Thai Economy For The Next Year?

[ray23]

The Bot has said time after time they were confident, it seems to backing a little further away form that position. They are coming under pressure from several sides to devalue the baht to offset export losses. In a recent article the BOT told the Finance Minister to promote tourism. Ok I see watching inflation, but looking to tourism thses day as a magic bullet, just doesn't seem realistic.

First people with the money to travel these days simple have to be less in number, then the choices of less expensive destinations with a comparable vacation comes into play. And the there is the political situtation that doesn't seem to show any signs of resolving any time soon.

"Economy will struggle in 2009: BoT, Somkid

www.bangkokpost.com

(BangkokPost.com) - Bank of Thailand (BoT) deputy governor Bandit Nijthaworn and former finance minister Somkid Jatusripitak forecast that the Thai economy will weaken in 2009.

“Next year will be a challenging year for Thailand because the impact from the global economic downturn will be more serious than expected. The economic growth figures would not be as high as projected, and all sides have to quickly adapt to the changes,” Mr Bandit said.

He insisted the implementation of Basel II capital accord by the BoT will start by the end of 2008, since most local commercial banks have prepared for more than two years. However, he cautioned the banks to be more careful when issuing credits due to the global economic setback.

Former finance minister Somkid also viewed that the national economy next year will decelerate because of both global economic woes and the local political deadlock.

Speaking about the opportunities and challenges of the Thai economy in 2009, Mr Somkid said the country is not in a normal state and the government must restore the confidence in both economy and politics.

If the government cannot administer the country and has negative image towards the international community, it would lose the power of negotiations, he said.

He therefore advised the government to negotiate and respect the ideas of all sides to prevent the country from facing more risks.

In order to push the country and its economy forward, Mr Somkid said political reform is needed to amend the political mistakes in the past and to handle new problems in the future.

However, he believed the economic fundamentals of Thailand are still strong enough to prevail over the global economic crisis."

[midas]

The Bot has said time after time they were confident, it seems to backing a little further away form that position. They are coming under pressure from several sides to devalue the baht to offset export losses. In a recent article the BOT told the Finance Minister to promote tourism. Ok I see watching inflation, but looking to tourism thses day as a magic bullet, just doesn't seem realistic.

First people with the money to travel these days simple have to be less in number, then the choices of less expensive destinations with a comparable vacation comes into play. And the there is the political situtation that doesn't seem to show any signs of resolving any time soon.

"Economy will struggle in 2009: BoT, Somkid

www.bangkokpost.com

(BangkokPost.com) - Bank of Thailand (BoT) deputy governor Bandit Nijthaworn and former finance minister Somkid Jatusripitak forecast that the Thai economy will weaken in 2009.

“Next year will be a challenging year for Thailand because the impact from the global economic downturn will be more serious than expected. The economic growth figures would not be as high as projected, and all sides have to quickly adapt to the changes,” Mr Bandit said.

He insisted the implementation of Basel II capital accord by the BoT will start by the end of 2008, since most local commercial banks have prepared for more than two years. However, he cautioned the banks to be more careful when issuing credits due to the global economic setback.

Former finance minister Somkid also viewed that the national economy next year will decelerate because of both global economic woes and the local political deadlock.

Speaking about the opportunities and challenges of the Thai economy in 2009, Mr Somkid said the country is not in a normal state and the government must restore the confidence in both economy and politics.

If the government cannot administer the country and has negative image towards the international community, it would lose the power of negotiations, he said.

He therefore advised the government to negotiate and respect the ideas of all sides to prevent the country from facing more risks.

In order to push the country and its economy forward, Mr Somkid said political reform is needed to amend the political mistakes in the past and to handle new problems in the future.

However, he believed the economic fundamentals of Thailand are still strong enough to prevail over the global economic crisis."

Ray it amazes me that everything still appears as normal here and yet we know that

Thai exporters must be hurting now with such a strong baht and many of the remaining tourists

coming here are meant to be from Russia. But look at their economy ( stock exchange

kept closed for several days ) and its oil revenues must be plummeting - so taking into

account the political landscape......where is the silver lining for Thailands economy ?

it the silver lining

[ray23]

I think there are two things you have to consider, the biggest being it's the land of smoke and mirrors and worlds largest bill board to hide slums.

The second is they felt that the US was only 20 % of their exports, they believed they would continue to export to China at the same levels. What they missed was for China to continue to import to make their exports. Which were primarily going to Europe and the U.S. they needed as market as well.

At this juncture it really doesn't appear as if they have really been hit at all other then the market. But appearance can be very deceiving here. Just like it was in the states and Europe.

