Navigating Economic Turbulence: The Thai Economy at a Crossroads

[webfact]

 

As Thailand grapples with its latest economic challenges, the recent contraction in headline inflation for four consecutive months has emerged as a critical barometer of the nation’s financial health.

 

Prime Minister Srettha Thavisin’s warning underscores a broader economic narrative that demands urgent attention. The Bank of Thailand (BoT)’s aggressive interest rate hikes, aimed at taming inflation, now seem to tread a fine line between stabilizing prices and inadvertently stifling economic growth.

 

The confluence of rising interest rates, from a historic low of 0.5% to the current 2.5%, the highest since October 2013, and the subsequent economic contraction, signals a precarious juncture for Thailand.

 

This tightrope walk by the BoT reflects a broader global challenge as central banks worldwide struggle to balance inflation control with economic vitality.

 

by Thai Enquirer

 

Full story: THAI ENQUIRER 2024-02-06

 

- Cigna offers a range of visa-compliant plans that meet the minimum requirement of medical treatment, including COVID-19, up to THB 3m. For more information on all expat health insurance plans click here.

 

Get our Daily Newsletter - Click HERE to subscribe

 

[flyingtlger]

7 minutes ago, webfact said:

Bank of Thailand (BoT)’s aggressive interest rate hikes, aimed at taming inflation, now seem to tread a fine line between stabilizing prices and inadvertently stifling economic growth.

We need a "soft" landing....

[Pique Dard]

18 minutes ago, webfact said:

The confluence of rising interest rates, from a historic low of 0.5% to the current 2.5%, the highest since October 2013, and the subsequent economic contraction, signals a precarious juncture for Thailand.

 

...i don't have a clue about what you are talking about, but i'm impressed.

[mfd101]

Not too many 'soft landings' available in the C21st for an obsolescent economy based on low education, low wages, low trust, low productivity and low or no technology.

[soalbundy]

4 hours ago, mfd101 said:

Not too many 'soft landings' available in the C21st for an obsolescent economy based on low education, low wages, low trust, low productivity and low or no technology.

A soft landing has never been accomplished in any major economy, fact is we are in or heading into a major global recession. Compared to the West Thailand seems pretty stable at the moment but one major part of the economy, tourism must suffer as recessions eat away concessionary spending power but that is beyond Thailands control just as the FED's problem is the supply chain disruption which they can't alter either. Once the FED pivots that will be the official surrender to inflation but it will happen anyway as due to excessive tightening there is a liquidity problem which will cause a stock market collapse preceded by large scale unemployment, in some sectors, banks, Amazon, chain stores etc. it's already happening, soon to be followed by car manufacturers, shipping, road haulage and builders etc. Foreclosures on houses whose value will continue to drop will put the banks into trouble as well as defaults on credit card debt (already having to charge 20-25% interest rates). The debt party is over, the Major economies have to inflate their debt away.

[Mike Lister]

6 minutes ago, soalbundy said:

A soft landing has never been accomplished in any major economy, fact is we are in or heading into a major global recession. Compared to the West Thailand seems pretty stable at the moment but one major part of the economy, tourism must suffer as recessions eat away concessionary spending power but that is beyond Thailands control just as the FED's problem is the supply chain disruption which they can't alter either. Once the FED pivots that will be the official surrender to inflation but it will happen anyway as due to excessive tightening there is a liquidity problem which will cause a stock market collapse preceded by large scale unemployment, in some sectors, banks, Amazon, chain stores etc. it's already happening, soon to be followed by car manufacturers, shipping, road haulage and builders etc. Foreclosures on houses whose value will continue to drop will put the banks into trouble as well as defaults on credit card debt (already having to charge 20-25% interest rates). The debt party is over, the Major economies have to inflate their debt away.

How do you measure when something is too soft or too hard, in economic terms, it's an enigma that's not  been defined?

[soalbundy]

Just now, Mike Lister said:

How do you measure when something is too soft or too hard, in economic terms, it's an enigma that's not  been defined?

