Thai Economic Crash

[hhgz]

With all of the misspellings, you should employ a spell checker.

"the Baht is always the strongest currency...THB is the most overvalued currency in the world..."

You should also employ a fact checker.

"Jewelry and textile business are going to close ALL OF THEM, it is a disaster I tell you, I work in this field..."

Which field is that: hysteria, misinformation, or hyperbole?

[bingobongo]

however, the majority of the others did not put in the same gruelling efforts the successful ones did. the majority did not work 7 days a week and an average of 14 hours a day but preferred to draw their generous salaries and perks, enjoyed life and were content with whatever little they achieved because they had no set target. said majority was not able to retire at age 46 except those who inherited a bundle of money.

there is no correlation between putting in "grueling efforts and success", the name of the game is EFFICIENCY and INTELLIGENCE, if someone can do the same job in 7 hours that some other fool takes 14 hours to do, who is more succcesful? could it be that you are a little bitter in the fact that you wasted so much time in reaching your supposed "nirvana"?

my sympathies on your inability to manage your time well and your need to toil away in the past, and why are you wasting so much time on thaivisa in retirement?

given that i shorted the financial markets the past 2 years, i will be retiring earlier than you with much less effort required.

Edited January 31, 2009 by bingobongo

[Naam]

given that i shorted the financial markets the past 2 years, i will be retiring earlier than you with much less effort required.

best of luck to you little poor boy

[tijnebijn]

Its getting cocky over here .

[Old Man River]

I for one, work with several cornucopians at the office, who I would classify in a similar category with Naam. They are computer programmers, and believe that it is through their own ingenuity that they have acquired what they've got. This is actually a disease of western culture that has spread throughout most of us. True, individual effort makes a small difference in this world, but not much. Most of it is luck, and what the environment gives to you.

Greg, i [not so] humbly beg to disagree although i admit that the essence of your posting applies partly to me. half of my professional career i spent as the right man at the right time in the right job and the right environment. but just like me there were hundreds of others, with perhaps the same qualifications in the same or similar environment and with the same chances. however, the majority of the others did not put in the same gruelling efforts the successful ones did. the majority did not work 7 days a week and an average of 14 hours a day but preferred to draw their generous salaries and perks, enjoyed life and were content with whatever little they achieved because they had no set target. said majority was not able to retire at age 46 except those who inherited a bundle of money.

to sum it up: if you think that "individual effort makes a small difference in this world" then you have not experienced "this world" too much. i claim that individual efforts make all the difference. applying individual efforts starts already when you study and decide going for a master's in only one or in two subjects. extra efforts are needed later when taking jobs and the selection is between a mediocre career in a comfortable environment and a high-fly one in the jungle, bush, swamps or desert.

Or, to quote a wise old saying, the harder you work the luckier you get.

[jdrake72]

With all of the misspellings, you should employ a spell checker.

"the Baht is always the strongest currency...THB is the most overvalued currency in the world..."

You should also employ a fact checker.

"Jewelry and textile business are going to close ALL OF THEM, it is a disaster I tell you, I work in this field..."

Which field is that: hysteria, misinformation, or hyperbole?

Not at all. It is insight information, I have been working in these fields in Asia for over 15 years and I know just about anybody here. I see every day businesses closing down and I have dozens of thousands of foreigner customers lists with their costant surveys.

They are all fleeing away Thailand . Jewelry sector is finished. Textile too. Nobody is exporting anything, some big fish who had made several dozens millions dollars during the golden age don't care too much , but virtually any small one who has started lately is shutting down with mountains of debts leaving people unemployed.

The few ones who are surviving are just mixing indonesian, indian and chinese stuff labelling Made in Thailand here but at the triple of the price, of course and often much more expensive than selling prices of big distribuitors in Europe or Americas.

I had never seen something like this in these sectors in Thailand ,not even during of after the 1997 crisis. Turkish customers (re-exporters from Istanbul to Middle East and former USSR countries) are the ones who are saving the ass of most Thai jewelry exporters right now.

Just get informed before spitting sentences, already dozens of thousands of people have lost their jobs in these fields in the past year and hundreds of thousands are at a high risk in the coming months.

The -3.5C GDP contraction of Q4 is just the appetizer....