The BOT and the Finance Minister really seem to be at odds on this.

Oh well maybe they will surprise a everyone have a great tourist season, but I really don't think so.

What the real situtation is here is beyond my wildest guess.

I think if it does hit here it will be a reaction like something fell out of the sky. A big surprise to everyone. That is very dangerous to the well being of the country.

[GuestHouse]

Keep in mind that the last economic recession in Asia started in Thailand.

One minute the Thai roads where jam packed with Red Plated Cars, the restaurants stuffed full of Thais eating the most expensive food on the menu and drinking the obligotroy 'Black' while outside there was a building boom.

Next minute the restaurants where empty, the roads where deserted and the half finished buildings starting to decay.

And let's not forget the devaluation.

Sorros was blamed, but before the Bhat was devalued the then PM purchased over $200million - floated the Bhat and made a tidy proffit on the return purchase.

Meanwhile Thais up and down the country donated their gold chains and jewelery to settle the national debt.

My wife and I bought land... look for some bargains to come.

Edited October 21, 2008 by GuestHouse

[GuestHouse]

the then PM purchased over $200million

Sorry that was Bht200 million into $ float then back to Bht.

[Bangyai]

Doesn't look like its going to be too rosey anywhere at the moment and some commentators say its going to get worse before it gets better.

[neil324]

Doesn't look like its going to be too rosey anywhere at the moment and some commentators say its going to get worse before it gets better.

So whys the baht appreciating then like things are all peachy in LOS

[skipvice]

Doesn't look like its going to be too rosey anywhere at the moment and some commentators say its going to get worse before it gets better.

So whys the baht appreciating then like things are all peachy in LOS

I don't know, but I think the BHT had been deapreaciating to the USD lately, or am I wrong?

[VegasVic]

Doesn't look like its going to be too rosey anywhere at the moment and some commentators say its going to get worse before it gets better.

So whys the baht appreciating then like things are all peachy in LOS

I don't know, but I think the BHT had been deapreaciating to the USD lately, or am I wrong?

You are correct skip! The Dollar has moved from around 31baht/Dollar to currently around 34.5baht/Dollar. The BOT has drawn a line in the sand at the 35baht/Dolar level and has been selling its dollar reserves to offset the exodus of foreign capital from the LOS. Given the fact that most of the expats in Thailand (especially the ones on thaivisa) are Brits, Europeans or Aussies, there is a sense that the baht is strengthening because their home currencies are depreciating. In reality the baht is being manipulated by the BOT selling Dollars to try and keep pace with the Dollar as it rises against the Pound, Euro and Aussie dollar. There will come a time as the Dollar continues its climb that the BOT will have to throw in the towel and a "true" value for the baht will then be determined. Until that time arrives it may get quite unpleasant for many Brit, European and Aussie expats as their exchange rates continue to fall at a time when Thailand is experiencing double digit inflation. What is going on here is almost a mirror image of what has happened over the past three years. The past three years have been a gift to European, Aussie and Brit expats in Thailand with favorable exchange rates, but going forward the Dollar will be one of the few currencies that will be actually appreciating vs. the baht.

[ray08]

The media in Thailand is manipulated in a large way by government, this happens all over the world ,but the Thai,s seem to overdo it

The real state of the Thai economy is not out in the open, so a lot of fantasy and misinformation in the pappers by the government ,and after you see them revise predictions and lower forcasts,

Next year Thailand will hurt bad ,along with the rest of the world ,less tourists ,less exports , and the biggest factor ,No stable government to handle the situation,

I am very suprised with all the internal problems here that Thailand is still holding up,

but eventually we will see a decline , commencing with the items above and also the property sector.

[ray23]

The exchange rate and the true economy are really two different things, the Exchange rate is controlled by the BOT.

Watched an interview on BBC Asia this morning. When they say that Asia is in a better position then the west to ride this out. They are really talking about the banks not the general economy.

The BOT is under a lot of pressure to devaluate the baht by at least 5%, to assist the export sector. But we have been down this road before within the last three years. A lot of companies failed and other survived to end up producing a huge export quarter in this year. It reveloved around the exchange rate.

It has actually been worse in the past for me in recent years. But the thing I see changing drastically was in a purchase of meds yesterday, 1 baht capuslue to 2 baht per capsule. Now keep in mind I live in Udon therefore we don't have double pricing as a general rule I pay the same as a Thai. Is that extra baht going to kill me no. But this is just one of the many individual items I purchase through a month.

