Thai Economy Roars Back But Risks Linger

[webfact]

Thai economy roars back but risks linger - Focus

by Didier Lauras

BANGKOK (AFP) -- Thailand's economy is riding high again, just months after a crippling political crisis, underlining the strength of a system used to political turmoil but also seen as inherently vulnerable.

In May, when the retail heart of Bangkok was under the control of anti-government "Red Shirt" protesters, there was widespread concern about economic growth prospects and loss of investor confidence.

Those fears became more acute after a bloody military crackdown left the death toll from the two-month rally at 91, with 1,900 wounded, deepening the country's colour-coded political divide.

But the dire economic predictions never came to pass, and Thailand's central bank now envisages growth of between 6.5 and 7.5 percent in 2010.

The key tourism sector is rebounding faster than expected, with more than 10 million foreign visitors in the first eight months of this year -- up 13 percent from the same period of 2009, according to government figures.

Exports are booming, policymakers have raised interest rates twice since July to control inflation and the Thai baht is at its strongest level for 13 years.

Since 1997, when the collapse of the baht destabilised all of Asia, Thailand has set up strict procedures to control investment and risk.

These changes have been used by Tarisa Watanagase, the outgoing governor of the Bank of Thailand, to explain the economy's resistance to the 2008 worldwide financial maelstrom.

"I think we are very resilient if you look back, and that is probably attributable to all the efforts and reforms we have put in place since the Asian crisis," she told AFP recently.

Observers believe the Thai economy's robust performance shows its capacity to rebound from frequent political upheaval, including 18 actual or attempted coups since 1932.

"Political instability is an inherent part of the country," said one European businessman who did not want to be named.

Investors in Thailand "have the capacity to keep doing business regardless of which colour is in power," he said.

Aswin Kongsiri, a Thai businessman on the board of several companies and the Stock Exchange of Thailand, said a similar situation occurred in 1992 when the military crushed mass protests but the stock exchange quickly rebounded.

This year, "during the protest, 90 percent of the economy was working normally," he said.

Aswin said there was a certain understanding between influential forces that have enabled the wheels to stay on the economy despite instability.

"Political leaders have managed to form a sort of coalition between military, the business elite and the bureaucrats," he said.

But the flattering figures posted over recent weeks have not prevented numerous voices rising to warn of the fragility of the situation.

A strengthening baht could in itself pose a danger to the crucial export industry, making Thai-made goods more expensive on foreign markets.

Exports increased 48.1 percent year-on-year in the second quarter, but the sector is highly reliant on the Chinese and US economies, making Thailand vulnerable to any fresh global slowdown.

Another fear is that the stronger currency could be linked to speculative capital inflows from the US and Europe -- attracted by a rising stock market and higher interest rates -- which could recede as swiftly as they arrived.

"When there is a problem, they (investors) just take their money and go somewhere else. The money comes in quickly, and will go away quickly too," said Sompop Manarungsan, president of the Panyaviwat Institute of Technology.

At the heart of Thailand's vulnerability is a cultural and social fracture that has created a political climate able to plunge the country into chaos -- like the violence on the Thai capital's streets this year.

The mostly poor and working class Reds were seeking immediate elections they hoped would replace a government which they see as an undemocratic elite.

Prime Minister Abhisit Vejjajiva has expressed his wish for a process of "reconciliation", but the country appears as politically divided as ever.

"One does not see a way out but everyone is in denial," said the European businessman.

The economy appears to have returned to a similar state as before the most recent bout of unrest, said Aswin.

"The rich are getting richer, the economy is doing well, a lot of people are doing well in terms of income, but we still haven't addressed the basic inequalities in the Thai society," he said.

Fundamentally, he said, "the Thai economy is based on a rather vulnerable structure".

-- (c) Copyright AFP 2010-09-15

[hoaker]

Start receding FDI's but look for short postions in the next 9-12 months before the market starts taking the downsides!!!

[morphious]

45 baht to the pound = less brits to thailand, simples

[thailandbluegrass]

The key tourism sector is rebounding faster than expected, with more than 10 million foreign visitors in the first eight months of this year -- up 13 percent from the same period of 2009, according to government figures.

Of which we are into the 9th month now so I wonder how many of those 10 million came pre-anti government month which would cover January to April and how many came Post-anti government protest which lasted for almost 2 months?

[BSJ]

Only when the government allow the baht to float in the free market will the truth be known. Don't hold your breath!

[asiawatcher]

Yeah this is the PR sunshine before the storm. Strong Baht, dollar down, tourists can't spend as much, exports way down and so on. So how is Thailand 'roaring' back? The PR machine never let's up!

[mccw]

Yeah this is the PR sunshine before the storm. Strong Baht, dollar down, tourists can't spend as much, exports way down and so on. So how is Thailand 'roaring' back? The PR machine never let's up!

I agree that in some ways with the potential problems you point out; but there are over looked advantages, to the rising bht for example; Thai income in bht can buy more and cheaper from overseas, meaning they can move up a level and skill to be buying the raw materials from overseas and making the priduct in Thailand which kinda product is economicaly probably far bigger bussiness than teak handicrafts or umbrellas; for example a Thai company just bought the teeside steel works in uk, meaning Thais can now expand globaly their asset and production reach. Also on the bht I don't beleive in the long run people will not come to Thailand because of more expense, people still go to Australia and such because of the destination rather than price; these are part of the process in moving from developing economy to developed; labour to skill, production coupled with domestic comsumptiondriving economy not just lowest level relliance on a forieng buck. It may be a tricky road to negotiate and there will be winners and loosers but over time it's an enevitable part of progress.

[elliss]

The key tourism sector is rebounding faster than expected, with more than 10 million foreign visitors in the first eight months of this year -- up 13 percent from the same period of 2009, according to government figures.

i come thru bkk airport 4 times year from UK .

the last year , has been the least busiest over 12 years .

[mccw]

^obviously u can't of been coming through the same airport for all those 12 years.

Now swampi seems more busy than don muang was any time (I prefered the old place) atleast double from 10years ago, unless just the times my flight?

Rooms along with everything else is more expensive from when I first came, but still more and more people, little dips here n there, but overall trend is undeniably up up up, people living here and visiting.

[marquess]

The key tourism sector is rebounding faster than expected, with more than 10 million foreign visitors in the first eight months of this year -- up 13 percent from the same period of 2009, according to government figures.

i come thru bkk airport 4 times year from UK .

the last year , has been the least busiest over 12 years .

There is something in the Bangkok English language press, saying that the Saudis are at breaking point! The incompetence of the gov will be further highlighted to the world I think.