Next Year, The Thai Govt Must Adjust Its Economic Strategy

[webfact]

EDITORIAL

Next year, the govt must adjust its economic strategy

The Nation

BANGKOK: -- Populist schemes are unsustainable, distort the market and will have a long-term adverse effect on the nation's economy and fiscal security

The Thai economy will face a series of challenges next year. Prime Minister Yingluck Shinawatra may be satisfied that that her populist policies have managed to stimulate domestic consumption this year. But this may not be the case with next year's economic performance, since Thailand is facing many issues, both on the domestic front and with pressure from external factors.

Domestically, the populist policies will have an impact, slowing down of consumption and overall economic growth. Externally, the debt situations are not yet settled in the US or Europe.

The Thai government and Thais cannot be complacent. In fact, the expected final growth figure of 4.7 per cent this year is a result mainly of the populist schemes. Household loans rose by double-digit figures, due partly to a rise in vehicle lease-purchases. Last month alone, domestic car sales skyrocketed by 477.6 per cent from the same period last year, to 148,243 units. This was due solely to the subsidy given by the government to first-car buyers.

The government has borrowed against future earnings and revenue to inflate growth, but the Thai economy is forecast to grow by only around 5 per cent next year. The figure shows that our current growth is vulnerable and it does not stand on solid economic fundamentals.

The rapid rise in public debt can pose a serious fiscal threat if the deficit level is not curtailed. Currently, public debt stands at 47 per cent of GDP. But if the government continues with its massive spending plans, which are not sustainable and which do not put real revenue back into society, the public-debt level could hit the dangerous threshold of 60 per cent of GDP.

Next year the government must initiate economic policy discretion or run the risk of destabilising the economy. So far its populist policies are not producing the multiple economic effects as planned.

Thailand is set to see single-digit export growth next year. Some Thai products such as rice are losing in price competitive on the world market. In addition, global demand depends on economic factors in the European Union and the US, which are not resolved yet.

The economic downtrend in the euro zone will certainly hit Thai exports to many countries, since the European Union is one of the world's major markets. Indirect sales to Europe via China and other Asian countries will also be hit hard by the crunch.

Thai exports declined by 14.56 per cent in 2009 as a result of the US-led global economic crisis, but then grew by 28.13 per cent in 2010 and 13.96 per cent last year. Single-digit expansion next year will largely result from the downward trend in global trading.

The higher minimum wage to be introduced nationally next year will affect the costs of operators. It could also prompt small and medium-sized industries to adjust their operations and even lay off staff.

This whole raft of populist policies could have severe consequences in the coming years. The rice price-pledging programme has been an absolute failure. It has not only had a negative impact on the country's fiscal standing, but has also eroded Thai competitiveness on the world market. Most importantly, the project does not improve the wellbeing of farmers, nor boost their capacity.

Some of the other populist policies have also distorted the market and will have a negative impact next year. For instance, more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidising new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner.

We hope the government will concentrate on policies that are sustainable in 2013. Instead of merely citing election pledges, it will have no other choice except to become more sensible in its economic policy. Ministers will have to understand that this course is not sustainable, and then communicate that reality to voters - to prepare them for changes.

-- The Nation 2012-12-28

[hellodolly]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

[Payboy]

Grow more rice.

[petedk]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

Just read about the increasing air pollution in Bangkok. The level of benzene in the air in Pathumwan is now at 6.1 mg per cubic meter well above the safety level of 1.7 mg. With all the extra cars on the road that figure is expected to rise. I guess we'll see an increase in the number of lung cancer cases too.

[bushwacker]

I'm hoping for a major collapse or correction to the baht!!!!

[trainman34014]

Companies are already laying off large numbers of workers in some area's and it's not being widely reported. Wife has relatives in Lampang working in the China manufacturing industry and one company laid off 600 workers last week, quoting to those that were being laid off... 'we have to automate more because we cannot afford to pay 300 Baht per day to every one of you'. Word is that more factories are about to take similar measures and as this industry is the main one in that City it could mean many thousands out of work. Just one example from one City.

[Tanaka]

"

The Thai Govt Must Adjust Its Economic Strategy"

Strategy? What strategy?

[scotto]

Its called the lucky dip strategy pull one

out of the barrel and go with it!

[Arkady]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

I am not sure that all the cash would have been available without the 1st car policy, since they seem to have succeeded in creating some opportunistic demand from those might never have bought a car at all. In addition they have also brought some demand forward. in any event it is an incredibly misguided policy intended to benefit businesses and try to get the economy humming quickly and make it easier to go ahead with the constitutional amendments and bring Big Brother no. 1 home as soon as possible. There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses.