And if Indian rupiah, philipines peso, korean won, and now even singaporean dollar, malaysian ringgit and all currencies around are going down sharply and THb is not (despite having one of the worst political scenario and now even terrible economic data) it is very logical its currency is the most overvalued. That will send exports crashing even more.

You might not realize that, from the beach where you are getting tan under a comfortable umbrella, but export business in Asia is damned competitive.

No misinformation than, fresh economic data is showing I am right and in few months all doubts will dissipate.

Of course, I am NOT happy with this situation, if you see some hysteria in me, it is because I am not enjoying living in a country in crisis (although it is not only Thailand, but the whole world too). Smiling and happy people make my day happier and Thais are not smiling anymore.

What I am trying to tell is that Thailand is losing competitivness in exports with its neighbour countries and that will become even more evident when the world economy will start to pick up, at that moment Thai exports will struggle to recover,unlike exports of its neighbours. I think only you and Tarisa are the only ones still convinced THB is not overvalued. :-).

I remember before 1997 many guys like you didn't want to listen to me when I had told them THB was set to plunge....

Edited January 31, 2009 by jdrake72

[AlexLah]

So what do you suggest?

Should I change my THB to some other currency now while it is still strong?

[flying]

Most people are now aware of the Treasury department's statement to Parliament that their reserve as at end of December was 52 Billion Baht (sufficient to pay Government employee salaries for 6 weeks). But, reassuringly, a department spokesperson said today that there was no problem as they would receive lots of money through taxes in May! That must come as a great relief to their employees, who I'm sure won't have a problem surviving 2.5 months with the potential of being unpaid!

Made me wonder too

Dear workers the good news is We have money coming in May

The bad news is we will run out of money in Feb

[pagallim]

Most people are now aware of the Treasury department's statement to Parliament that their reserve as at end of December was 52 Billion Baht (sufficient to pay Government employee salaries for 6 weeks). But, reassuringly, a department spokesperson said today that there was no problem as they would receive lots of money through taxes in May! That must come as a great relief to their employees, who I'm sure won't have a problem surviving 2.5 months with the potential of being unpaid!

Made me wonder too

Dear workers the good news is We have money coming in May

The bad news is we will run out of money in Feb

I think like most of us, sit tight, minimise your exposure to the Baht (i.e. keep your money in your home country/offshore etc), and see how things pan out. No doubt, sometimes soon the Baht is going to take a mega fall, logic (at least in these times) tells us that. That said, I keep waiting for it to happen, but it doesn't. Again, wait, it will happen. Someone is manipulating the market for Baht, but when it falls, I think it's going to fall big time.

[Pakboong]

however, the majority of the others did not put in the same gruelling efforts the successful ones did. the majority did not work 7 days a week and an average of 14 hours a day but preferred to draw their generous salaries and perks, enjoyed life and were content with whatever little they achieved because they had no set target. said majority was not able to retire at age 46 except those who inherited a bundle of money.

there is no correlation between putting in "grueling efforts and success", the name of the game is EFFICIENCY and INTELLIGENCE, if someone can do the same job in 7 hours that some other fool takes 14 hours to do, who is more succcesful? could it be that you are a little bitter in the fact that you wasted so much time in reaching your supposed "nirvana"?

my sympathies on your inability to manage your time well and your need to toil away in the past, and why are you wasting so much time on thaivisa in retirement?

given that i shorted the financial markets the past 2 years, i will be retiring earlier than you with much less effort required.

I have encountered many individuals who believe it is a good idea to get heart surgery from a surgeon who has an obsessive compulsive disorder.

[midas]

Could this mark the real beginning ................?

Rising debt raises crisis fears, Puea Thai says

Bangkok Post 2/02/2009

The opposition Puea Thai party is demanding that the government reveal the country's real economic health, saying worsening debt could lead to a recurrence of the 1997 financial crisis.

Khanawat Wasinsangvorn, Puea Thai deputy leader, yesterday said Prime Minister Abhisit Vejjajiva should make public the economic fundamentals, as the country now has just 52 billion baht in reserves.

The Finance Ministry's plan to seek 270 billion baht in credit from domestic and overseas lenders had raised concerns that the government was about to drive the country deeper into debt, similar to what happened in 1997, Mr Khanawat said.

