Thai opinion: There is still time to avert disaster

[webfact]

OVERDRIVE
There is still time to avert disaster
Thanong Khanthong

BANGKOK: -- Thailand is about to face macro-economic complications from its triple deficits. The deficits are in the current account, the trade account and the budget. Dr Pisit Lee-atham, the former deputy finance minister during the Chuan administration, warned that the triple deficits reflect growing deteriorations in Thailand's competitiveness.

Let's start with the current account, which measures the flow of goods and services. In 1996, Thailand ran a current account deficit of 8.1 per cent of GDP. The previous years saw a similar rate, resulting eventually in a loss of confidence in the Thai baht and the financial crisis that followed. Essentially, the financial markets forced a correction of the Thai current account deficit in a painful way, to end Thailand's over-investment or over-consumption. The deficit in the current account was then financed by foreign capital.

In 2007, The Thai current account improved to a surplus of 6.3 per cent of GDP. Yet last year, the surplus narrowed significantly to 0.1 per cent. In the first half of this year, the current account ran into a deficit of 1.9 per cent of GDP.

The situation is similar to the trade account. In 1996, Thailand ran a trade deficit equal to 5.2 per cent of GDP. In 2007, the country enjoyed a surplus of 10.8 per cent to GDP. In the first half of this year, the deficit was 0.4 per cent of GDP.

Most worrisome are the rising deficits from oil and gold imports. In the first half of this year, oil imports accounted for 9.3 per cent of GDP, while gold imports accounted for 4.3 per cent of GDP.

In spite of the privatisation of the PTT and the heavy investment of PTTEP, Thailand still continues to rely heavily on energy imports. This is a sore policy failure in Thailand's energy sector, which continues to drain the country's reserves in a significant way. Gold imports are another story, but the phenomenon represents investors' craving for hard assets to hedge against inflation and as a safe-haven investment.

The Thai government so far has failed to commit to a budget balance. All administrations in recent time have been running a budget deficit to the tune of Bt300-Bt350 billion a year to finance overspending. This will create more public-sector debt at a time when it is important to maintain fiscal discipline to cope with the global economic crisis lying over the horizon. If the public-sector debt continues to grow, its ratio to GDP will soon exceed 50 per cent or 60 per cent, beyond which it might reach a point of no return as experienced by most euro-zone governments over the last few years.

If Thailand continues to allow the triple deficits to persist, it will face macro-economic deteriorations starting with a weaker baht, inflationary pressure, tighter financial conditions, higher interest rates, economic slowdown and a loss of the country's competitiveness.

These troubling signs must be addressed now before they develop into a full-blown crisis. Better late than never.


-- The Nation 2013-09-27

[cloudhopper]

There is still time to avert disaster

I'm afraid not.

[worgeordie]

Not to mention Public debit,and the Government wants to borrow more

money,everything is coming together for the perfect storm.

regards Worgeordie

[roiethome]

There is still time to avert disaster

I'm afraid not.

If this means that Sterling goes back to 72, then bring it on......................................

[Carl64]

There is still time to avert disaster

I'm afraid not.

If this means that Sterling goes back to 72, then bring it on......................................

Giddy up!

[Baerboxer]

Dr,Pisit clearly needs to understand Thaksinomics better. I'm sure the PM/DM or Finance Minister would be happy to explain all this to him if he cared to pop round.

[WhizBang]

There is still time to avert disaster

Bring it on... 50 baht/$

[Robbie Dye]

And this excludes the billion trillion Baht planed borrowing to roll out a new train system. I agree, give it a year and the Baht will drop like a stone but of course that is good for Expats, good for Tourism and bad only for HiSo's sending kids to school abroad and buying properties in London etc, they can afford the drop anyway!

[Time Traveller]

The journalist's analysis is flawed.

Firstly, gold is not destroyed so any gold imported can be exported again to make a trade surplus. And it often is in the form of jewellry which is a net gain to thailand. So only looking at trade figures that remove gold is meaningful.

Secondly, oil imports are how Thailand runs it's economy. Many things that Thailand exports rely on oil - think agricultural products, petrochemicals, even tourism. Simply put Thailand needs to import oil because they have very little. In time they could switch to using more cheaper energy sources such as natural gas or nuclear, but this can't be done overnight

[indyuk]

Hi hello Thailand. Steady as you go. Do not let up. There will be NO Armageddon. There is nothing to fear in the current situation because re stressing the Thai economy to suit the actual profile of the Thai people is just.

