such as the Chinese-Thai dual rail system)
• policy makers can enhance the efficiency and productivity with which fewer infrastructure assets are used to create resilient economic prosperity.

https://www.itrc.org.uk/does-infrastructure-contribute-to-economic-growth-micro-level-evidence-from-transportation-projects-in-china/

 

Just recently, the ultra-useful BTS network around Bangkok is becoming too expensive for many Thais, and is more expensive than international equivalents [note-as the Red Line goes into operation next year]. Because of high fares fewer commuters could use the electric rail lines, and operators would have to shoulder high operating costs. https://thethaiger.com/hot-news/transport/bangkoks-bts-becoming-too-expensive-for-thai-passengers

 

 

 

[Srikcir]

10 hours ago, webfact said:

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years.

Looks like Thailand has real competition for Economic Hub of ASEAN despite Thailand's Pillars of Society mantra.

[Eric Loh]

The blame lies solely on Prayut inability to form the government. Too long allowing the poor economic situation to fester and becoming bad. We lose time to make decision to tackle the problems. No government to further trade negotiations and disburse the spending and infrastructure budgets. Some piece meal spending policies for short time remedies but nothing meaningful, long term and structural. The opposition bloc should get him in Parliament and crucify him for the mess he created. 

[Caldera]

The sooner this utterly inept government will tank the economy, the sooner they will be gone. There's hope.

[zydeco]

Buy houses! Buy cars! Buy stocks! Buy phones and TVs! Buy! Buy! Buy! 

[marcusarelus]

5 hours ago, Eric Loh said:

The blame lies solely on Prayut inability to form the government. Too long allowing the poor economic situation to fester and becoming bad. We lose time to make decision to tackle the problems. No government to further trade negotiations and disburse the spending and infrastructure budgets. Some piece meal spending policies for short time remedies but nothing meaningful, long term and structural. The opposition bloc should get him in Parliament and crucify him for the mess he created. 

Don't you all want the baht to drop in value?  Bad economy is the way.  

[Eric Loh]

36 minutes ago, marcusarelus said:

Don't you all want the baht to drop in value?  Bad economy is the way.  

Tell you the truth. I don’t want baht to drop as I am an importer. And I also reduce my fuel costs. 

[ocddave]

Keep spreading the bad news, I need that Baht to reverse course.....LOL

[pookondee]

The baht will never drop.

There are many reasons.

Thailand as a business has low labour costs.

They do have various exports, not only rubber and rice.

If all else fails they will always have ideal weather for agriculture, and they seem to have managed water a lot better than other countries.

 

Economies will soon be chrashing everywhere due to out of control household debt, and the massive wealth shift that is going on.

Thailands problems will always be relatively minor compared to those of other countries, so the Baht will always be a safe haven.

 

It aint over yet, be prepared to see your exchange rates shaved off another 10-15% against the baht in coming years.

 

[ivor bigun]

Two friends of ours from the UK normally spend 3 months of the year here ,this year because of the high baht ,one is here three weeks one 4 weeks,another who spends 2/3 weeks not coming, i wonder how many others are going elswhere,i know its not much but their spending will be down 3 thousand pounds or so.
Multiply that by?

Sent from my SM-A720F using Thailand Forum - Thaivisa mobile app

[billd766]

On 7/8/2019 at 7:22 PM, zydeco said:

Buy houses! Buy cars! Buy stocks! Buy phones and TVs! Buy! Buy! Buy! 

We have 2 houses, 1 old pickup truck. more mobiles than we need and several older TVs that nobody ever watches. 

 

We don't need to buy.

[onera1961]

On 7/7/2019 at 11:34 PM, RichardColeman said:

has less money in her pocket now

Yes, she has less money to enrich Chang beer company, gamble, and feed her Thai lover boy with yaba. 

Edited July 9, 2019 by onera1961