Puea Thai spokesman Phrompong Nopparit said the depletion in cash reserves showed the government was mismanaging the country.

Mr Phrompong said the government acted shamefully by making approval of funds for populist projects, with the aim of strengthening its voter base, its main priority.

He also opposed the government plan to raise fuel prices by five baht, saying the increase would play into the hands of oil smugglers, particularly those operating in the South.

Mr Phrompong questioned whether the Democrat party's 99-day urgent operations plan, which includes an end to motorists' contributions to the State Oil Fund, was possible during the term of this government.

The Democrats vowed last year while in opposition that if they headed the next government, they would come up with a 99-day quick-fix policy which included free education, boosts to the million-baht tambon fund, free electricity to the poor, and lower fuel prices.

Prime Minister Abhisit denies the country's cash reserves are suffering due to the government's decision to introduce a second economic stimulus package.

[Smithson]

given that i shorted the financial markets the past 2 years, i will be retiring earlier than you with much less effort required.

best of luck to you little poor boy

After working hard for early retirement, you now spend hours everyday on TV telling other members how clever you are. Funny thing is many ppl here are actually posting on their work time. Ironic isn't it.

[Naam]

interesting facts. take a look at reserves and total external debt. the politicians of Europe, the Greatest Nation on Earth and various other countries would jump with joy if they had equivalent ratios!

Edited February 4, 2009 by Naam

[Naam]

After working hard for early retirement, you now spend hours everyday on TV telling other members how clever you are. Funny thing is many ppl here are actually posting on their work time. Ironic isn't it.

your posting proves that you are not really a clever person but just a disgruntled one who invents fiction based on frustration and/or envy. nothing special about that, one realises that quite often. but as you mentioned "actually posting during working time", (what's so funny and ironic about it?) what do you expect? perhaps donations enabling you to retire early too?

[Firefan]

I admit to know very little about anything but the Thai Baht's strength is a true mystery to me too. One theory I believe can hold some value is that the THB follow the Chinese currency fairly close now due to the tight link-up between the 2 countries financially (as most know; Chinese or Thai/Chinese are BIG players in this country). The Chinese Yuan will continue getting stronger - a bit slower now naturally - as has been held artificially low for years.

The THB might not be able to "hang on" for that ride though.

So what do one do? Personally I do not want to hold too many assets/capital in ANY given currency. I try to spread out my currency exposure over multiple currencies as well as real assets; real estate, commodities and gold.

Cheers!

[parryhandy]

Mr Phrompong said the government acted shamefully by making approval of funds for populist projects, with the aim of strengthening its voter base, its main priority.

Pot kettle black.

[ray23]

Blame game has started. But, here it is serious. Comments as to the balance of reserve funds. Why this administration has spent so much. Reality this administration wanlt in cahrge wehn the funds were spent, they were.

Certainly an interest place.

These next loans will put them at 47% of GDP isn't that high?

[Smithson]

After working hard for early retirement, you now spend hours everyday on TV telling other members how clever you are. Funny thing is many ppl here are actually posting on their work time. Ironic isn't it.

your posting proves that you are not really a clever person but just a disgruntled one who invents fiction based on frustration and/or envy. nothing special about that, one realises that quite often. but as you mentioned "actually posting during working time", (what's so funny and ironic about it?) what do you expect? perhaps donations enabling you to retire early too?

What I mean is that if I had retired young I would have better things than spending all day on TV.

[Naam]

Blame game has started. But, here it is serious. Comments as to the balance of reserve funds. Why this administration has spent so much. Reality this administration wanlt in cahrge wehn the funds were spent, they were. Certainly an interest place.

These next loans will put them at 47% of GDP isn't that high?

no it is not. compare it with Japan's public debt of 165%, Germany 65%, U.S. of A. 62% of GDP to get a clearer picture.

[Naam]

What I mean is that if I had retired young I would have better things than spending all day on TV.

for the record Smithson. it is correct that i spend daily many hours on my computers (plural) doing research, handling my investments and working hard since nearly three years on my habilitation. in between i switch several times to Thaivisa, not only for some interesting information, but also for diversification and amusement/entertainment.