Utterly irresponsible nonsense.

[hellodolly]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

I am not sure that all the cash would have been available without the 1st car policy, since they seem to have succeeded in creating some opportunistic demand from those might never have bought a car at all. In addition they have also brought some demand forward. in any event it is an incredibly misguided policy intended to benefit businesses and try to get the economy humming quickly and make it easier to go ahead with the constitutional amendments and bring Big Brother no. 1 home as soon as possible. There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses.

Utterly irresponsible nonsense.

Can't seem to wrap my mind around

"There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses."

From my point of view it will affect the market for used cars and increase pollution in addition to add more debt to people who already are having trouble setting a little bit of money aside. I believe those are going to be sustainable losses. Also the increase in time to get to where ever you are going. Would have made more sense to help them buy new motor bikes.

Just My Opinion.

[Thai at Heart]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

I am not sure that all the cash would have been available without the 1st car policy, since they seem to have succeeded in creating some opportunistic demand from those might never have bought a car at all. In addition they have also brought some demand forward. in any event it is an incredibly misguided policy intended to benefit businesses and try to get the economy humming quickly and make it easier to go ahead with the constitutional amendments and bring Big Brother no. 1 home as soon as possible. There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses.

Utterly irresponsible nonsense.

Can't seem to wrap my mind around

"There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses."

From my point of view it will affect the market for used cars and increase pollution in addition to add more debt to people who already are having trouble setting a little bit of money aside. I believe those are going to be sustainable losses. Also the increase in time to get to where ever you are going. Would have made more sense to help them buy new motor bikes.

Just My Opinion.

Well if they had extended it to importing ngv buses for major cities that would have negated the increase in cars. Burning sugar cane , rice stubble and half the mountains in the country probably contributes more than 1mn brios.

[mancub]

But, never mind any of this potential negativity ......the SET is up , GDP is up ....and there'll always be a never ending and upwardly increasing number of quality and higher spending tourists to offset any possible future economic concerns .

[kimamey]

Companies are already laying off large numbers of workers in some area's and it's not being widely reported. Wife has relatives in Lampang working in the China manufacturing industry and one company laid off 600 workers last week, quoting to those that were being laid off... 'we have to automate more because we cannot afford to pay 300 Baht per day to every one of you'. Word is that more factories are about to take similar measures and as this industry is the main one in that City it could mean many thousands out of work. Just one example from one City.

My gf works in part of the Ministry of Labour and apparently some firms are moving closer to the borders to take advantage of foreign workers who it seems aren't covered by the minimum wage. This discrimination prices Thais out of the labour market in many cases.

[kimamey]

" more than 1 million new cars are set to hit the roads soon, thanks largely to the first-car policy. It remains to be seen how this would affect used-car sales and the demand for new cars next year. Instead of subsidizing new-car purchases, the government should have used the Bt60 billion to improve public transport systems in a sustainable manner."

Some of that money could have gone into infrastructure making it easier for a rapid transit system. Also improving rural roads.

I am not sure that all the cash would have been available without the 1st car policy, since they seem to have succeeded in creating some opportunistic demand from those might never have bought a car at all. In addition they have also brought some demand forward. in any event it is an incredibly misguided policy intended to benefit businesses and try to get the economy humming quickly and make it easier to go ahead with the constitutional amendments and bring Big Brother no. 1 home as soon as possible. There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses.

Utterly irresponsible nonsense.

Can't seem to wrap my mind around

"There is very sustainable benefit from this and the short term benefits are more than negated by the environmental damage and the strain on roads that creates economic losses."

From my point of view it will affect the market for used cars and increase pollution in addition to add more debt to people who already are having trouble setting a little bit of money aside. I believe those are going to be sustainable losses. Also the increase in time to get to where ever you are going. Would have made more sense to help them buy new motor bikes.

Just My Opinion.

I'm not sure the increase in pollution will be that significant as the extra cars over and above what would have been sold anyway is relatively small. Of course next year there will probably be a drop in sales.

The UK used a system whereby you scrapped a car over 10 years old and got an amount similar to 100,000 baht for a new one. Hence no increase in vehicles but a change to more efficient ones. It's only short term though as the sales of cars has dropped again.

Of course I suppose the car manufacturers may reduce prices a bit next year if their sales drop significantly. There may also be a glut of second hand cars due to low sales this year and repossessions when payments aren't made on cars bought this year.

Edited December 31, 2012 by kimamey