The next few years may feel worrying to some. However we can expect that Thailand's economy will emerge from this necessary period of austerity like an express train within three to seven years time.

What we are about to see is a necessary redistribution of wealth that will allow all Thai's to feel pride in the achievements of their collective humanity.

The outcome for those of us that came here for the eccentric and chaotic Thailand may be disappointed. However the new Thailand will have morphed into a free, just and stable society. Such achievement after decades of instability and corruption will seem like a miracle.

On the other hand we foreigner might be proud to have lived through the egalitarian transformation of this fine land.

[Thai at Heart]

The journalist's analysis is flawed.

Firstly, gold is not destroyed so any gold imported can be exported again to make a trade surplus. And it often is in the form of jewellry which is a net gain to thailand. So only looking at trade figures that remove gold is meaningful.

Secondly, oil imports are how Thailand runs it's economy. Many things that Thailand exports rely on oil - think agricultural products, petrochemicals, even tourism. Simply put Thailand needs to import oil because they have very little. In time they could switch to using more cheaper energy sources such as natural gas or nuclear, but this can't be done overnight

The cost to the economy of having savings tied up in gold as opposed to the banking sector are quite high. All that money could be in a form that could be lent to business.

[itchybum]

11 days exactly.

There is still time to avert disaster

Edited September 27, 2013 by itchybum

[phitsanulokjohn]

Here in P'lok in the last 6 months i've witnessed an extremely rapid building program,the like of which I've never seen before.Houses and well overpriced condo's seem to be sprouting up in almost every road.I've also witnessed many of these said buildings sitting empty.Always a good or bad sign which ever way you want to look at it,that the bubbles close to bursting.

[pisico]

This approach to economics has nothing to do with the current administration or people related to it.

It is Thainess.

22 million Thais reportedly are in arrears. I am referring to the data provided by Thai banks and other lending institutions. Loan sharks, are also part of this picture enabling people to buy motorcycles and other items they cannot afford anyway. But TIT and people seldom get a hint of the failures of their own existence.

A Thai journalist recently wrote this: "Thais are poor long-term strategic planners."

Of course this is an accurate assessment. But, there is never full acceptance of shortcomings in LOS.

Thais have many good qualities that I would be hard pressed to find in other countries.

But Thais refuse to grow up mentality. This equates to adults in the Western World firmly believing that Santa Claus exists and he lives in the North Pole, etc.

But they think they are good practical short-term problem solvers.

Proof is the measures taken during the last flood of 2011.

Furthermore, as of late, the Governor of Bangkok reached the pinnacle of disconnect when the first news arrived to his ears that a flood was forming up North: he instructed his crew to make sure that the existing billboards in the city were legal and were safe.

Priorities Thai style in life and economics.

[pisico]

Hi hello Thailand. Steady as you go. Do not let up. There will be NO Armageddon. There is nothing to fear in the current situation because re stressing the Thai economy to suit the actual profile of the Thai people is just.

The next few years may feel worrying to some. However we can expect that Thailand's economy will emerge from this necessary period of austerity like an express train within three to seven years time.

What we are about to see is a necessary redistribution of wealth that will allow all Thai's to feel pride in the achievements of their collective humanity.

The outcome for those of us that came here for the eccentric and chaotic Thailand may be disappointed. However the new Thailand will have morphed into a free, just and stable society. Such achievement after decades of instability and corruption will seem like a miracle.

On the other hand we foreigner might be proud to have lived through the egalitarian transformation of this fine land.

Thais of the world unite! Make those who create jobs, build factories give the money to those who never earned it. That is just and egalitarian. Look at the URSS, Cuba, North Korea as the shining beacon of your struggle to redistribute other people's assets.

Dear God! A hand have 5 fingers. They are all different but still are in the same hand. The thumb has 60% of the hand dexterity. Opposing thumb makes us different from other species.

People are the same: some have capabilities and abilities that other don't.

[RubbaJohnny]

Well Thai bashers debt is around half of USA a quarter of Japan or Ireland in an economy with floating exchange rate and lots of gold for when the `Shi'ites hit the Man.

PTT leaving the oil in the ground is good husbandry,UK and USA regret they haven't.

If you want to look at mismanagement USA Euro area or Japan anyone?

[virtualtraveller]

Look, it's the only way the masses are ever going to see the light and get over the Shinwatras. Let them continue with the populism, the masses become addicted, eventually the country runs out of money and there is another financial crisis, the poor lose their jobs, Yingluck is hounded from office and finally we can all move on. Bit extreme but it's the only way.