So if you look at that transfer over to the Thai's who work locally for less then 200 baht per day. The real economy revolves around them not us we are a relatively small group here in comparison then the citizen of the country. So if they are paying more for everday things takes away from the driscreationary money.

Fuel costs have come down, you can see that at the pump. But, have the other costs followed I really don't know.

All of these things make Thailand a more expensive place to live or visit then it was four years ago.

The export numbers really confuse me. I know they manufactor cars here for export for example. Ok lets say that each vehicle represent 500K in exports numbers. How much of that money actually stays here and how much goes to the countries who sit up the plants?

I have no idiea. but I would say that the percentage is not the same as a company who manufactors a local product and exports it. Rice was a huge number in exports last year, that cost has went way down. So the farmer and the middle man are not going to see the numbers on the profit side they did last year. The exact same thing with rubber. Has it hit Bio fuels don't know.

I'm sorry I really rambled on. But the entire point is stock markets and exchange rates are very different then what the everyday Thai deal with. But, in the end it's average people who drive economies they are also the ones that are usually overlooked.

At the moment it looks as if that end purchaser, is either already effected are in fear they will be, which has exactly the same effect.

[ray23]

I think this gives a lot answers as to next year. Never kid yourselfs that the BOT does have control. Her position is to go against the grain on growth. Will she be right maybe, could that the world gets so busy trying to save itself that Thialand can ride the coat tails.

It's a huge risk if she is wrong, it will hit here hard. One area I think she is completly off base on is the Tourist angle. But, I think I understand where the thought comes from. How amy times have you seen Thai people look at us like we have a never ending money supply?

Ever try explaining momney limits to yuor Thai sweety. They really beleive that. Why by the time we get here either on vacaion or to retire, we have put in the hard work to relax. They see money and never see us do a darn thing for it. It is completly wrong Hence it just falls off trees.

Thruth is the country is much expensive to visit in as little as five years. Secondly the money tree has stopped dropping leaves. There is segment of the world population that will come and fill the five star hotels. But, that segiment can go anywhere nto just Thailand. The majority of toursit her are working class people and they will not have the funds to play.

"FINANCE MINISTER

BOT rejects Suchart's ideas

By WICHIT CHAITRONG,

ANOMA SRISUKKASEM

Published on October 21, 2008

The central bank yesterday raised objections to most of the measures proposed by Finance Minister Suchart Thadathamrongvech to steer the economy through troubled waters.

Among ideas floated by Suchart were keeping the baht undervalued by 5 per cent, reinstating the 100-per-cent state guarantee for bank deposits and further delaying new capital-adequacy rules for banks.

The minister is optimistic these steps will help the economy avoid a sharp slowdown next year, when the fallout from the global financial crisis is expected to hit hard.

Bank of Thailand Governor Tarisa Watanagase rejected most of these ideas, reasoning the central bank would keep inflation as the main policy target instead of adopting the exchange-rate target.

"If we want to fix the exchange rate, we must have a target, which would then be a complete departure from present policy. The world is now much smaller; it's hard to fix the value of a currency," she said, adding the baht should move in line with other regional currencies.

The unit has been gradually depreciating lately, due to capital outflows, the same as with other regional units.

She said the way to boost exports was to diversify foreign markets, cut costs or enhance productivity rather than manipulate the exchange rate.

The government should further promote tourism, in order to bring in foreign-currency revenue, because export revenue will likely face a slowdown, she said.

Financial costs here are already cheap, because of the low-interest-rate policy, she said.

However, Suchart said in a speech entitled "The Hamburger Crisis: Oppor-tunity or Risk?" that the Thai economy could be dealt a hard blow by the US crisis, with growth in gross domestic product (GDP) falling below 4 per cent next year.

The export sector, the key engine of growth, accounting for 60 per cent of GDP, is expected to expand only 10 per cent or less next year, down from 25 per cent this year.

"To cope with this economic condition, it is necessary that the baht weaken further, by about 5 per cent [relative to the US dollar], in order to boost exports," he said.

On deposit guarantees, he said the government should continue to provide 100-per-cent coverage for another three years, instead of just one more year as stipulated by law.

The blanket guarantee on bank deposits is due to end next August, when deposit insurance will apply to only Bt100 million per account per bank a year, then drop to Bt50 million and Bt10 million in following years and finally Bt1 million in August 2013.

Tarisa said the country's deposit-protection scheme was sound but that it was up to the Deposit Protection Agency to make any changes.

However, any moves need to be considered carefully for long-term rather than short-term benefits, she said.

Suchart also wants the government to delay implementation of the Basel II banking standard, in order to give more time for local banks to adjust.

