BOT sees dark cloud of 8% contraction looming over economy

By The Nation

 

Titanun Malikamas, secretary to BOT’s Monetary Policy Committee (MPC)

 

Thailand’s economy this year will contract 8.1 per cent, its worst point ever, because the Covid-19 crisis has had a greater impact on both the Kingdom’s and global economy, says the Bank of Thailand (BOT).

 

The central bank on Wednesday (June 24) revised downward its economic growth forecast to 8.1 per cent contraction from minus 5.3 per cent it previously forecast due to the Covid-19 fallout having a greater impact that expected, said Titanun Malikamas, secretary to BOT’s Monetary Policy Committee (MPC).

 

In a meeting on Wednesday, the MPC decided to leave the key policy rate unchanged at 0.5 per cent as expected. 

 

Titanun said that Thailand’s exports and tourism in particular will be hit harder than previously estimated. 

 

The MPC also revised downward its GDP projection for 2021 to 3 per cent from 5 per cent growth it forecast earlier. 

 

This year, exports are expected to contract 10.3 per cent compared to a previous estimate of an 8.8 per cent shrinkage as the global economy has also been hit hard by the crisis, he said. Imports, meanwhile, are expected to fall 16.2 per cent from 15 per cent. 

 

Private consumption will contract 3.6 per cent from 1.5 per cent, private investment will plunge 13 per cent from 4.3 per cent, while headline inflation will fall to minus 1.7 per cent from minus 1 per cent forecast earlier. The price of crude oil is currently averaging at $35.1 a barrel. 

 

Thailand this year will only see 8 million foreign tourists from the previously estimated 15 million, compared to 40 million last year. More tourists are expected to arrive in the latter half of 2021, on the assumption that Covid-19 vaccine is widely available. 

 

“The central bank has not yet taken into account the possibility of a second wave of Covid-19. If that happens, there is a high risk of further downward projection,” he said, adding that a loosening of the monetary policy since early this year and the government’s fiscal expansion should help the economy to some extent. 

 

Don Nakornthab, a senior director at BOT, said the 8.1 per cent contraction this year is the deepest in history. Even during the 1997 financial crisis, the economy contracted 7.6 per cent. 

 

“Economic contraction in the second quarter may hit double digits, before the economy starts to recover slowly,” Don said. 

 

As for financial stability, it has become more fragile in line with the falling economy. Banks are leading more to big businesses, as they are switching from issuing debentures to taking loans. However, loans to small- and medium-sized businesses and individuals has slowed down.

 

Hence, he said, the MPC has to make sure affected businesses and households have access to loans. 

 

The baht, which usually has the tendency to be weaker than major foreign currencies, is strengthening because the US dollar is weakening.

 

Meanwhile central banks across the world have implemented quantitative easing (QE) measures, which are bound to encourage large and volatile flows of capital, especially in Thailand. The central bank will closely monitor this and take necessary action where the exchange rate is concerned, as a strong baht will further hurt the export market, he said. 

 

Source: https://www.nationthailand.com/business/30390234

 

-- © Copyright The Nation Thailand 2020-06-25

 

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The covid19 pandemic is arguably a bigger economic event than the crash of 1997 so it's not too surprising that GDP forecasts will change. At least in 1997 business was still operating and people were still working, this is uncharted territory where forecasts will change continuously.

Edited June 25, 20206 yr by Trillian

Well, we could squeeze out some more money at immigration from our foreign retirees...????

33 minutes ago, Trillian said:

The covid19 pandemic is arguably a bigger economic event than the crash of 1997 so it's not too surprising that GDP forecasts will change. At least in 1997 business was still operating and people were still working, this is uncharted territory where forecasts will change continuously.

Businesses are opening again its mainly the tourist sector taking a hit. In my part of Thailand everyone is working again. 

3 minutes ago, robblok said:

Businesses are opening again its mainly the tourist sector taking a hit. In my part of Thailand everyone is working again. 

And exports which have a reporting time lag.

1 minute ago, robblok said:

Businesses are opening again its mainly the tourist sector taking a hit. In my part of Thailand everyone is working again. 