[ray23]

Thanks Namm good to have clear piciture

[Naam]

for a change instead of some three liner bla-bla from fly by night "experts" a sober and comprehensive look at Thailand's economy and its near future:

Very weak Q4 – maybe as bad as it gets

December’s data set surpassed even our own depressed expectations and we have further lowered our

expectation of real GDP growth in Thailand to -3% for 2009 (from -2.0%). However, we still think that

the Q4-Q1 period may be as bad as it gets in terms of rates of contraction and that a fillip in activity driven by

policy and the inventory cycle is likely into year-end. Evidence of yawning excess capacity means a strong

capex led recovery is, however, unlikely any time soon and we thus forecast circa 3.5% GDP growth

(unchanged from our previous forecast) on average in 2010.

Manufacturing output fell 12.2% in December; bringing the cumulative fall in output to 22% (page 12). This

means that in the five months from the all time high in July to December, Thai manufacturing output has fallen

more than the total 18% decline recorded during the Asian crisis (and that was over 18 months).

In the light of this data, senior officials in both the Finance Ministry and the Bank of Thailand have been

quoted on the wires with predictions that the economy will contract by 3 percent or more in the final quarter of

2008. Our previous assumption was a 2.5% contraction. Moreover, our calculations suggest that unless

manufacturing output rises from its level in December during the first quarter of 2009, the decline in output on

the quarter in Q1 will be marginally worse than the 10.5% quarterly decline recorded in Q4 2008 relative to Q3.

Unfortunately a strong rebound in manufacturing output seems unlikely in Q1. As we highlighted in Tough

Start for the new government; Kneeland and Teather; 2 January 2009, the weakness is Thai activity is being

driven by global demand (or the lack thereof). True, the airport closures in November must have had some

impact. And Thai export volumes did rise in December relative to November (page 10). However, timely data

on Korean exports in January (down 33% yoy after 18% decline in December) point to a further decline in the

level of global trade, while the abysmally low US and European January purchasing manager business surveys

say the same. In Thailand, inventory to shipment levels also suggest more production cuts may be needed.

However, we stick to our view that the rate of GDP contraction in Q4 2008 and Q1 2009 may be as bad as it

gets. The US and European purchasing managers’ surveys, key indicators of business cycle turning points, did

rise in January. Moreover the policy stimulus in Thailand will augment the global stimulus that is taking place.

The Bank of Thailand reduced policy rates 75bps to 2% in January, and we think will cut a further 100bps in

coming months. Furthermore the government’s stimulus package, 180bn baht (2% of GDP) of which was

defined in January, should start to take effect in Q2 2009 and will almost certainly be supplemented in coming

recovery in activity in H2, excess capacity is going to be

prospects.

Gross Domestic Product

What the numbers say: Real GDP growth slowed a little more than expected to 4.0% on the year in Q3 2008

(consensus 4.3%), but was a little better than expected at 0.6% on the quarter (consensus 0.4% qoq). The disparity

in surprise was a function of the revision to seasonally adjusted growth rates such that the peak in quarterly

growth occurred in Q3 2007, earlier than previously stated. Domestic growth (public and private consumption and

investment) was subdued in Q3 2008, while export growth remained elevated at 8.2% yoy.

What they mean: Thai growth is slowing at an accelerating pace.

12-month outlook: 2009 will be a different story. High frequency data suggests a 3% plus contraction in real

GDP in Q4 2008, with exports playing a key role. Positive quarterly growth should return in H2 2009, in our view.

But growth for the year as a whole could be very weak. -3.0% real GDP growth is our base case for 2009.

Private consumption expenditure

What the numbers say: Thai real private consumption expanded 1.0% qoq in Q3 after contracting 0.4% qoq in

Q2 2008. On the year consumption growth rose to 2.6% from 2.4%. However, nominal consumption growth

accelerated to 11.5% yoy. The BoT’s private consumption index continued to slump in December, falling close to

the lows recorded in early 2007.

What they mean: Thai consumers’ real incomes were adversely impact by higher food and energy prices over the

summer of 2008. More recently, prices are falling but fear of unemployment is negatively impacting consumption.

Note that car sale growth on the year in December 2008 was favourably impacted by the low base associated with

the tax benefit introduced in January 2008 (chart 6).

12-month outlook: As food and energy price increases moderate, the blow from reduced income expectations

should be cushioned. However, consumer confidence remains subdued and there is a substantial income risk from

higher unemployment and lower farm income growth. We expect subdued real consumption growth.

