Thai Economy Shrinks 10.7% On Flood Impact

[webfact]

Thai economy shrinks 10.7% on flood impact

by Janesara Fugal

BANGKOK, February 20, 2012 (AFP) - Thailand's economy suffered a double-digit contraction in the fourth quarter of 2011, the sharpest on record, it said Monday after the kingdom's worst floods in half a century pummelled industry.

Gross domestic product (GDP) shrank 10.7 percent in October-December from the previous quarter, according to the National Economic and Social Development Board. GDP fell 9.0 percent compared with the same period in 2010.

It was the sharpest drop in a single quarter since comparable records began in 1993, according to Apichai Thamsermsukh, an official at the government agency.

The 1997-98 Asian financial crisis saw smaller quarterly declines but over a longer time period, he said.

"This is an unusual drop caused by the manufacturing sector," Apichai added.

The months-long floods last year killed hundreds of people and took a heavy toll on Thailand's industrial heartland north of Bangkok, with many factories forced to close temporarily.

For the whole of 2011, Thailand's economy expanded by 0.1 percent, after an increase of 7.8 percent in 2010, the figures showed, missing analyst forecasts.

But the government and analysts are optimistic about prospects for a rebound, with Finance Minister Kittiratt Na-Ranong predicting last week that the export-dependent economy could grow by 7.0 percent in 2012.

"Last year's floods severely affected the Thai economy but the contraction is only temporary," said Standard Chartered economist Usara Wilaipich.

"There will be an economic recovery this year, driven by domestic demand and manufacturing, which are rebounding."

But she said the revival would be slow in the first half of 2012 because industrial production and exports would take time to recover to normal levels, while the global economic outlook remains uncertain.

"Semi-conductor makers in particular need to import and install new machines replace those damaged by the flood. I think their operations will be back on track in the third quarter."

At their height last year's floods affected 65 of the country's 77 provinces, deluged hundreds of thousands of homes and forced the closure of large industrial parks, disrupting global supply chains.

After the clean-up operation began towards the end of the year, many of the worst-hit companies said it would be several months at least before their operations returned to normal.

Japanese auto giant Honda has idled operations since early October at its factory in Ayutthaya, where it was forced to destroy more than 1,000 cars that were submerged by the muddy waters.

Thailand's central bank in January cut its benchmark interest rate for the second time in three months, by 0.25 percentage points to 3.00 percent, in a bid to stimulate the weakened economy.

Experts see scope for another rate cut, particularly as inflation slowed sharply in December to an annual rate of about 3.5 percent.

"Monetary policy can be loosened as inflation is easing," said Usara.

Investors took the weak data in their stride, with Thai stocks up about 0.7 percent in early afternoon trade on optimism about the Chinese economy and prospects Greece will secure a long-awaited bailout to avert a debt default.

-- (c) Copyright AFP 2012-02-20

[Reasonableman]

So much for all the guff about all the wondrous employment opportunities the flood created... or are they still "in the pipeline"? Over half of the affected still haven't received their 5,000 Baht, as reported elsewhere, and how many are still unemployed? Who's paying for all the repair work needed on homes, infrastructure, factories, farms, and other production facilities? Let's put on a brave face by all means, but let's also get very real.

[Scott]

My car was having a problem and I took it in to the dealership. It will be at least a month before a simple part can be replaced. Reason: the factory making the part was flooded! I asked how long will it take once they get the part to replace it: 15 minutes to 1 hour.

[trainman34014]

Nah; can't be true because Yinglucks band of merry crooks said the floods didn't make any difference to Miracle Thailand, and we know they only speak the truth about such matters.

[asdecas]

The 10.7% contraction in just one quarter is a very bad number. By way of comparison, the Greek economy contracted about 7-8% over the whole of last year. Of course, it all depends how quickly the clean-up can be done, plant replaced and production restarted: the article says third quarter, but I'd be surprised if the overall economy can hit the 7% forecast for 2012 by Khun Kittiratt, particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

Edited February 20, 2012 by asdecas

[jimbeam1]

The 10.7% contraction in just one quarter is a very bad number. By way of comparison, the Greek economy contracted about 7-8% over the whole of last year. Of course, it all depends how quickly the clean-up can be done, plant replaced and production restarted: the article says third quarter, but I'd be surprised if the overall economy can hit the 7% forecast for 2012 by Khun Kittiratt, particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

And just to add to that. What are this years floods, as predicted by the P/M last week going to bring? The third quarter is when any likely flooding is going to be at it's worse.

jb1

[pogal]

Ah dont worry! there will be another report tomorrow that the economy has actually grown, and then several more times after that it will go up and down like a yoyo since no one really knows anything here for sure:)

[animatic]

10.7%

That's what they are telling us.

