Thailand Hits Bottom Of Regional Economies

[Furbie]

Now my contribution to the discussion:

On the economy, one point I would like to make is that foreign direct investment is critical to Thailand's future development. You can bring out all the statistics from previous years that you want, but the FDI aimed at Thailand is going down and moving to China and Vietnam. This is a real problem for future economic growth.

The second point I would like to make is that 4.5% growth for a developing economy is not all that great – an economy such as Thailand has a lot of room for growth, while economies such as the US and UK do not, you can not compare developing countries and developed countries in this manner. Third, the inflation rate for Thailand in 2006 was something like 4.5% (I believe) - where's the growth now?

[Furbie]

yes the econmy is slowing a bit but it is doing so nearly all over the world. and its bound to affect thailand.

the huge capital flow by forign hedge funds and speculators is what realy killing the economy.

Ah yes. It's the foreigners fault

THAT, is third world thinking at it's best.

Wow what an intlectual reply. please share with your knowledge what exactly are you saying? what is a third world ? who is the first and second?? and who initialy named tose countries as third world?

is the first and second world better then the third? and what exactly nakes them "better"

Its been a while since Uni, but as I recall – first world is a cold war term used to refer to the US and its allies in the fight against the second world, know as the USSR and its allies. Third world would refer to the unaligned nations (predominately developing countries) that were not allied with the US or USSR. It is far more accurate to refer to countries as developed or developing. Under the developing header, you can further break it down to terms such as least developed (Cambodia) and mid-developed (Thailand). Technically, first world, second world, third world went out with the cold war – though some will still use the term third word, it is really a pejorative term.

[Furbie]

It took me a while to find this – I think this article does a very good job of summing up what the numbers mean and demonstrates why you can not take one number, such as export growth, and make assumptions about the economy as a whole.

This is an excerpt from an article in the Asia Times – the full link is here: http://www.atimes.com/atimes/Southeast_Asia/IC27Ae02.html

Notice the comment about "real investment growth" dropping significantly. This is coming at a time when region competitors are increasing.

RISKY BUSINESS

Clouds on Thailand's horizon

By Jephraim P Gundzik

…Judging by certain economic measures, Thailand's performance in 2006 was quite healthy. According to official statistics, real GDP (gross domestic product) growth accelerated to 5% last year from 4.5% in 2005. Exports were up 17% year on year even as the baht appreciated more than 15% against the US dollar.

The central Bank of Thailand has in recent months been fighting against this appreciatory trend, fearing the negative economic impact a strong baht would have on Thai exports, which contribute more than 65% of total GDP. In December, the central bank sent shock waves through international markets when it imposed capital controls on foreign portfolio, currency and bond transactions. The authorities have since eased those restrictions.

But central banking authorities surprised the market again when on Friday it was revealed that they have urged traders at local banks to adjust their foreign-exchange positions from "short" to "long" dollar positions, resulting in Thai banks buying US dollars to weaken the onshore exchange rate from Thursday's close of 34.63 to Friday's of 35.05 per dollar. A substantial spread has emerged between onshore and offshore baht valuations, with the baht trading at between 31 and 32 to the greenback overseas. The Bank of Thailand has in recent months spent more than a trillion baht to keep the currency weak.

These almost desperate offshore interventions come simultaneously with a weakening domestic economy. Real domestic demand growth slowed substantially in 2006. Meanwhile, real private consumption expenditure growth fell to 3.2% in 2006 from 4.4% in 2005. In the fourth quarter of 2006, real private consumption growth dropped to 2.5%, its weakest quarterly growth rate since the second quarter of 1999. Tourist arrivals stayed on course, despite the news of domestic volatility.

The rapid deceleration of consumption growth was no doubt influenced by the political and social instability that led up to the bloodless military coup that ousted prime minister Thaksin Shinawatra last September. Poor sentiment was compounded by the expanding insurgency in southern Thailand, where Muslim rebels have recently intensified attacks.

Thailand's instability-driven collapse of domestic demand is also plainly discernible in sliding real investment growth. Between 2003 and 2005, real investment growth expanded at an average annual rate of 12.4%, propped up by strong fiscal stimuli. In 2006, real investment growth dropped to 4%, its weakest level since 1999. As with real private consumption, rapidly slowing real investment growth had little to do with interest rates or credit conditions.

Thailand's monetary policy was remarkably easy during 2006 in light of significant imported inflationary pressures. This easy-money policy made credit readily available. However, demand for credit from individuals and businesses is what weakened, and the prime factor undermining this demand was growing political and social instability.

