Finance Ministry's..... Pessimistic About Growth

[LaoPo]

Finance Ministry's research body pessimistic about growth

WICHIT CHANTANUSORNSIRI

excerpts:

Economic growth is likely to dip below the 4% to 4.5% target set by the government, according to Kanit Sangsubhan, the director of the Fiscal Policy Office's Policy Research Institute.

Vehicle sales fell 10% year-on-year in January and 18.6% in February, and motorcycle sales dropped 17.9% in January and 14.7% in February.

Cement sales, an indicator for new construction activity, fell 0.5% in January and 4.6% in February from the year before,..while taxes on land transactions also declined for the first two months from last year.

If people stop buying cars, motobikes....houses and land...ouch !

source and more news here:

http://www.bangkokpost.com/Business/18Apr2007_biz27.php

LaoPo

[Dupont]

Just more and more chickens coming home to roost!

Even the gloatings stopped! 7 hours without a response to what is very serious news indeed.

All the Thai intelects on TV (Highdiver and Thaigoon) still batting against the falangs rather than look at the shortcomings of the political situation in Thailand.

Som Nam Na, we still rich prosperous falangs whether we work and live in Thailand, Vietnam, China or falang land.

Edited April 18, 2007 by Dupont

[Temporaneo]

Thai land is for Thai only.

And farang money is for farang only

How fun to see them taking their own medicine.

[Dupont]

Thai land is for Thai only.

And farang money is for farang only

How fun to see them taking their own medicine.

I can go to bed happy now mate.

Thanks for the best soundbite I've seen in months on here.

[ThaiGoon]

[cclub75]

If people stop buying cars, motobikes....houses and land...ouch !

Well... We should stay positive LaoPo.

People do continue to buy stuff.

Amulets.

[samran]

I'm quite happy that this slow down is happening, and I suspect that many in the central bank would be as well. At least, in the way it is supposedly happening

If the article is to believed, then the greatest slowdown is in areas where people rely on credit to purchase. Usually, unproductive consumer goods and the like, cars and motor bikes, which while they are reasonable proxies for confidence, do not tell the whole story.

If I was a policy maker as well, I'd worry about excessive credit induced spending, which leverages people beyond their means, making them more exposed to any downturns/loss of employment. A lot of consumption in recent years has happend in Thailand due to what is called the 'wealth effect'. They spend not based on their current fiancial situation, but based on what they expect their financial situation will be in the future.

If I remember my first year economics correctly, a nations income (GDP) is a product of Consumption + Government Spending + Investment + (Exports - Imports).

We know that there is a trade surplus is growing, and that imports are decreasing so (exports - inports) is a positive number. Investment, I wouldn't know, but I suspect would be low but now rising (though the smart ones are probably investing and lower interest rates are designed to help that along). It was reported today that the government is going to pump prime a little bit, so that is fine too. Consumption down, but if it is frivolous consumption, then it is not such a bad thing that it is going down.

So what do we know from the article.... we know one part of the story! I've hypothesised the rest, but it seems to be to be a likely story. A headline growth rate number, especially if it is unsustainable, is an equally as bad thing as it produces inflationary pressures. Something China is going to have to deal with shortly.

I've always maintainted that the economic team in place is a good one. The junta got in some very smart people, but they aren't the headline grabbers who's sole aim was to stab the dagger into the structure Thaksin has set up for himself. You have to dig a bit deeper to look at the guys who are doing the grunt work. I don't know about the rest of you, but I'm actually using this time to invest in Thailand, not run away.

[ThaiGoon]

[samran]

I'm the first to admit what I've said is up for debate.

You've just got to try and look at the whole picture. So don't pat me on the back yet.

[ThaiGoon]

I'm the first to admit what I've said is up for debate.

You've just got to try and look at the whole picture. So don't pat me on the back yet.

Krab, that's true. We will see how it all pans out.

[cclub75]

:D

I'm the first to admit what I've said is up for debate.

You've just got to try and look at the whole picture. So don't pat me on the back yet.

Because ThaiGoon agrees, I feel compelled to disagree.

Basically, you are right. A cool wind on loans, consumption etc. in theory, could be a good sign.

But, i believe it's a bit... short.

First point, this idea is in total contradiction with what the gvt is doing : cut in interest rates to "boot domestic demand", aids for real estate sector, "stimulus package", price control on many goods, the political will to keep the VAT at 7 % etc.

http://www.bangkokpost.com/Business/19Apr2007_biz36.php

Second point, this idea matches perfectly what the gvt is saying. It's the whole sufficiency economy concept (that by the way, is going to be written on the new constitution).

Here, we can see a massive discrepancy, weird at such level.

It's rather disturbing and draws some questions : what is the real policy ? Where the gvt wants to go ? And how ? Do they know it themselves ?

Then, if people buy less, is it because they want to ? Or because they have too (they are poorer) ? Or because they are using their money for something else, more productive (investing, creating businesses etc.) ?

So you can see that we should be cautious. Thoses figures are like the bottle : half full or half empty.

-less consumption -> sufficiency economy -> people happy

-less consumption -> people poorer - > people unhappy

No need to tell you which part of the bottle I'm personaly looking at...

Thoses signs, real, that you are pointing out are announcing a crisis. The kind that hurts people.

And absolutly not a "party on the green grass of a lovely garden, by a nice summer afternoon" like some people, desperately, want to believe...

[samran]

one thing I think that I forgot to mention, and it is a blessing in disguise, is the strength of the baht.

I think, almost by default, the realisation that you can't control the exchange rate (easily) means that the strenthening baht will force investors, companies etc to consider the true worth of certain businesses which have an export orientation or domestic businesses which have to compete with imports.

It isn't a pretty thought, but the strong baht will hopefully lead the private sector to make some hard choices. Economics isn't a zero sum game (people often assume that it is), but I'm inclined to think that the baht will either force long needed improvements to productivity levels, induce more value adding, or make people pull out of non-competitive industries all together and re-invest in other areas which aren't as exposed to currency fluctations, such as service industries.

Everything I think is based on theory, though with a good eye to the fruits of 25 years of economic reform in places like Australia, NZ (small open economies, resonably similar to Thailand) and to a lesser extent, the UK.

[Ricardo]

It's only a minor point, but there are plenty of other countries where a 4-4.5 percent growth-rate would be welcomed, or even regarded as un-sustainably high.

[sonicdragon]

one thing I think that I forgot to mention, and it is a blessing in disguise, is the strength of the baht.

I think, almost by default, the realisation that you can't control the exchange rate (easily) means that the strenthening baht will force investors, companies etc to consider the true worth of certain businesses which have an export orientation or domestic businesses which have to compete with imports.

It isn't a pretty thought, but the strong baht will hopefully lead the private sector to make some hard choices. Economics isn't a zero sum game (people often assume that it is), but I'm inclined to think that the baht will either force long needed improvements to productivity levels, induce more value adding, or make people pull out of non-competitive industries all together and re-invest in other areas which aren't as exposed to currency fluctations, such as service industries.

Everything I think is based on theory, though with a good eye to the fruits of 25 years of economic reform in places like Australia, NZ (small open economies, resonably similar to Thailand) and to a lesser extent, the UK.

Bravo - Good points !

Increasing productivity is one of the main drivers of economic growth, not artificially high or low exchange rates.

[sonicdragon]

It's only a minor point, but there are plenty of other countries where a 4-4.5 percent growth-rate would be welcomed, or even regarded as un-sustainably high.

But most, if not all, of those would be developed, rather than developing, countries.