But Tarisa said banks had been preparing for Basel II for years and that virtually all were ready to comply with the new rules, which should not hold back loan approvals.

Going ahead with Basel II would help restore confidence, she said."

[Bangyai]

Doesn't look like its going to be too rosey anywhere at the moment and some commentators say its going to get worse before it gets better.

So whys the baht appreciating then like things are all peachy in LOS

Might not be appreciating for long. Read in the papers yesterday that Thai exporters are having trouble shifting goods on account of the strong baht. They, along with the tourist industry , are pressurising the govournment for some kind of baht devaluation to ease the situation.

I remember the last crash. Things were seemingly peachy until....

Suddenly people switched from Johnny Walker Black back to Mekong

[Felt 35]

the roads where deserted

Not so bad however then

[johnwills]

Grim news today, the pound /baht exchange rate is the lowest I have seen in the 8 years I have been coming to Thailand, reached 55 baht and the euro dropped to just above 44 baht. If it drops much lower than this I guess the exporters will be up in arms(hopefully not literally) and the tourists may start looking for alternative place to holiday. Many expats from the UK have now seen a 20% fall this year in their earnings due to the exchange rate, not sure what the percentage fall in the euro is, but I don't think it is quite as bad. Still not good for anyone living on a UK pension out here. I think 50 baht to the pound would be a real crunch for many people, lets hope we don't get to this point.

At what point do the BOT intervene and try to reduce the strength of the Baht??

Edited October 22, 2008 by johnwills

[VegasVic]

Grim news today, the pound /baht exchange rate is the lowest I have seen in the 8 years I have been coming to Thailand, reached 55 baht and the euro dropped to just above 44 baht. If it drops much lower than this I guess the exporters will be up in arms(hopefully not literally) and the tourists may start looking for alternative place to holiday. Many expats from the UK have now seen a 20% fall this year in their earnings due to the exchange rate, not sure what the percentage fall in the euro is, but I don't think it is quite as bad. Still not good for anyone living on a UK pension out here. I think 50 baht to the pound would be a real crunch for many people, lets hope we don't get to this point.

At what point do the BOT intervene and try to reduce the strength of the Baht??

John, You haven't been paying attention have you? The BOT has been intervening for quite some time now and they have been selling their U.S. Dollar reserves in order to prop up the baht against the rising Dollar. Given the recent rhetoric from Ms. Tarissa it doesn't look like they will be throwing in the towel anytime soon, so I would expect that the Euro, Pound and aussie dollar exchange rates in Thailand will be falling further

[goatfarmer]

One of the reasons that the baht is not depreciating wildly, as it did ten years ago, is because it floats somewhat freely. How freely I don't know. But I suspect that there is some internal economic strength supporting the baht for the time being, rather than BOT intervention, which could only have a minor effect.

Nonetheless, I am expecting the baht to weaken by at least 12% in the next few months to at least 38 to the dollar - probably further. I can't imagine Thailand will be able to escape the effects of a global recession for too long, as it appears to be at the moment.

As to you expats with sources of income in Oz dollars and Sterling, this period of grimness should be a warning. You should always maintain a few months reserves of baht if you are living here. A year's reserves would be better. You could then pick the optimum time for buying baht, rather than being at the mercy of aberrant swings.

[ray23]

Well a few thoughts, Thai's are in a better situtation to ride this out them most westerners, for one reason, family farms. They will have food to eat and palce to stay.

There was an interesting discussion on NBT to day, that revealed a lot. They believe that depreciating the baht will serve no purpose, because no matter what the price there will be no market. Hence no advantage to a lower valued currency.

The one area tht they keep talking about in the tourist trade and they have allowed huge budget to promote it. Actually one of six incentives. If the rate exchange doesn't lossen up Thailand will remain an expensive Asain vacation. There ar simply to many alternatives availble.

[wintermute]

What is the logic for keeping the baht at 35 to the $ anyhow? It benefits people like me but i'm a little puzzled with the BOT stance on this issue. I thought a cheap baht benefited Thailand tremendously.

[Naam]

What is the logic for keeping the baht at 35 to the $ anyhow? It benefits people like me but i'm a little puzzled with the BOT stance on this issue. I thought a cheap baht benefited Thailand tremendously.

soaring inflation is not a benefit for any country.

[wintermute]

What is the logic for keeping the baht at 35 to the $ anyhow? It benefits people like me but i'm a little puzzled with the BOT stance on this issue. I thought a cheap baht benefited Thailand tremendously.

soaring inflation is not a benefit for any country.