I work on one of the Industrial estates in Thailand and my thai family one another one in Ayutthaya

Lots of companies in my IE have been laying of staff and 30% has not reopened. The company I work for has 1,400 workers and staff suspended and no clear view on when they restart

 

In Ayutthaya the family that works in factory have been laid off, indefinitily

In Korat, where another family member lives and works, factories are partly reopening in July

 

What is your source??

 

6 minutes ago, jumbo said:

I work on one of the Industrial estates in Thailand and my thai family one another one in Ayutthaya

Lots of companies in my IE have been laying of staff and 30% has not reopened. The company I work for has 1,400 workers and staff suspended and no clear view on when they restart

 

In Ayutthaya the family that works in factory have been laid off, indefinitily

In Korat, where another family member lives and works, factories are partly reopening in July

 

What is your source??

 

Talking with the people around me in my BKK village. Also my friend who works at a big Thai company. They all started again. Markets in full swing. So that is my source. I believe what you say to its different all over Thailand. 

12 minutes ago, Trillian said:

And exports which have a reporting time lag.

Yes seems logical that exports will take a hit too. I mean other economies are taking a hit so export will take a hit too as client wont have money.

My wife's company  , which export finished stainless steel products

 is hoping to work at 1/2 of previous numbers.

150 or so jobs hanging  with hopes of global building to resume.

I don't see a good future for it in the coming 2 or 3 years.

Most restaurants need customers to much, to worry about

capital improvements. 

 

Besides the whole world is trying to attract the contracting pool

of very rich tourist and second home buyers to their doors.

Sooner or later those medium and super rich will be taxed to pay down

huge debts incurred by nations trying to survive right now.

 

Lack of people to tax will lead to super inflation as countries try

printing money as a way out of debt.

The future is not a rosy picture for anyone.

 

I read where Thailand is trying hard not incur debt, which is 

good for the country's standing but not so great for those

out of work.

National debt either has to work or it fails and situation

is worse than ever.

 

 

Edited June 25, 20206 yr by PatchinExPat
made mistakes in trying to type this out,

15 minutes ago, robblok said:

Talking with the people around me in my BKK village. Also my friend who works at a big Thai company. They all started again. Markets in full swing. So that is my source. I believe what you say to its different all over Thailand. 

This could be stimulus money supplied by the various countries around the world.

Or just the same money being churned over and over.

Neither produces long term growth.

The only export which I saw in another report that has increased is Gold.  Imports have seen an uptick as far as from the Asean countries supplying goods to Thailand.  Not sure why the Baht is still flying high but that's for another story and someone who can try and explain it in light of the economy and such.

Even if household debt levels stay constant it will jump from 80 to 87% of GDP, just because GDP is falling.

 

Just now, ExpatOilWorker said:

Even if household debt levels stay constant it will jump from 80 to 87% of GDP, just because GDP is falling.

 

Yes that is true.. but I would be more worried about NPL then household debts. 

There is no surprise in this.

At least it abandons false optimism.

A global depression is unfolding.

 

16 minutes ago, robblok said:

Yes that is true.. but I would be more worried about NPL then household debts. 

It is like saying you are more worried about getting wet than the tsunami, while you arrange your deck chair on the beach in Phuket a sunny boxing day morning. 

Well the pound is dropping against the Baht, so less pension for us .

Let's think big.

 

"IMF says global economic collapse caused by coronavirus will be even worse than feared"

 

https://www.thehour.com/business/article/IMF-says-global-economic-collapse-caused-by-15362593.php

Edited June 25, 20206 yr by NCC1701A

3 hours ago, jumbo said:

I work on one of the Industrial estates in Thailand and my thai family one another one in Ayutthaya

Lots of companies in my IE have been laying of staff and 30% has not reopened. The company I work for has 1,400 workers and staff suspended and no clear view on when they restart

 

In Ayutthaya the family that works in factory have been laid off, indefinitily

In Korat, where another family member lives and works, factories are partly reopening in July

 

What is your source??

