Political chaos signals another rocky year for Thai economy

[webfact]

YEAR-END SPECIAL
Political chaos signals another rocky year for Thai economy
Achara Deboonme
The Nation


A screen displays stock price information alongside a news broadcast showing Democrat Party leader Abhisit Vejjajiva speaking in Parliament.

Uncertainty over govt projects to limit investment; mild growth seen for exports

BANGKOK: -- The economy will undoubtedly brace for another turbulent year in 2014, primarily because of the prolonged political conflicts.

The bigger picture looks discouraging. Public and private investment - a key economic driver - will remain subdued as the prospects for the two major government projects - believed to draw in more private investment - are opaque. Exports, despite improving from 1-per-cent growth this year, should not hit a double-digit gallop. Consumption would remain low without stimulus measures.

Most economists had expected improvement in economic indicators next year, following the sharp fall in exports, investment and consumption this year. Yet, while projecting 2014 growth rates at 3-5.2 per cent - which is above the 2.6-4-per-cent range of projections for 2013 - most economists have not yet factored in the impacts from the prolonged political unrest.

"Thailand's government has dissolved parliament, but the opposition has pledged to boycott the February election and it is difficult to foresee a lasting solution to the impasse," Glenn Levine, a Moody's Analytics economist, said in a note released last week.

Last month, the Bank of Thailand revised down its 2014 GDP growth forecast to 4 per cent from 4.8 per cent.

Gundy Cahyadi, an economist of DBS Group Research, noted earlier this month that by this move, the central bank suggests that growth momentum may even be worse than what many expect going forward.

"The ultra-dovish view might have been spurred by an assumption that further delays to the government's infrastructure projects could be on the cards. Remember that we had also warned of another sub-4-per-cent GDP growth in 2014 should there be further delays to the government's infrastructure projects," he said.

TMB Analytics recently slashed its growth projection for 2014 from 4.2 per cent to 3.3 per cent, against the 2.9 per cent forecast for 2013, due to lower-than-expected investment and limited growth in consumption. While tourism should post lower growth, exports would be the only engine to drive the 2014 economy.

It expects investment to increase only 4.4 per cent next year from the previous forecast of 10.4 per cent. While public investment, chiefly through the Bt350 billion water-management scheme and the Bt2 trillion infrastructure scheme, is expected to fall by Bt93 billion from the earlier forecast, this would lead to a cut in private investment of Bt130 billion. The combined amount accounts for nearly 2 per cent of GDP.

Tourism operators had complained about the protests during November and December, and they are now fretting even more over bigger impacts if the protests continue to next year. In the wake of the airport closure in 2008 and the bloody protests in 2010, it took the tourism industry about six months to recover.

After anti-government protester leader Suthep Thaugsuban declared on Sunday that he would thwart the February 2 election, the baht yesterday dived to a three-year low of 32.68 to the US dollar.

"Investors aren't buying the Thai baht if this political situation continues," Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp in Bangkok, told Bloomberg. The baht may gradually weaken toward 32.9 per dollar as the political conflict threatens the economy, he said.

Foreigners are continuing to dump Thai shares. As of last Friday, their year-to-date net sales hit Bt192 billion. The Association of Securities Analysts made the original forecast that the SET Index would end the year at over 1,700 points. However, as of Friday the SET has slipped by 3.54 per cent from the end-2012 level on a combination of negative factors - political unrest, the US Federal Reserve's decision to taper its bond-buying programme and lower-than-expected earnings of listed companies.

The only benefit from the sluggish outlook could be low inflation.

DBS Research forecasts inflation to accelerate to 3.1 per cent in 2014 from 2.2 per cent in 2013, assuming steady increases in food prices and moderating terms of trade as well as some demand-side pressure from the government-led investment that would also prop up underlying inflation next year if materialised.

As factors at home are unfavourable, Thailand might ride along with other Asian economies to fully benefit from the improvement in the global economic outlook.

While noting that the global recovery was on the whole slightly disappointing, marked by problems in Europe, political distraction in the US and a weaker first half in China, Moody's Analytics said there are reasons to believe that 2014 will be better.

Its economist Glenn Levine sees global risks receding, most notably in Europe and to a lesser extent in the US. Europe's economy should add bulk in 2014 for the first time since 2011, which would help lift exports from Asia.