But if this department figures anything like the tourist department,

this figure is no reflection of the reality, which would 'scare investors',

and possible even a few Thais too.

[airconsult]

The 10.7% contraction in just one quarter is a very bad number. By way of comparison, the Greek economy contracted about 7-8% over the whole of last year. Of course, it all depends how quickly the clean-up can be done, plant replaced and production restarted: the article says third quarter, but I'd be surprised if the overall economy can hit the 7% forecast for 2012 by Khun Kittiratt, particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

And just to add to that. What are this years floods, as predicted by the P/M last week going to bring? The third quarter is when any likely flooding is going to be at it's worse.

jb1

Also, don't forget the companies where the Thailand-based production was really excess to their needs - insurance never covers all costs, and to rebuild they are either looking for concrete, workable ideas to stop it happening again, or different locations.

On the grapevine I heard that new locations were subtly being prevented, due to the pressure of the current industrial estates. Typical.....

[bendix]

particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

Wrong. Tourism comprises around 6-7% of GDP. Manufacturing is significantly higher, hence the huge knock caused by the flood.

[Unkomoncents]

Wow! That's the first time I've seen the Thai media publish a double-digit negative effect on Thailand (in any area). I would still, by default, double that figure. That would roughly explain some of the economic issues plaguing Thailand.

[belg]

the good news is, this year, they will announce that the economy in same months as last year has suddenly raised 10%

[xthAi76s]

particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

Wrong. Tourism comprises around 6-7% of GDP. Manufacturing is significantly higher, hence the huge knock caused by the flood.

I'd estimate tourism closer to 20%. That 6-7% is rather well-known to be quite low.

[DP25]

particularly in light of renewed threats to the tourist industry, the biggest engine of growth in Thailand.

Wrong. Tourism comprises around 6-7% of GDP. Manufacturing is significantly higher, hence the huge knock caused by the flood.

I'd estimate tourism closer to 20%. That 6-7% is rather well-known to be quite low.

6-7% is actually probably too high. The spending estimates per tourist are too high, and Thai GDP is underestimated. Thai industry and exports are massive now and there is a huge domestic economy that isn't recorded very well. Even TAT's very optimistic estimates of tourism are only about $20 billion, less than 1/10th of the value of manufactured and agricultural exports.

Even with the economy stagnant for the year, it really wasn't that bad. Exports for the year were $229 billion, up from $196 billion last year. A 17% increase. And that is even with exports taking a beating the last 2 months of the year. The economy is still strong once all the factories are back at full production

Edited February 20, 2012 by DP25

[geriatrickid]

Math skills are not a strong suit for some. A negative result in one quarter, is not overly significant. No country relies on a single quarter. What matters is if there is a consistency of the result, ie. if the negative trend continues into Q1& Q2-2012. If it continues, then we're in a serious crisis. However, if it is significantly reduced, i.e there is a trend towards improvement in Q1 then the Q4-2011 results will just be a blip.

BTW, I do not consider the Q4 result overly worrisome. It was a lot better than anticipated. Look at some of the claims made in the forum. One would have expected the entire economy to have collapsed. It did not. Yes, the result is bad, but i I think the 2012 Q1 results will show a significant improvement. One item that will provide an unexpected boost will be tourism. The key tourist regions are reporting a much better high season result than in 2011.

[BigJohnnyBKK]

I'd estimate tourism closer to 20%. That 6-7% is rather well-known to be quite low.

And of course it doesn't include all the foreign currency inflow enticed by young lovelies from their kind sponsors, I don't think there's a standard category measurement for that in the Thai economy, but I know a few tambon in Isaan where it's likely over half the local GDP.

[rubl]

For the whole of 2011, Thailand's economy expanded by 0.1 percent, after an increase of 7.8 percent in 2010, the figures showed, missing analyst forecasts.

But the government and analysts are optimistic about prospects for a rebound, with Finance Minister Kittiratt Na-Ranong predicting last week that the export-dependent economy could grow by 7.0 percent in 2012.

On 2012-02-04 it was said 2011 growth was 1.0%. For 2012 the prediction was 4.8% (Jan, 27th) and 4.9% (Feb, 4th). Makes you wonder about predictability.

BTW is there a relation between GDP growth and THB 1.4 trillion moved aside and the need to borrow THB 350 billion at an affordable rate ?