Thailand 'Must Rely On Own Strengths' Amid Euro Crisis

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EURO CRISIS

Kingdom 'must rely on own strengths' amid euro crisis

Wichit Chaitrong

The Nation

BANGKOK: -- The European crisis could drag on for four or five years, driving down Thai exports and whipping up stock and bond markets, an academic said yesterday.

"The euro could be worthless paper as more money is unlikely to solve problems until troubled countries like Greece, Spain and Italy reform their economies," said Sompop Manarungsan, president of the Panyapiwat Institute of Technology.

The European Central Bank will likely inject more money into the crisis countries in the euro zone, which will weaken the currency, while the US Federal Reserve may pump liquidity into Europe, since any trouble there would also hurt the US economy, he said.

Thailand's exports will be buffeted by both the crisis in Europe and the slowdown of the global economy, he said. As the credit ratings of major banks in Europe have been downgraded by Moody's Investors Service, trade finance will dry up.

Since Thailand's exports in the first five months were still in negative territory, they need to expand by 30 per cent in the second half to achieve the Commerce Ministry's growth target of 15 per cent for the full year. However, if the country can achieve export growth of 8-9 per cent, that will be all right, Sompop said.

The Bank of Thailand will face a challenge in managing capital flows, which are expected to be two-way. The likely scenario is more inflows than outflows. Swift inflows could have a devastating effect on the exchange rate and capital market, he said.

Private investors are wrong to ask the government to establish a fund to shore up stocks, as that would distort the market and the government would not have enough funds to intervene in the market, he said.

Thai authorities should watch whether the European crisis rattles Hong Kong and Singapore, which are the financial centres of Asia. Indonesia, which depends on bank loans from Europe, may also be in trouble, Sompop said.

India and Vietnam, with high inflation rates, would be unable to do much to boost their economies.

"Any impact on other countries in the region will also affect Thailand significantly," he said.

However, Thailand's fiscal position is strong thanks to treasury reserves of Bt500 billion and relatively low public debt. The country's international reserves are also hefty.

"The biggest threat to Thailand is political conflict. If it escalates into violence, it will weaken the country," he warned.

Thailand has to strive to become the hub of mainland Asean, as it could do well in logistics, road and air transport and communications, Sompop said.

"We must make Bangkok the capital of mainland Asean or the Mekong region."

-- The Nation 2012-06-27

[northernboy]

Sorry to say it but clearly this article pretends to imply for the sake of Thai pride, that Thailand is a economic leader, rather than the small spoke in the wheel of off shore production.

Since when as the so called private investors not required public funding and support to proper in Thailand? Is not most of the exports coming from BOI or agricultural related businesses? Lets face it the sweat of the poor have made the private investments here work in the past, but soon (if not as you read this) the cheaper labour will be sourced elsewhere with the emerging countries opening to offer their poor an opportunity to make there leaders richer. That is not socialism propaganda, but the simple economic truth of Thailand.

Bangkok the capital of Asean is a dream, in reality it will just sink into the sea, as it has no real fundamental economic basis to think it can compete when so few have the real skills needed to be leaders in a multicultural and open business arena. Given a more level playing field, Thai business people will find the rules will not make as easy to use the government and family contentions to limit competition and to attain as profitably government sweetened deals like in the past. May I ask why so many long term contract for government services (ie BTS) are being issued now, clearly some see the real future and are planning for the reality of it now.

[Lifer]

What strengths! Boy are they in trouble.

[brianP]

As long as the rich and elite which only constitute 1% of the entire population but control by estimates 70% of the wealth of the world are manipulating and running the show, the gap between rich and poor will widen and push out the real engine of growth.. the middle class. The middle class has always bore the burden of taxes and other heavy handed government tactics. The poor only do well in welfare countries and always get the shaft in third world countries where they are the real backbone. As the US is finding out now, an imported workforce of unskilled workers with no menial work in a technological society are bringing down the whole machine. Thailand with it's vast agricultural fed economy is not gaining much from the westernization that is taking place and needs to re-invent itself and keep reality in the crosshairs.