Investment expenditure

What the numbers say: Real investment expenditure growth slowed to 0.6% yoy in Q3 from 5.4% in Q1. Some

of the weakness is a function of a post election slump in government investment. High frequency indicators of

investment also have recorded a moderation in growth and leading indicators have deteriorated sharply.

What they mean: Investment growth seems likely to fall into negative territory in coming months.

12-month outlook: Public investment growth should pick up in coming quarters. Dominating this dynamic will be

the considerable excess capacity implied by the 22% decline in manufacturing production from its high through to

December 2008. We look for a marked, 5% plus, decline in investment in 2009.

Government consumption expenditure

What the numbers say: Government consumption expenditure fell in real terms in Q4 2007, was flat in H1 2008

but expanded in Q3 2008. Nominal data for Q3 suggests spending growth remains very weak.

What they mean: The winding down of the Military Junta, the political difficulties surrounding the PPP

government, and the focus of that government on tax breaks and handouts rather than spending, has adversely

effected government consumption. Latest data has been more positive.

12-month outlook: We expect government spending to continue to return to positive year on year growth in

coming quarters.

Trade

What the numbers say: Export volumes broke their falling streak in December, rising 7% on the month after a

massive 27% decline from July through November. Nominal USD export growth recovered a little but remained

down 16% in December after growing 19% in September and 44% in July. The key development in December

was the sharp slowing of US dollar and volume import growth, pushing the trade balance into surplus.

What they mean: The slowdown in export growth is delivering a substantial shock to the Thai economy.

12-month outlook: We expect export volume growth to be negative on average in 2009. The rise in excess

capacity, decline in production activity in the manufacturing sector and slower consumption should ensure a

collapse in import growth such that Thailand runs a current account surplus in 2009.

Industrial sector output

What the numbers say: Manufacturing output shrunk by 7.7% in November and a further 12% in December. The

decline in activity in the six months to December has now surpassed the decline in production seen in 18 months

during the Asian crisis. On the other hand, inventories declined in November, but remained stable relative to

shipments.

What they mean: The manufacturing sector will subtract 3.6 percentage points from Thai GDP in Q4 2008. The

precipitous decline in November and December means that even if manufacturing production stabilises in Q1

2009 at the level recorded in December it will subtract more from GDP in that quarter than in Q4. And it is not

clear that production will stop falling in sequential terms in Q1 2009.

12-month outlook: Unless there is a very sudden turn-around, manufacturing production is going to be lower in

2009 than in 2008. Importantly for markets, we expect the rate of deterioration is to lessen during 2009 as

inventories are brought under control. At present inventory to sales ratios are still elevated, however.

Construction sector output

What the numbers say: The construction sector has been recessionary in H1 2008 and this continued into Q3.

Private sector construction contracted almost 10% yoy in Q2 and Q3 2008. Cement consumption growth

rebounded in fourth quarter and could be supported by public investment, politics willing.

What they mean: More public construction investment, if the government is able to act on its intentions, should

help support the sector. Unfortunately, private sector demand may get worse in coming quarters.

12-month outlook: We do not expect a strong dynamic from the construction sector in aggregate.

Up country activity (agriculture)

What the numbers say: Agriculture is a small part of the economy (11% of GDP in 2007). But while growth has

been strong, it is now slowing. In nominal terms the BoT calculation of farm income was up 15% on the year in

December, down from 32% in September. Nominal agricultural value added is up almost 30% while real value

added rose 10% in Q3 2008, but this is backward looking data. Production volume contracted on the year in

October but recovered a little in November and was unchanged in December.

What they mean: Higher agricultural prices have been driving farm incomes up. The spike in agricultural prices

that is now unwinding means that during 2009, year over year income growth may (temporarily) fall.

12-month outlook: Agricultural prices (including rice) have fallen, but the decline appears to have been arrested

for now. It remains to be seen if the transfer of income from agri-consuming to agri-producing sector during 2008

is entirely reversed by lower rice prices.

Labor market

What the numbers say: The unemployment rate is low at 1.5% but does appear to be tracking higher while

employment growth has slowed sharply in December.