 

Your observations are supported by a falling industrial electricity consumption in 2020:

 

January: 6,889 Down 1.3%

February: 6,903 Up 2.5%

March: 7,386 Down 4.8%

April: 6,450 Down 7.1%

 

Business electricity consumption is down by a whopping 25.5% in April 2020.

 

Unit = Gwh

 

I am not a real expert on the forex market but I do know the slip from 32.5 to 21.xx of the Aussie dollar to Thai baht is more the fault of bad decisions in Australia than the trend here in Thailand.  The result of decisions of corrupt or inept fools has cost ordinary Aussies many millions of dollars in losses. But that doesn't explain how the baht is, it would seem, artificially high. 

3 hours ago, bert bloggs said:

Well the pound is dropping against the Baht, so less pension for us .

And that's only going to get worse now that the communists are out on the streets and the UK Government looks weak and vulnerable.

 

I predict 30thb to the GBP this time next year. 

4 hours ago, robblok said:

Yes seems logical that exports will take a hit too. I mean other economies are taking a hit so export will take a hit too as client wont have money.

Our son must be lucky ,he runs a small company exporting and importing ,only about a dozen employes ,but they have been doing ok ,in fact the owner ,who lives out of the country is expanding .also my daughter in the UK has done far more during the crises owing to the fact shops have ben closed and she gets most of her business off the internet

1 minute ago, Mr Meeseeks said:

And that's only going to get worse now that the communists are out on the streets and the UK Government looks weak and vulnerable.

 

I predict 30thb to the GBP this time next year. 

thanks for cheering me up .

1 minute ago, bert bloggs said:

thanks for cheering me up .

Forewarned is forearmed.

19 minutes ago, Grumpy John said:

I am not a real expert on the forex market but I do know the slip from 32.5 to 21.xx of the Aussie dollar to Thai baht is more the fault of bad decisions in Australia than the trend here in Thailand.  The result of decisions of corrupt or inept fools has cost ordinary Aussies many millions of dollars in losses. But that doesn't explain how the baht is, it would seem, artificially high. 

It is not that the Baht is high, THB has remained largely flat but other countries currencies have lost value against it, that may change however.

5 hours ago, Puchaiyank said:

Well, we could squeeze out some more money at immigration from our foreign retirees...????

What is a retiree? You mean tourists which are not allowed to enter altogether 555 ?

15 minutes ago, bert bloggs said:

thanks for cheering me up .

I predict 50 if it makes you feel any better.

6 hours ago, webfact said:

The baht, which usually has the tendency to be weaker than major foreign currencies, is strengthening because the US dollar is weakening.

Next week i pretty much guarantee the baht will be HIGHER due to dollar STRENGTHENING

the thai economy is fragile,tourism is a large part of it and it overflows into so many different parts of the general economy,thats gone right now and govt hasnt made an attempt to start it up at a regional level.europe has where levels are a lot higher than here.august would be a good time to open it again.the obsession with china is basically dangerous and flawed,they have spread it lied and misinformed at every level and stage of this crisis.thats not going to change.manufacturing is cratering too,local demands picking up and people are consuming more,at a local level things r improving BUT this is a manufacturing export base and thats going no where,many companies could well use it as a way out. to relocate.the countrys stood still for yrs,education levels are poor, foreign investement is treated poorly too,visa, workpermits and any type of duality is not forthcoming.just look at foreigners with partners spouses etc here.we also have the double speak from govt now cases in 31 days and still this reaction,you must question the logic and come to the conclusion its a lie or they wouldnt act in this way.

Edited June 25, 20206 yr by rupert the bear
typos

7 hours ago, Trillian said:

And exports which have a reporting time lag.

Thai Exports have been reported as being down a massive 22.5 % Y on Y for May.

Many more Months of figures like these and Thai GDP down 8.1 % is going down the crapper as well.

A tough time ahead for the Thai Economy, as well as for many others around the Globe.

7 hours ago, robblok said:

Yes seems logical that exports will take a hit too. I mean other economies are taking a hit so export will take a hit too as client wont have money.

Especially as the baht remains strong no matter what