Even more evidence that domestic demand is collapsing can be seen in Thailand's rapidly slowing rate of real import growth. Real import growth plunged to 1.6% last year from nearly 10% in 2005. Meanwhile, real export growth doubled to nearly 9% in 2006 from 4.3% in 2005.

Because real export growth surpassed real import growth by such a wide margin, Thailand's net export growth turned positive in 2006 for the first time since 1999.

In addition to net exports, real agricultural output surged by 4% in 2006 after contracting by 3% in 2005. Strong external demand and rebounding agricultural production offset collapsing domestic demand in 2006, allowing real GDP growth to accelerate...

[jumnien]

I'm still not convinced that "Thailand hits bottom of regional economies." I think there are economists in Bangladesh, Myanmar, Laos and Cambodia that might contend that Thailand has a wee bit better economic situation than their own.

[Mid]

Third, the inflation rate for Thailand in 2006 was something like 4.5% (I believe) - where's the growth now?

wondered about that myself , but couldn't find the cite , didn't look hard either ................................

[Mid]

I'm still not convinced that "Thailand hits bottom of regional economies." I think there are economists in Bangladesh, Myanmar, Laos and Cambodia that might contend that Thailand has a wee bit better economic situation than their own.

[Jai Dee]

Australian investors defer plans

Concern over politics and the economy

The Thailand Research Fund (TRF) has found that Thailand ranks lowest among four attractive investment destinations for Australian investors in spite of the free-trade agreement between the two countries.

Sunee Sathaporn, an adviser to the Board of Investment in the Australian state of Victoria, yesterday said a recent TRF survey that the board had commissioned among Australian investors on the investment atmosphere in Thailand revealed that Australians were worried about the unstable Thai political and economic situation.

In particular, Australian investors are concerned about the proposed amendment of the Foreign Business Act and capital control measures. These factors have become more influential in their decisions than the Thai-Australian free-trade agreement.

The Australian investors said they preferred to wait until the general election before they decide whether to invest in Thailand, which Sunee said ranked lowest on a list of attractive investment destinations in the eyes of Australian investors, after China, Vietnam and India respectively.

The TRF survey was conducted between November and April among 125 Australian investors in Thailand and Australia from 10 business groups. The survey compared the investment atmosphere in Thailand with the other three countries. Sunee said Australian investors had negative perceptions towards Thailand because they viewed the coup was against democratic principles.

Although the coup was bloodless, the investors were concerned about subsequent incidents such as the bombs in Bangkok and the violence in Southern Thailand. These factors have a stronger impact on the investment atmosphere because investors think the country is unsafe and the government cannot control the situation.

On economic matters, most respondents said they were concerned with the 30-per-cent reserve requirement and the amendments to the foreign business law. Most said the government should open up the service sectors in Annex III, including agriculture, education, financial, property development, construction, railways and airports.

The Australian investors also felt that the emergence of a nationalistic sentiment in the country under the sufficiency-economy concept might result in a slowdown in infrastructure investment. Therefore, they have suspended their plans to come to Thailand, preferring to wait for the general election.

"The most attractive sector for Australian investors is automotive, because Thailand is a centre for Japanese car production. However, the image of Thailand is negative," Sunee said.

Source: The Nation - 26 April 2007

[vermin on arrival]

I've seen a few comments that the economy will improve after the elections at the end of the year. I certainly would like to take the CNS at its word that this will take place, but how do we know that this will even happen. I've heard that many thais feel that the army will try to find a way to hold onto power and reap the spoils of being in power. In the past, they never gave their power up voluntarily. I hope and kind of feel that they will do the right thing this time, but maybe they won't.

Even if they do return power and have elections, with the issue of Thaksin still unresolved and his shadow looming over the political scene, and the continuing ulcer that you have in the South, I don't think that you will have the political stability to give the kind of certainty/comfort that foreign investors want. Although I would like to see things improve, I am not optimistic about the situation here, especially in the short term.

[bingobongo]

no more rainbows and lollipops.....

Political uncertainties affect total cement sales

Kan Trakulhoon, president of Siam Cement Group Plc (SCG), the country's largest industrial conglomerate, conceded the ambiguous political climate had undermined the country's economy, decreasing public confidence in all areas and total spending in the whole system.

http://etna.mcot.net/query.php?nid=29112

Thailand's vehicle output drops 3.54 % in 1st quarter

http://nationmultimedia.com/breakingnews/r...newsid=30032789

Edited April 26, 2007 by bingobongo

[Plus]

Well, I never said there was none to either of these issues.

Which article was this? Can you please show me the reference.