What they mean: Uncertain measurement of the rural sector labour force means the unemployment numbers

usually cannot be trusted, but with high agricultural prices keeping workers in the fields the data may have more

meaning at present.

12-month outlook: Real wage growth should improve as consumer price inflation declines. As real economic

growth slows, however, the labour market should quickly shed any tightness it exhibited in early 2008. Indeed,

our calculations suggest a rise in the unemployment rate to 3% may be on the cards in the coming quarters.

Inflation

What the numbers say: Inflation rose to 9.2% in July, a decade high. But fell to -0.4% in January on lower food

prices, gasoline prices and administered price reductions. The official measure of core inflation fell to 1.6%,

within the Bank of Thailand’s target range of 0-3.5%. The official core inflation measure includes processed food;

excluding this and the administered price changes to water and public transport, inflation was sub 1% in October.

What they mean: Thailand now has negative inflation. This is not broad based deflation, it is a function of

commodity price declines. However, the excess capacity being generated globally and in Thailand means that the

potential for deflation in Thailand cannot be idly dismissed.

12-month outlook: Headline inflation has reversed its mid-2008 spike, helped by temporary electricity and public

transport tariff cuts. Lower commodity prices suggest much softer CPI inflation in 2009 than in 2008; we expect

CPI inflation to average close to zero in 2009. Medium term inflation risks are rapidly diminishing given real

growth prospects and weaker commodity prices.

Money & Debt

What the numbers say: Broad money growth continues to rise with deposit growth. Credit growth to the private

sector remains lively in nominal terms but appears to be slowing – particularly to the business sector. Sterilisation

of foreign exchange intervention by the BoT has increased loan to deposit ratios in the banking sector, a process

that is ongoing as the baht (surprisingly) remains under upward pressure from the flow of funds.

What they mean: The acceleration in credit growth is a function of loose monetary conditions and an increased

demand for working capital loans on the part of businesses (business credit growth is accelerating, but investment

is not). The demand for working capital is probably partly a function of commodity prices, which should reverse.

12-month outlook: Credit growth should ease with commodity price inflation and reduced investment intentions

as growth prospects dim.

Balance of Payments

What the numbers say: The current account surplus was negative in Q3 and early Q4 due to a weaker trade

balance. An impressive volume of portfolio flows came in to Thailand in H1 2008. FDI inflows are at the low end

of recent years, but still positive.

What they mean: Thailand’s external accounts are being buffeted by large swings in portfolio flows. The BoT’s

efforts to smooth the flows are clearly visible in the monetary data (above). Note that Thai investors are

repatriating funds at the same time as foreigners, providing more than an offset to downward pressure on the baht.

12-month outlook: Currency weakness suggests the portfolio flows left as quickly as they came on news of

higher inflation and subsequently because of global de-leveraging/de-risking. Rising reserves suggest the balance

of flows actually favoured the baht in the tail end of 2008, however.

Household and corporate finances

What the numbers say: Corporates have been de-leveraging over the last decade. Households have been

leveraging up.

What they mean: Corporates have the lowest debt burden (assuming earnings are broadly proportional to GDP)

since 1990. Households’ debt burden has risen but does not appear excessive.

12-month outlook: High frequency credit data suggests an end to corporate de-leveraging near term and ongoing

household leveraging. Low policy rates in nominal and real terms could help this trend. Unfortunately, the more

powerful force may be slower economic growth and weak confidence levels presaging ongoing retrenchment.

Fiscal policy

What the numbers say: The public and central government debt burden is low. In 2008, the central government

cash balance has moved from negative to positive suggesting a tighter fiscal policy. This now appears to be

changing direction.

What they mean: The last government’s efforts to distribute fiscal stimulus to the voters did not bear a great deal

of fruit.

12-month outlook: We expect the fiscal deficit to widen in into 2009 and 2010. The new government is

promising fiscal stimulus of 300bn baht or 3% of GDP, 180bn of which was defined in January. We expect the

stimulus effect to be spread out into 2010 but for there to be a positive impulse to the economy during 2009

(politics permitting).

Monetary policy

What the numbers say: The Bank of Thailand (BoT) more than reversed the tightening of policy in the summer

of 2008 with a 100bp policy rate cut in December 2008 and a 75bp cut in January 2009.