When inflation has been brought down without too much damage to the labour market (obviously there will always be some damage but not so excessive that the FED has to bring down rates excessively, which never works because it's too late and just causes another spike in inflation) The inverted yield curve in the Bond market (where short term yields are higher than the 30 year bond yield) is the real economy telling the deaf FED they've over done it and recession is coming shortly. The FED is between a rock and a hard place and being mocked by most economic experts but there isn't much they can do, drastically lower interest rates now to save the economy and by so doing spike inflation, or carry on higher for longer which will bring down inflation but cause an economic meltdown.

[Mike Lister]

7 minutes ago, soalbundy said:

When inflation has been brought down without too much damage to the labour market (obviously there will always be some damage but not so excessive that the FED has to bring down rates excessively, which never works because it's too late and just causes another spike in inflation) The inverted yield curve in the Bond market (where short term yields are higher than the 30 year bond yield) is the real economy telling the deaf FED they've over done it and recession is coming shortly. The FED is between a rock and a hard place and being mocked by most economic experts but there isn't much they can do, drastically lower interest rates now to save the economy and by so doing spike inflation, or carry on higher for longer which will bring down inflation but cause an economic meltdown.

The yield curve inverted in October 22 when rates reached 3% so that's either not a realistic measure or there are other forces in play.

 

The economy has become a political tool and scapegoat, even the most goldilocks like landing will be weaponised by the other team which makes it hard to discern truth from fiction. Which is why I wondered about the measure of too hard/too soft, the problem is there's no establish criteria. At least a technical recession is measurable, even if its effects aren't.

 

https://tradingeconomics.com/united-states/interest-rate

 

https://www.usbank.com/investing/financial-perspectives/market-news/treasury-yields-invert-as-investors-weigh-risk-of-recession.html#:~:text=An extended period featuring a,those of short-term bonds.

[soalbundy]

2 minutes ago, Mike Lister said:

The yield curve inverted in October 22 when rates reached 3% so that's either not a realistic measure or there are other forces in play.

 

The economy has become a political tool and scapegoat, even the most goldilocks like landing will be weaponised by the other team which makes it hard to discern truth from fiction. Which is why I wondered about the measure of too hard/too soft, the problem is there's no establish criteria. At least a technical recession is measurable, even if its effects aren't.

 

https://tradingeconomics.com/united-states/interest-rate

 

https://www.usbank.com/investing/financial-perspectives/market-news/treasury-yields-invert-as-investors-weigh-risk-of-recession.html#:~:text=An extended period featuring a,those of short-term bonds.

I think the lies being told by Yellen and Powell aren't so much political as a psychological whistling in the dark (which Wall street believes) In fact I have read an article which says it's possible that the FED is too scared to lower interest rates as they should do because they fear accusations of political bias in an election year. China, a major exporter to the US is now a basket case, Europe is already in recession, Japan has never really come out of recession for the last 20 years, Yemen/Iran, Israel and Palestine, Ukraine and Russia are now major factors in the West's demise, all beyond the Fed's control. It is said that the global supply chain disruption started when Trump started the tariff war with China. There are so many factors at play here but the biggest must be that the West, in particular America, have been living beyond their means for too long, there's no more wiggle room left. Perhaps, as some say, there has to be a total economic collapse before a new start can be made, a collapse that has to be made over a ten year period, good night to that. 

[Mike Lister]

50 minutes ago, soalbundy said:

I think the lies being told by Yellen and Powell aren't so much political as a psychological whistling in the dark (which Wall street believes) In fact I have read an article which says it's possible that the FED is too scared to lower interest rates as they should do because they fear accusations of political bias in an election year. China, a major exporter to the US is now a basket case, Europe is already in recession, Japan has never really come out of recession for the last 20 years, Yemen/Iran, Israel and Palestine, Ukraine and Russia are now major factors in the West's demise, all beyond the Fed's control. It is said that the global supply chain disruption started when Trump started the tariff war with China. There are so many factors at play here but the biggest must be that the West, in particular America, have been living beyond their means for too long, there's no more wiggle room left. Perhaps, as some say, there has to be a total economic collapse before a new start can be made, a collapse that has to be made over a ten year period, good night to that. 