"This is quoted from Forbes Magazine

40 richest Thais have combined $20 billion​

Bangkok Post, 18th July 2006

Thailand's 40 richest business figures have a combined net worth of US$20 billion, evenly split between old and new wealth, according to Forbes magazine...."

This is from a post on page 7.

>>>>>>>

Do I get this right - in 2005 GDP growth was 4.5%???

What makes people think that 4.5% in 2007 will lead to a total collapse?

Thailand is not Vietnam, it is about 15-20 years up the curve. Ultra high growth, like Thailand had in the 80-ies, is bound to slow down, even for China. There will be a point where people won't need any more 7-Elevens or Post Its - Thailand is full of that crap already, just look at the shops - they don't know what to sell anymore, everything people need is already there.

The initial rush to have western style, "international" goods that drives developing countries is not permanent.

[bingobongo]

Well, I never said there was none to either of these issues.

Which article was this? Can you please show me the reference.

"This is quoted from Forbes Magazine

40 richest Thais have combined $20 billion​

Bangkok Post, 18th July 2006

Thailand's 40 richest business figures have a combined net worth of US$20 billion, evenly split between old and new wealth, according to Forbes magazine...."

This is from a post on page 7.

>>>>>>>

Do I get this right - in 2005 GDP growth was 4.5%???

What makes people think that 4.5% in 2007 will lead to a total collapse?

Thailand is not Vietnam, it is about 15-20 years up the curve. Ultra high growth, like Thailand had in the 80-ies, is bound to slow down, even for China. There will be a point where people won't need any more 7-Elevens or Post Its - Thailand is full of that crap already, just look at the shops - they don't know what to sell anymore, everything people need is already there.

The initial rush to have western style, "international" goods that drives developing countries is not permanent.

Thailand is going backwards, not forward

Thailand's growth worsening as competitors reap the benefits

Thailand is now trailing all other countries in the region in terms of economic growth.

http://www.nationmultimedia.com/2007/04/27...on_30032832.php

[Plus]

What is backwards if it's still growing? Surely a year without a government followed by a year with junta in power is going to leave a mark.

But look at the positive side - Thai political system is maturing. In 1992 very few Thais, percentage wise, had any idea of what the commotion was all about.

Now everyone is in it. The role of the government, the nature of democracy, government's accountability, people's freedoms - it's all out in the light and everyone has an opinion about this and that.

When will Vietnam or China reach that stage? When will communism fall there? Who will come to power? How they will stay in power? When will people start asserting themselves? Look at Russia - it's been fifteen years and their politics is still in deep shit.

In Thailand we see important political adjustments and the is economy mature enough to basically go on by itself.

It is so far ahead that we will have to go back twenty thrity years to level with Vietnam or China.

Edited April 26, 2007 by Plus

[vermin on arrival]

Plus,

Thanks for locating that reference for me.

Politically they are tying to come to grips with things. It remains to be seen whether they will succeed or not. I'm not sure if the economy will go on by itself. I think it still relies on foreign investment and if the political situation doesn't get sorted, there will be hard times. Do you anticipate for these laws which are making foreign investment more difficult to be rolled back quickly?

The fact that they are trying to improve the political situation is certainly a good sign.

As to China and Vietnam, certainly one must wonder what will happen when the political systems change. I would be shocked if they could stay "communist" dictatorships in the long run. I'm actually wondering what will happen in China when they show the transparency in the banking sytem, etc that they were required to do this year by their agreement when they joined the WTO. I've heard from people in China that the banks are hiding many non performing loans from foreign eyes to maintain investor confidence. Has the transparency taken place? For now, I think the fact that they are dictatorships is certainly aiding their growth.

As for Russia, the US really screwed them after the collapse of communism. We deliberately tried to weaken them, and I believe that whole shock treatment switch to capitalism was pushed just to cause chaos and lessen the sense of threat we felt form them after competing with them in the cold war. We knew they weren't ready for it.

I think looking at the return to more autocratic rule under Putin also shows another possibilty of what may happen here. However, I think eventually the people would take it to the streets again big time if that happened. Although wasn't that really what Thaksin was trying to do in a way anyway, create a parliamentary dictatorship and silence all critics. Look at all the people he killed in the drug war,8000, and the 5000 of them in the second phase were never reported in the press until after the coup. And how many of them were really guilty?

I think it is good that they are trying to come to grips with democracy and accountability, and hope that they do, but can anyone say for sure what will happen? An article in the nation today said that the new national draft charter will almost certainly be rejected when it is put to referendum. After that, what next?

Edited April 26, 2007 by vermin on arrival