What they mean: Given the sharp decline in inflation, inflation expectations and growth the BoT’s monetary

policy settings no longer look loose.

12-month outlook: We expect reduced inflation risks and slower growth than expected by the authorities will lead

to an easing of monetary policy. We look for 100bps of policy rate cuts in coming months, taking policy rates

from the current 2.00% to 1.00%.

Interest Rates

What the numbers say: The yield curve steepened as inflation accelerated, but has since flattened with the decline

in growth prospects and the price of energy and other commodities. It is now steepening again as short term

policy rates are reduced.

What they mean: Financial market inflation concerns have declined. Policy rate expectations have fallen back

from a total of around 125bps of tightening at one point to easing now. Government bonds have probably been

benefiting from the risk aversion trend away from equities.

12-month outlook: Fixed income markets should continue to look for more aggressive policy rate cuts. Long term

government bond yields will depend on slowing inflation, greater fiscal expenditure and the level of risk aversion.

Exchange Rate

What the numbers say: The nominal trade weighted thai baht fell for most of this year as financial market risk

aversion mounted and inflation accelerated. Limited reliance on international capital flows has helped shore up

the baht more recently.

What they mean: The rise in USDTHB overstates the weakness of the THB, but the THB has weakened

meaningfully in real and nominal terms since the beginning of the year. More recently the trade weighted

currency has stabilised, with some help from the BoT and despite ongoing political concerns.

12-month outlook: We expect modest baht weakness against the USD over the next three months, targeting

USDTHB 37. Longer term, lower inflation, an improved trade balance and less adverse capital flows should limit the downside to the trade weighted baht. We look for USDTHB 36 at year end 2009.

Asset Markets

What the numbers say: The equity market has underperformed the bond market since late May. Foreigners have

been selling the equity market, though the weight of foreign selling has slowed.

What they mean: Risk aversion continues to hurt Thai asset markets.

12-month outlook: Thailand’s equity market will continue to be buffeted by international shifts in risk aversion.

Thailand in Context

What the numbers say: If the government’s projection of a 3.5% seasonally adjusted decline in GDP on the

quarter is correct, Thai weakness may be second only to Singapore in ASEAN in Q4 2008. However, the

contraction in Thai exports (-18% yoy in USD terms for December) and manufacturing output (-18.8% yoy

volume in December) is not out of line with the average of Singapore, Taiwan and Korea.

What they mean: Thailand is no longer the underperforming economy in ASEAN. However, Thailand’s activity

indicators are very weak.

12-month outlook: We expect Thai growth to trough in H1 2009 alongside Singapore, Malaysia and the

Philippines. Even if Thailand is less volatile than Malaysia or Singapore, given its more moderate trade exposure,

the difference in performance may be slight compared to the scale of the moderation in activity underway in the

Asian economy.

Edited February 4, 2009 by Naam

[lannarebirth]

Not too shabby under prevailing circumstances. Here's to a soft landing.

[Naam]

Not too shabby under prevailing circumstances. Here's to a soft landing.

i was thinking the same, provided that global conditions do not extremely deteriorate. that they will deteriorate more goes without saying.

[ray23]

An outstanding report Naam, where was the data generated?

[popshirt]

Two interesting bits of news came my way today:

1. A Thai friend who is a civil engineer and has worked for the same firm for 17 years was laid off, along with a dozen others, just yesterday. Most of the projects they were working on have been suspended indefinitely.

2. My lease on the Bangkok condo is up for renewal. With very little negotiation on my part, my landlord reduced the monthly rent by ALMOST HALF, a considerable amount in a luxury high rise. He works for JP Morgan and knows what is bound to happen to the Thai economy, he says just a matter of time.

[jumnien]

Two interesting bits of news came my way today:

1. A Thai friend who is a civil engineer and has worked for the same firm for 17 years was laid off, along with a dozen others, just yesterday. Most of the projects they were working on have been suspended indefinitely.

2. My lease on the Bangkok condo is up for renewal. With very little negotiation on my part, my landlord reduced the monthly rent by ALMOST HALF, a considerable amount in a luxury high rise. He works for JP Morgan and knows what is bound to happen to the Thai economy, he says just a matter of time.

Your landlord sounds like a bit of an idiot, or maybe just a poor negotiation skills.