Thanks, you cheered me right up.   :))

[Pouatchee]

i was watching this week's 60 minutes and an interview with jerome powell. i am usually a pretty good judge of character, but this guy had me stumped. imho bankers are on top of the list as the major players in the hard times we are facing now and for the last 100 years. but this guy, jerome powell, almost seems sincere. i still believe one thing... never trust bankers, politicians, economists and cops.

 

Quote

Following the Federal Reserve's announcement to hold interest rates steady, correspondent Scott Pelley interviews Fed chair Jerome Powell in Washington, D.C., on inflation risks and the economy, the timeline for cutting rates, the health of the country's banks and more.

 

--> link to the interview

 

https://www.primewire.tf/tv/53872/60-minutes-season-56-episode-18

 

back to the thai economy... i dont get it, i was driving around a 'village' in my area the other day and cant stop thinking. if things are so bad how can anyone afford all the mansions being built right now?

 

[Mike Lister]

4 minutes ago, Pouatchee said:

i was watching this week's 60 minutes and an interview with jerome powell. i am usually a pretty good judge of character, but this guy had me stumped. imho bankers are on top of the list as the major players in the hard times we are facing now and for the last 100 years. but this guy, jerome powell, almost seems sincere. i still believe one thing... never trust bankers, politicians, economists and cops.

 

 

--> link to the interview

 

https://www.primewire.tf/tv/53872/60-minutes-season-56-episode-18

 

back to the thai economy... i dont get it, i was driving around a 'village' in my area the other day and cant stop thinking. if things are so bad how can anyone afford all the mansions being built right now?

 

I don't get it either, if there's an economic storm brewing it's difficult to see where. I just posted in another thread on this subject, here's a partial extract:

 

"And anyway, by what measure is the Thai economy faltering? Exports are down slightly because the China market is not performing but monthly exports are still pushing USD 23/24 billion per month which is well above trend and the 5/10 year averages. Tourism numbers are recovering and are heading back to pre-covid numbers? Where is this crisis that demands Central Bank rates be cut? Ah wait, it's the crisis that profits in business are not high enough and central bank rate is still too high, to borrow money to give away and ensure government popularity, hmmm!"

 

 

 

[retarius]

16 hours ago, soalbundy said:

I think the lies being told by Yellen and Powell aren't so much political as a psychological whistling in the dark (which Wall street believes) In fact I have read an article which says it's possible that the FED is too scared to lower interest rates as they should do because they fear accusations of political bias in an election year. China, a major exporter to the US is now a basket case, Europe is already in recession, Japan has never really come out of recession for the last 20 years, Yemen/Iran, Israel and Palestine, Ukraine and Russia are now major factors in the West's demise, all beyond the Fed's control. It is said that the global supply chain disruption started when Trump started the tariff war with China. There are so many factors at play here but the biggest must be that the West, in particular America, have been living beyond their means for too long, there's no more wiggle room left. Perhaps, as some say, there has to be a total economic collapse before a new start can be made, a collapse that has to be made over a ten year period, good night to that. 

Japan has been in recession with zero or near zero interest rates for 30 years.....since the early 1990s. But you wouldn't know it if you visited Japan. People have money, the restaurants and bars are full, there is still substantially full employment....the only sigh there is any trouble is homeless schizophrenics on the street begging in Shinjuku. It is the soft landing of soft landings. Very low inflation over the 30 years and now the current has fallen to new lows this past year, Tokyo is a very affordable place, apart from high rents. This brings me to another point, the Japanese tend to live in very small apartments, which means they have a problem with storage, which in turn means that they tend to buy fewer higher quality items for the home or wardrobe, which is why they flock to Chanel etc in the Ginza. To my eyes they seem to have shared the pain of recession much better than we have in the west where it seem the poor get slaughtered each time and the rich? Well they get richer and richer, don't they always? Of course the Japanese have not tackled the burgeoning problem of their society ageing, and what they will do with all the 90 year olds in 20 or 30 years time. 

