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Thai Economy Shrinks As Exports Lose Steam


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Thai economy shrinks as exports lose steam

BANGKOK, August 22, 2011 (AFP) - Thailand's economy contracted 0.2 percent in the second quarter as parts shortages caused by Japan's massive earthquake led to a sharp slowdown in exports, government data showed Monday.

On a year-on-year basis, economic growth weakened to 2.6 percent, from a revised figure of 3.2 percent in the first quarter, the National Economic and Social Development Board (NESDB) reported.

"The slower growth in the second quarter was due to a contraction in the industrial sector because of the earthquake and tsunami in Japan, while total investment slowed," said NESDB secretary-general Arkom Termpitayapaisit.

Gross domestic product (GDP) had expanded by 2.0 percent in first quarter from the previous three-month period -- the quickest pace in a year.

Export growth slowed to 19.2 percent in the second quarter, from 27.4 percent growth in the first.

Japan's March 11 twin natural disasters led to supply disruptions in Thailand, particularly at local plants operated by Japanese carmakers.

The NESDB revised its 2011 growth forecast for the Thai economy to a range of 3.5-4.0 percent, from 3.5-4.5 percent previously, blaming the economic woes of the United States and Europe.

Thailand, whose economy rebounded strongly from political violence last year, has raised its key interest rate by 200 basis points since July 2010 to tame inflation. Monetary policymakers are due to meet again on Wednesday.

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-- (c) Copyright AFP 2011-08-22

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Thailand's 2011 overall economic growth revised downward to 3.5-4%: NESDB

BANGKOK, Aug 22 – The Thai economy is expected to expand by 3.5-4 per cent in 2011, lower than the 3.5-4.5 per cent projected in May, according to the National Economic and Social Development Board (NESDB).

Thailand's economy in this year’s second quarter grew by 2.6 per cent, decreasing from 3.2 per cent in the first quarter, NESDB Secretary General Arkhom Termpittayapaisith told a press briefing on Monday.

The falling performance figure was partly attributed to contractions in the manufacturing sector affected by Japan's devastating earthquake and tsunami, and the subsequent contraction of the Japanese economy as well as reduction in total investment.

Consequently, the Thai economy grew by 2.9 per cent in the first half of 2011.

After seasonal adjustment, the gross domestic product (GDP) is projected to grow in the range of 3.5-4.0 per cent while headline inflation is forecast to be in the range of 3.6- 4.0 per cent.

The adjustment was owing to the fluctuation of oil prices, the delay of government budget disbursements in 2012, risks on global economic recovery, particularly the higher risk of economic recession in the US and the continuing European public debt issues, and the risk of volatility related to the money market, the capital market and the foreign exchange rate.

In addition, the Thai baht tends to appreciate in the latter half due to depreciation of US dollar, according to the NESDB secretary general.

The two other risks and limitations related to the country’s economic growth were the condition of agricultural production and farm income remaining vulnerable to the impact of fluctuating weather after increasing flood frequency since late 2010 and the inflation rate and interest rate remaining high.

Regarding the interest rate, Mr Arkhom expected that the Monetary Policy Committee (MPC) will monitor and proceed with its policies in accordance with the current situation.

During the past decade, state investment decreased to 24 per cent from 40 per cent in 1997.

During the second quarter, the MPC decided to raise the policy interest rate twice, a total of 0.5 per cent, from 2.50 per cent to 3.00 per cent per annum.

The recent policy rate hike was in line with monetary policy in the Asian region and emerging market countries, which aim to curve down their overheated economies and inflationary pressures to a sustainable level.

In July, the MPC decided to raise the policy interest rate by 0.25 per cent. Thus, the policy interest rate at present was at 3.25 per cent per annum.

However, the administration of the new government will help boost the confidence of consumers and investors, Mr Arkhom added. (MCOT online news)

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-- TNA 2011-08-22

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In addition, the Thai baht tends to appreciate in the latter half due to depreciation of US dollar, according to the NESDB secretary general.

Yeap, tourist high season will soon arrive and usually the baht does appreciate during the tourist high season.