[midas]

Two interesting bits of news came my way today:

1. A Thai friend who is a civil engineer and has worked for the same firm for 17 years was laid off, along with a dozen others, just yesterday. Most of the projects they were working on have been suspended indefinitely.

2. My lease on the Bangkok condo is up for renewal. With very little negotiation on my part, my landlord reduced the monthly rent by ALMOST HALF, a considerable amount in a luxury high rise. He works for JP Morgan and knows what is bound to happen to the Thai economy, he says just a matter of time.

Your landlord sounds like a bit of an idiot, or maybe just a poor negotiation skills.

Have you though........ maybe it is you that is a bit of an idiot.............

News is getting grim............just today -Panasonic lay off 15,000 .US jobs report

for January another 500,000 jobs lost .....wake up man.these are drastic times

[jumnien]

Oh, I don't quibble with the economics. But when you are a landlord renting out a unit it is rather moronic to be pointing out the inevitable slide in the price of rents. Does this guy have a car to sell too?

[midas]

Collapse in demand the enemy

Bangkok Post

Olarn: GDP could fall 4% without stimulus

By: DARANA CHUDASRI

Published: 4/02/2009 at 12:00 AM

Newspaper section: Business

Heavy dependence on the global economy will cost Thailand dearly this year as demand across a range of industries has all but collapsed, warns former deputy premier Olarn Chaipravat.

"For 2009, every country in the world will post negative growth, save perhaps for China," he said yesterday.

"Without a stimulus package, Thailand could post the worst contraction in the world."

Dr Olarn, an economist and former president of Siam Commercial Bank, said that without stimulus, real GDP could contract by 4.05% this year.

"Thailand's three key industries are electronics, automobiles and tourism - each is projected to fall 20% this year, and the three together represent as much as 60% of GDP," he said at a conference at the Stock Exchange of Thailand. "Without effective measures, unemployment is sure to rise."

Dr Olarn said the US bank Goldman Sachs forecast the balance sheet destruction of banks and non-banks this year at as much as US$2.376 trillion, or four times the 2008 estimate.

The "financial bomb" that started in the US sub-prime market and exploded on Wall Street last year was not limited to the property and financial markets, but had spread to Main Street, undermining consumer demand for durable goods and electronics.

Exports across the region had already begun to drop from the second half of 2008. Thai exports contracted by 17% year-on-year in November and 16% last month, and could fall by as much as 25% for January, Dr Olarn said.

With sales down by over 20% for many companies for more than three months now, cash flow problems are spreading across various industries.

He said bankruptcies could rise as businesses lack funds to cover inventory and working capital, making state assistance critical if the country was to avoid a sharp rise in unemployment.

The government is pushing forward with a 116-billion-baht midyear spending budget to help finance job programmes, cash handouts and subsidies to ease the impact of the recession.

Another 40 billion baht is expected to come from tax breaks for new homebuyers and small businesses. Authorities yesterday also approved new funding for state-owned banks to help cover business and state enterprise loan risks.

Governments across the world are emptying their coffers to prop up growth - the US Congress is currently deliberating an $825-billion programme to shore up jobs and boost growth.

But Dr Olarn said stimulus packages would fail if they were underfunded, slow to enact, misallocated or poorly co-ordinated with other countries.

"This is probably the first time since the Great Depression that every government and 99% of all economists are in agreement that [expansionist] fiscal policy is the only way out," he said. "Monetary policy isn't going to be enough. Many countries have already been at zero interest rates or near zero with little impact."

Dr Olarn said that for Thailand, effective policy would require first understanding the characteristics of each sector - how many people are employed, how many companies are affected and what financial institutions could help address the problems.

He said companies and workers could then agree to reduce work hours to cut costs and free up time for new skills training. The government could also offer coupons or consumer subsidies to encourage purchases from problem sectors to support demand.

"We aren't alone in facing these problems. This is a global crisis. Financing isn't the main issue. The main issue is more about how to implement these programmes in a co-ordinated fashion across the globe."

A global response could result in a recovery by 2010, Dr Olarn said. But delays or policy mismanagement could result in a protracted downturn.

"I think that if we can't solve the crisis, then the world should just give up on economics altogether. But if we can get out of this within two years, then we should all be sending our children to study economics even more."