[Mike Lister]

3 minutes ago, retarius said:

Japan has been in recession with zero or near zero interest rates for 30 years.....since the early 1990s. But you wouldn't know it if you visited Japan. People have money, the restaurants and bars are full, there is still substantially full employment....the only sigh there is any trouble is homeless schizophrenics on the street begging in Shinjuku. It is the soft landing of soft landings. Very low inflation over the 30 years and now the current has fallen to new lows this past year, Tokyo is a very affordable place, apart from high rents. This brings me to another point, the Japanese tend to live in very small apartments, which means they have a problem with storage, which in turn means that they tend to buy fewer higher quality items for the home or wardrobe, which is why they flock to Chanel etc in the Ginza. To my eyes they seem to have shared the pain of recession much better than we have in the west where it seem the poor get slaughtered each time and the rich? Well they get richer and richer, don't they always? Of course the Japanese have not tackled the burgeoning problem of their society ageing, and what they will do with all the 90 year olds in 20 or 30 years time. 

An excellent post, I really enjoyed reading that! 

[retarius]

6 minutes ago, Mike Lister said:

An excellent post, I really enjoyed reading that! 

Thank you. 

[soalbundy]

23 minutes ago, retarius said:

Japan has been in recession with zero or near zero interest rates for 30 years.....since the early 1990s. But you wouldn't know it if you visited Japan. People have money, the restaurants and bars are full, there is still substantially full employment....the only sigh there is any trouble is homeless schizophrenics on the street begging in Shinjuku. It is the soft landing of soft landings. Very low inflation over the 30 years and now the current has fallen to new lows this past year, Tokyo is a very affordable place, apart from high rents. This brings me to another point, the Japanese tend to live in very small apartments, which means they have a problem with storage, which in turn means that they tend to buy fewer higher quality items for the home or wardrobe, which is why they flock to Chanel etc in the Ginza. To my eyes they seem to have shared the pain of recession much better than we have in the west where it seem the poor get slaughtered each time and the rich? Well they get richer and richer, don't they always? Of course the Japanese have not tackled the burgeoning problem of their society ageing, and what they will do with all the 90 year olds in 20 or 30 years time. 

Japan although heavily in debt (230% of GDP I believe) they have an advantage over the US, most of their debt is local, ie. in Japanese yen. Basically Japan has the problem of deflation which is harder than inflation to get rid of.

[Mike Lister]

1 minute ago, soalbundy said:

Japan although heavily in debt (230% of GDP I believe) they have an advantage over the US, most of their debt is local, ie. in Japanese yen. Basically Japan has the problem of deflation which is harder than inflation to get rid of.

Which makes it interesting that less than 5% of Thai public debt is foreign currency debt yet their debt levels are less than 60% of GDP. Domestic rather than foreign debt, appears to be a common denominator.

[soalbundy]

Just now, Mike Lister said:

Which makes it interesting that less than 5% of Thai public debt is foreign currency debt yet their debt levels are less than 60% of GDP. Domestic rather than foreign debt, appears to be a common denominator.

and a better option, you can print the debt away if necessary without annoying the foreign debtors.

[Mike Lister]

1 minute ago, soalbundy said:

and a better option, you can print the debt away if necessary without annoying the foreign debtors.

Funny but true.

 

I think it only makes sense to borrow in the currency that you earn in so BOT has to be given some credit for this thinking. By the same token, BOT knows it will need USD in the future to settle export bills which consume more USD than they receive when import bills are settled. Their solution is to buy USD futures, the last time I read anything on this these amounted to almost 50% of the value of the Foreign Currency Reserves (FCR's). That means the FCR's are some 50% higher than the reported headline figure and that future currency exchange costs are well managed. The US on the other hand says this is currency manipulation which I think is nonsense. What it means is that the US will stop labelling Thailand that way, if they buy more goods from the US! (Just like Vietnam, Germany and Switzerland). So yes, after the crash of '97, Thailand went overboard with currency and economic management and this remains true until today. 

[soalbundy]

1 hour ago, Mike Lister said:

Funny but true.