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Just a few topics ago, some Thai minister was saying as how the declining economy world wide was not going to effect Thailand. I guess this minister neglected to talk to the other minister.. :whistling:

That wouldn't be the finance minister by any chance who stated that the 300 baht minimum wage would not affect the inflation rate as IT IS A ONE OFF TAX!!!! by any chance, would it. What a total jerk he is!!!:blink: I wouldn't like to have him as my financial advisor as he is a complete prat of the highest order :unsure:

Edited by SICHONSTEVE
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Yea, I remember some high-roller in the govt saying the 300 baht wage would only affect inflation for one year.

Ain't that kinda like saying if something caused inflation say to double one year, then it's not really affecting what the customer pays come Year 2.....wroing!!!!....that price inflation don't magically go back down come Year 2 or Year 3, 4, etc....it has increased the price by X-amount for all the out-years until "possibly" some unexpected event causes price decreases.

With inflation increasing that may casue the Bank of Thailand to raise interest rates which usually causes the baht to appreciate which is bad for exports and for us farangs converting our home country currency to baht.

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Yea, I remember some high-roller in the govt saying the 300 baht wage would only affect inflation for one year.

Ain't that kinda like saying if something caused inflation say to double one year, then it's not really affecting what the customer pays come Year 2.....wroing!!!!....that price inflation don't magically go back down come Year 2 or Year 3, 4, etc....it has increased the price by X-amount for all the out-years until "possibly" some unexpected event causes price decreases.

With inflation increasing that may casue the Bank of Thailand to raise interest rates which usually causes the baht to appreciate which is bad for exports and for us farangs converting our home country currency to baht.

He didn't give any time scale - just said that it was a one-off affect. So they would have to drop it back to what it was after 1 month only for this to be valid as whilst it stayed at the new level it would be inflationary every month thereafter. It wouldn't rise further but it would stay higher on account of having implemented the minimum wage. Something like a windfall tax on the banks IS a one off event as it occurs just once!!!B)

You are correct on the affects on inflation, interest rates and baht strength. As I am repatriating money back to England this is great for me!!!

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No it's not wrong - a slowing economy is one that is contracting so a drop in the growth rate for example means that it is contracting!!:jap:

<deleted>.

They are talking about rate of increase.

A drop in the yearly growth rate from 10% to 7% means that the rate of growth is decreasing, but not that the economy is contracting.

You can try this out on your motorcycle. Instead of accelerating at 10% try accelerating at just 7%. I bet that you still go faster.

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Yea, I remember some high-roller in the govt saying the 300 baht wage would only affect inflation for one year.

Ain't that kinda like saying if something caused inflation say to double one year, then it's not really affecting what the customer pays come Year 2.....wroing!!!!....that price inflation don't magically go back down come Year 2 or Year 3, 4, etc....it has increased the price by X-amount for all the out-years until "possibly" some unexpected event causes price decreases.

With inflation increasing that may casue the Bank of Thailand to raise interest rates which usually causes the baht to appreciate which is bad for exports and for us farangs converting our home country currency to baht.

Yes, it is a bit of government deception.

The rate the government gives is the year on year increase. So only the increment is considered relevant. Merv has been getting away with this for years, "oh the current inflation rate is five percent, BUT don't worry it will be back down to 2% in two years"

The damage has been done, and written off.

IMO his remit should be the average rate of inflation over the years should be this dam_n 2% central banks inflict on us, thereby ensuring the currency loses 95% of its value every forty years.

Edited by 12DrinkMore
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No it's not wrong - a slowing economy is one that is contracting so a drop in the growth rate for example means that it is contracting!!:jap:

<deleted>.

They are talking about rate of increase.

A drop in the yearly growth rate from 10% to 7% means that the rate of growth is decreasing, but not that the economy is contracting.

You can try this out on your motorcycle. Instead of accelerating at 10% try accelerating at just 7%. I bet that you still go faster.

"A contraction in a country's economy, as evidenced by a decrease in its gross domestic product (GDP) during any quarter of a given year".

In other words - if the growth rate of a specific quarter is lower than the previous one then the growth rate is said to have contracted.

To use your example: if a motorbike is travelling at 50 mpn and then drops to 40 mph then it is deccelerating.

I cannot try this on my motorcycle as I don't own one.

Finally, you have spelt (spelled) <deleted> wrong!!!:)

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