Christine Lagarde, managing director of the International Monetary Fund, on Sunday signalled that the IMF would raise its growth forecast for the US economy in 2014. The forecast now stands at 2.6 per cent.


-- The Nation 2013-12-24

[leggo]

With Thai personal credit looking overextended and the current political confusion unresolved there is only one way for the economy - down and probably more than is estimated above.

Sent from my i-mobile IQ 2 using Thaivisa Connect Thailand mobile app

[PaullyW]

They never seem to discussion personal debt or the signs in the housing market oversupply. Wonder why. So shallow a report from these specialists.

[NongKhaiKid]

Worry not, tourists are flocking here in ever greater numbers and that's official from TAT.

[Costas2008]

With Thai personal credit looking overextended and the current political confusion unresolved there is only one way for the economy - down and probably more than is estimated above.

Sent from my i-mobile IQ 2 using Thaivisa Connect Thailand mobile app

Yes, but I get more Baht now....Yipeeeeeeeeee

Edited December 24, 2013 by Costas2008

[tingtongteesood]

The protests are not the problem, the problem is the Shinawatra tumour that is proving very difficult to remove. Once it has been operated on and is gone, there will be a very swift recovery.

[ggold]

With Thai personal credit looking overextended and the current political confusion unresolved there is only one way for the economy - down and probably more than is estimated above.

Sent from my i-mobile IQ 2 using Thaivisa Connect Thailand mobile app

But they are more concerned about the 2.3 trillion infrastucture project. IF it doesn't go ahead then there is not interest to be earned by the Banks. It doesn't matter even if the money doesn't go on infrastructure the country will still be paying interest on the money, and the world bank keeps another country in debt so that the west can survive. Long live the capitalist system!

[Asiantravel]

The protests are not the problem, the problem is the Shinawatra tumour that is proving very difficult to remove. Once it has been operated on and is gone, there will be a very swift recovery.

Not if it is replaced by fascist Suthep Thaugsuban, which will result in a heart attack

[siampolee]

The birds are coming home to roost in the nest constructed by the assorted populist policies of the P.T.P. and their coalition partners as instructed by the puppet master in his attempts to achieve the establishing of a new political family dynasty ( Dictatorship) no matter what the cost may be to Thailand and its peoples..The current protests have little or nothing to do with the upcoming storm.

[Bpuumike]

Worry not, tourists are flocking here in ever greater numbers and that's official from TAT.

So must be true.

[Bpuumike]

The protests are not the problem, the problem is the Shinawatra tumour that is proving very difficult to remove. Once it has been operated on and is gone, there will be a very swift recovery.

Not if it is replaced by fascist Suthep Thaugsuban, which will result in a heart attack:sick:

Won't happen. He is disliked as much or more than Madam.

But due credit, he has got things moving.

[Naam]

With Thai personal credit looking overextended and the current political confusion unresolved there is only one way for the economy - down and probably more than is estimated above.

Sent from my i-mobile IQ 2 using Thaivisa Connect Thailand mobile app

But they are more concerned about the 2.3 trillion infrastucture project. IF it doesn't go ahead then there is not interest to be earned by the Banks. It doesn't matter even if the money doesn't go on infrastructure the country will still be paying interest on the money, and the world bank keeps another country in debt so that the west can survive. Long live the capitalist system!

please do some basic homework instead of writing a chaotic fairy tale which is totally unsubstantiated

[Ulic]

Interesting times in Thailand. No matter who wins between the two main political parties corruption is in the spotlight.

While neither side can claim the moral or ethical high ground the focus on corruption may have the effect of both parties

trying to claim the high ground. This may slowly lead to less corruption. I am not going to hold my breath but I do remain

hopeful.

[JRSoul]

How will PTP get re-elected if they propose to drop the rice scam?

[Jay Sata]

The house of cards is fast approaching the ground while the Shin clan hope they can raise the Titanic.

More chance of a bamboo Thai satellite on the moon than Thaksin ever kissing Thai soil again.

But while the Shinawatra's fight to get their face back Thailand is sinking in to the debt they sold the poor people to get elected.

As I've said before Thailand thinks it's the only warm place in the world with beaches and rice.