I don't mean zimbabwe cheap. Inflation shouldn't increase (as there have already been relative cost of living increases in the past 3 years) much more than that if it returns to 38-42 baht to the $

[MHM]

Here in Kanchanaburi tourist numbers are significantly down on this time last year. Owners of guest houses, restaurants and especially bars very unhappy. I expect a shakeout with many small businesses going under, there simply isn't the demand for the amount of supply.

[VegasVic]

Here in Kanchanaburi tourist numbers are significantly down on this time last year. Owners of guest houses, restaurants and especially bars very unhappy. I expect a shakeout with many small businesses going under, there simply isn't the demand for the amount of supply.

Sadly (and I hate to say it) you haven't seen anything yet!

[Naam]

What is the logic for keeping the baht at 35 to the $ anyhow? It benefits people like me but i'm a little puzzled with the BOT stance on this issue. I thought a cheap baht benefited Thailand tremendously.

soaring inflation is not a benefit for any country.

I don't mean zimbabwe cheap. Inflation shouldn't increase (as there have already been relative cost of living increases in the past 3 years) much more than that if it returns to 38-42 baht to the $

the Bank of Thailand and Governor Ms Tarisa beg to differ from your opinion.

[madmitch]

A few months ago the government reduced the price of petrol at the pumps and offered to subsidise the price for six months.

with oil being priced in dollars, and despite the price falling, could this be one reason that it is in the government's interest to keep the baht reasonable strong against the dollar (hence excessively strong against most other currencies)?

Just a thought.

[Naam]

Here in Kanchanaburi tourist numbers are significantly down on this time last year. Owners of guest houses, restaurants and especially bars very unhappy. I expect a shakeout with many small businesses going under, there simply isn't the demand for the amount of supply.

Sadly (and I hate to say it) you haven't seen anything yet!

i tend to agree Vic but what is your forecast? inflation, deflation, stagflation?

[VegasVic]

Well a few thoughts, Thai's are in a better situtation to ride this out them most westerners, for one reason, family farms. They will have food to eat and palce to stay.

There was an interesting discussion on NBT to day, that revealed a lot. They believe that depreciating the baht will serve no purpose, because no matter what the price there will be no market. Hence no advantage to a lower valued currency.

The one area tht they keep talking about in the tourist trade and they have allowed huge budget to promote it. Actually one of six incentives. If the rate exchange doesn't lossen up Thailand will remain an expensive Asain vacation. There ar simply to many alternatives availble.

I would clarify that opening statement to "Thai FARMERS will be in a better situation to ride this out than most westerners" or more accurate yet, farmers throughout the world will be in a better situation to ride this thing out than urban dwellers! As far as the whole baht devaluing question goes, it is a double edged sword and I would expect that the BOT will be doing a dangerous dance with a foot on each edge for a while No matter how much the TAT spends on advertising the tourisim numbers will be down, and the ammount each of those tourists spend will be down as well, so as we say in Vegas its a double down

[VegasVic]

Here in Kanchanaburi tourist numbers are significantly down on this time last year. Owners of guest houses, restaurants and especially bars very unhappy. I expect a shakeout with many small businesses going under, there simply isn't the demand for the amount of supply.

Sadly (and I hate to say it) you haven't seen anything yet!

i tend to agree Vic but what is your forecast? inflation, deflation, stagflation?

It will be slightly different for each country, but overall I would expect deflation (actually disinflation) to rule the day for a period of time and then inflation will begin to take hold, however there will be some countries that will likely experiece stagflation I would normally mention those countries here, but I have to log off now and I don't like to start a fight and then run away

[wintermute]

What is the logic for keeping the baht at 35 to the $ anyhow? It benefits people like me but i'm a little puzzled with the BOT stance on this issue. I thought a cheap baht benefited Thailand tremendously.

soaring inflation is not a benefit for any country.

I don't mean zimbabwe cheap. Inflation shouldn't increase (as there have already been relative cost of living increases in the past 3 years) much more than that if it returns to 38-42 baht to the $

the Bank of Thailand and Governor Ms Tarisa beg to differ from your opinion.

Maybe but when have the BOT or Ms. Tarisa been right about anything? They are beholden to economic forces greater than their attempts at control.

Edited October 27, 2008 by wintermute

[philstone]

Maybe but when have the BOT or Ms. Tarisa been right about anything? They are beholden to economic forces greater than their attempts at control.

The Set is telling us something. We have to understand the Set reflects the thinking of the rich Thia's. Can someone thing me how much it decline in the last 12 months?