 

I think it only makes sense to borrow in the currency that you earn in so BOT has to be given some credit for this thinking. By the same token, BOT knows it will need USD in the future to settle export bills which consume more USD than they receive when import bills are settled. Their solution is to buy USD futures, the last time I read anything on this these amounted to almost 50% of the value of the Foreign Currency Reserves (FCR's). That means the FCR's are some 50% higher than the reported headline figure and that future currency exchange costs are well managed. The US on the other hand says this is currency manipulation which I think is nonsense. What it means is that the US will stop labelling Thailand that way, if they buy more goods from the US! (Just like Vietnam, Germany and Switzerland). So yes, after the crash of '97, Thailand went overboard with currency and economic management and this remains true until today. 

I think what is being ignored is the rising power of BRICS, at the moment the only thing stopping the collapse of the dollar is that dollars are essential for cross border trade. BRICS is showing self confidence by halting trade with the US and UK and trading among themselves using their own currencies, some big players here, India and Saudi Arabia in particular. China now gets coal from Russia instead of Australia, China gets soy beans from Brazil instead of America, same thing is happening among them with steel and IT (India has more talent than silicon valley). I think the West is in for a big shock, their hegemony in trade and banking is being challenged, when a BRICS currency is finalized the cat is among the pigeons. Many smaller countries, especially in South America, are showing strong interest in BRICS, they are fed up with the West's bullying, China's influence in Africa is increasing while the West's is decreasing, we are due for a major reset right when the debt laden West is at its weakest.

[Mike Lister]

4 minutes ago, soalbundy said:

I think what is being ignored is the rising power of BRICS, at the moment the only thing stopping the collapse of the dollar is that dollars are essential for cross border trade. BRICS is showing self confidence by halting trade with the US and UK and trading among themselves using their own currencies, some big players here, India and Saudi Arabia in particular. China now gets coal from Russia instead of Australia, China gets soy beans from Brazil instead of America, same thing is happening among them with steel and IT (India has more talent than silicon valley). I think the West is in for a big shock, their hegemony in trade and banking is being challenged, when a BRICS currency is finalized the cat is among the pigeons. Many smaller countries, especially in South America, are showing strong interest in BRICS, they are fed up with the West's bullying, China's influence in Africa is increasing while the West's is decreasing, we are due for a major reset right when the debt laden West is at its weakest.

I completely agree. I haven't yet begun to get my head around what BRICS means for FOREX markets and the whole structure of reserve currencies and cross rates. If you remove USD from the equation or at least reduce its importance, you impact on IMF rules of linked and fixed exchange rates which sounds scary and messy.

 

I read this morning that Jerome has commented for the first time publicly on US debt levels and how unsustainable they are, unusual for the non-politically aligned  Fed to do so. He reckons the cliff edge is less than 10 years away, which is far longer than I would have thought.

[retarius]

8 hours ago, soalbundy said:

Japan although heavily in debt (230% of GDP I believe) they have an advantage over the US, most of their debt is local, ie. in Japanese yen. Basically Japan has the problem of deflation which is harder than inflation to get rid of.

Not only that but most of it is in Post Office savings which pay peanuts in interest. It is a huge cheap loan from the citizens of Japan to their government. 

[retarius]

6 hours ago, Mike Lister said:

I completely agree. I haven't yet begun to get my head around what BRICS means for FOREX markets and the whole structure of reserve currencies and cross rates. If you remove USD from the equation or at least reduce its importance, you impact on IMF rules of linked and fixed exchange rates which sounds scary and messy.

 

I read this morning that Jerome has commented for the first time publicly on US debt levels and how unsustainable they are, unusual for the non-politically aligned  Fed to do so. He reckons the cliff edge is less than 10 years away, which is far longer than I would have thought.

Perhaps BRICS+ is on hold while China sorts it's economy out. I think it is a given that the dollar will not be used as the exclusive currency for trade within BRICS, but whether it will hold on to preeminence in trade between BRICS+ members and US/EU will depend largely, I think, on what happens to energy sales. If the SA and the Gulf ditch or downplay the dollar, the impact will be marked and perhaps a 'herd landing' for the dollar. If, as I suspect, BRICS+ and the Gulf will reduce their use of the dollar more slowly over time, then the dollar may well have a 'soft landing'. 

What puzzles me is a BRICS+ alternative to SWIFT hasn't emerged despite vocal bravado by Putin and Xi that they would establish one. They have put in alternatives to the IMF and World Bank which is welcome no doubt in some quarters. This might be very well received in Africa, Latin America and in countries non-aligned with US hegemony. 

The bottom line I think is that the US has publicly abused the dominance of the dollar for their geo-political aims....and people have become uncomfortable with that. How would you like to be sanctioned for supporting the innocent civilian side in the conflict in Gaza? It sounds outrageous but many ideas did, and later became established fact, like torture. I always thought naively that our side didn't use it.

[Mike Lister]

8 minutes ago, retarius said:

Perhaps BRICS+ is on hold while China sorts it's economy out. I think it is a given that the dollar will not be used as the exclusive currency for trade within BRICS, but whether it will hold on to preeminence in trade between BRICS+ members and US/EU will depend largely, I think, on what happens to energy sales. If the SA and the Gulf ditch or downplay the dollar, the impact will be marked and perhaps a 'herd landing' for the dollar. If, as I suspect, BRICS+ and the Gulf will reduce their use of the dollar more slowly over time, then the dollar may well have a 'soft landing'. 

What puzzles me is a BRICS+ alternative to SWIFT hasn't emerged despite vocal bravado by Putin and Xi that they would establish one. They have put in alternatives to the IMF and World Bank which is welcome no doubt in some quarters. This might be very well received in Africa, Latin America and in countries non-aligned with US hegemony. 

The bottom line I think is that the US has publicly abused the dominance of the dollar for their geo-political aims....and people have become uncomfortable with that. How would you like to be sanctioned for supporting the innocent civilian side in the conflict in Gaza? It sounds outrageous but many ideas did, and later became established fact, like torture. I always thought naively that our side didn't use it.

The bigger problem, I think, is that USD is at the top of the FOREX tree, every other currency in the world is measured against it, either directly or indirectly. If/when BRICS takes off, which it almost certainly will, sooner rather than later I suspect, whatever currency(ies) they use will be based back to USD. Even if they operate solely on swaps, the respective currencies have to be measured. The Yuan is not mature or stable enough to be the dominant currency, that leaves Japan which is OK if it's part of a basket but not on its own. There's then the question of how the BRICS group interacts with the US market, which is arguably the biggest single market in the world, what ever currency is used by BRICS, must be valued against USD.

 

One possible solution is that BRICS remains a regional solution only with the BRICS/US interface remaining in USD. But that doesn't solve the problem of USD dominance in economies such as Thailand where the economy is measured against USD. It needs some serious thought to understand what the end game might be.

 

[Banana7]

BOT interest rate should be at least 3%, to reduce inflation.

[Mike Lister]

Chartchai is always an interesting read, his column in the Post gives some clues to what the economics problem might be. Some interesting tidbits:

 

Thai industry utilisation is only 56%, the second lowest in the world just ahead of Nigeria!

 

IMF growth projections for 2024 depend on the digital wallet being implemented along with the underlying loan assumptions, 4.4% if implemented, 1.4% if not.

 

Total private domestic debt (this is every baht that has been borrowed in the country, exclusive of government and BOT borrowings), is over 200% of GDP plus foreign short term loans total more than THB 2 trill. 

 

The biggee seems to be, according to Chartchai, liquidity. Liquidity is the ability of a company to obtain credit and/or sell products to pay bills. Liquidity crisis occur when the economy is underperforming and/or when financial institutions are unable to lend, either because they don't have the resources or because the credit risk of the borrower is too high.  Capital outflows in January totalled over THB 100 bill. and are likely accelerating whilst  Corporate Bond payments totalling nearly 900 bill are due this year. IF even a lesser percentage of that amount was defaulted, the domino effect would wreck the credit industry. 

 

In a nutshell, private borrowings must be reduced and industry made more efficient and productive.

 

Read his column, he's always interesting.