With Thai economy flat-lining, it's time to look inward for answers

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OVERDRIVE
With Thai economy flat-lining, it's time to look inward for answers
Thanong Khanthong

BANGKOK: -- Thailand's economic growth this year looks set to level off at around 1.50-2.0 per cent. Most of the engines of growth are sputtering. In the first half of this year, exports began to go downhill, contracting by 0.1 per cent.

The question now is whether export growth can still hit this year's official target of 3 per cent. Private investment has also fallen, by 4.4 per cent. It's the same story for domestic consumption (-1.2 per cent) and government spending (-0.6 per cent).

Thailand's economic growth has been inconsistent for a number of years now, falling well short of our potential of 4-5 per cent. The economy has suffered a contraction of 0.1 per cent so far this year.

Without deficit spending, it would have shrunk even more. In the first half of 2014, lending growth in the banking sector came to the rescue, reaching 6.5 per cent - the only positive among a range of economic indicators that remain dead in the water.

Yet there is a good reason why bank lending should not be the source to power growth if other economic engines are not working. This is because many of those who borrow from the banks will inevitably have a hard time servicing the debt, hence creating non-performing loans that could trigger another banking crisis.

At present, overall levels of private sector and household debt remain high, at 154 per cent and 83 per cent of gross domestic product respectively.

Government debt to GDP remains manageable at around 50 per cent. The only hope to revive growth is through government spending on the mega-infrastructure projects, though we must avoid making the mistake other developing nations have made: Government spending is no answer to problems with economic growth.

It might help spur growth temporarily, but it inevitably fades away and leaves behind burgeoning public sector debt that future tax revenues can't pay off. Overall, it seems we are on our way to becoming an indebted nation.

Inconsistent economic performance prompts us to ask what has gone wrong and whether Thailand has lost its competitiveness. If that is the case, then we need to face the fact with courage and start doing the right things to overhaul the economy.

For without reform, the engines of Thai economic growth will continue to sputter. But we also have to decide on prescriptions for the reform process that will alleviate the condition of people on society's bottom rung.

If we can no longer rely on exports because we have lost competitiveness or because importing nations have lost their purchasing power or appetite for Thai goods, then we can settle down to improving domestic conditions.

Growth will have to come from the domestic rather than the external side. The resulting growth rate might be small, but it could slow the rate at which the gap between rich and poor is expanding.

In this respect, focusing on healthcare, food and agriculture, services and other sectors could be the answer to securing Thailand's future economic health. Let's take a break and do some rethinking.

Source: http://www.nationmultimedia.com/opinion/With-Thai-economy-flat-lining-its-time-to-look-inw-30241979.html

-- The Nation 2014-08-29

[SteveFong]

amazingly frank outlook,

but when I said this was coming 9 months ago,

no one thought about looking forward, which is the real problem

[JohnnyJazz]

"Inconsistent economic performance prompts us to ask what has gone wrong"

Is the writer of this article a total idiot or what ? Where was he for the past 12 months ? Did he realize that a bunch of economical morons have played "shut down the country" for the past year or so scaring away in the process tourists and investors alike.

"Let's take a break and do some rethinking." Yes, that's a good advise ....

[NongKhaiKid]

Another of these Yes - No, Up - Down stories a la tourist figures. It's hard to know which reports are the most accurate so for economy I rely on my bills at the supermarket and I am paying more for less.

[ramrod711]

Inconsistent economic performance prompts us to ask what has gone wrong and whether Thailand has lost its competitiveness. If that is the case, then we need to face the fact with courage and start doing the right things to overhaul the economy.

A decade of Thaksin led political parties led to this mess. Mismanagement, pie in the sky, populist policies that were only meant to keep those parties in power, so that they could continue to use the country as their own piggy bank. To blame what has happened in the last year for what has clearly been looming on the horizon for some time is a bit short sighted.

[IamNoone88]

Its very simple. Less people want to invest here for many self evident reasons and commercial policies that encourage foreign private investment are out dated and uncompetitive. Thailand needs foresight and aggressive commercial change throughout the system. Until then, watch the decline continue.

[GAZZPA]

All but the most stupid could see this coming.

Apart from the obvious things such as corrupt government schemes, political instability and also unhealthy xenophobia there are even more factors working against the economy.

I have said before that the loss of GSP, FTA and other import duty benefits are being withdrawn in Jan 2015. This can only have a negative effect on exports and I suspect many customers have already began to source elsewhere. The fact is that Thailand has not planned or reacted to keep the country competitive.

From a personal perspective I believe the very culture of Thailand holds the country back so much. I am working for a Thai company and the amount of jumping through hoops I have to do to get simple tasks done is really crazy. The "face" issue, lack of confrontation (constructive and professional of course) is also a huge issue. I work with people who seriously under perform and create huge problems but nothing is really done about it.

I am sure there are others that disagree but perhaps there are many who agree as well.

In short, the country needs to lose its xenophobia and grow up so it can play Internationally without the support of more developed countries, until it does that it will only get harder. I have said it before, 2015 is going to be a very tough year for Thailand.

[slipperx]

Really Thailand could very easily improve its growth rate. It's infrastructure is way ahead of its neighbours which is a major plus for businesses looking to invest here. It's labour is quite cheap though not as cheap as before.

The infrastructure gap which has been its attraction compared to Vietnam, Malaysia, Burma and Cambodia is now closing with various measures such as 100% foreign business control in Burma, incentives for foreigners in Malaysia and the like. Thailand is stuck in the Thinking that has made it a xenophobic and really not very friendly country for foreign investment or long term stay residents.

Looking forward Thailand will lose its window of opportunity because of its xenophobia and its governmental resistance to all things foreign. It has every opportunity to learn from other more advanced nations but always tries to insist Thailand is best to the point it seems of changing every foreign 'idea' to make it Thai.

Thailand will continue to lose ground to its neighbours with this mentality but by embracing foreign investment and allowing foreign ownership and changing the laws to facilitate and encourage it along with long term foreign residents and tourists it could be the hub of Asia rather than a spoke in a broken wheel.

[Cake Monster]

Today we have the headline " Economy flatlining ", and only yesterday, " Bloomberg " reported Prasarn saying " Thailands economy will grow 5% for the next 4 quarters ".

I know who I believe.

[dinger]

Wasn't it just a couple of days ago that Gvmt predicted that the economy would grow by 5% next year?

[AnotherOneAmerican]

Its very simple. Less people want to invest here for many self evident reasons and commercial policies that encourage foreign private investment are out dated and uncompetitive. Thailand needs foresight and aggressive commercial change throughout the system. Until then, watch the decline continue.

So it's not because of the Junta?

[SteveFong]

this started way before the coup

people dont want to be bothered and, let's face it,

who goes home raving about anything, other than the girls and massages?

[bangkokheat]

i just dont understand how this can happen, thailand is so perfect and everyone wants to live here, can you feel the love?

[ChrisY1]

amazingly frank outlook,

but when I said this was coming 9 months ago,

no one thought about looking forward, which is the real problem

You must have told the wrong people...Kittirat Na-narong would have listened

[joshstiles]

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amazingly frank outlook,

but when I said this was coming 9 months ago,

no one thought about looking forward, which is the real problem

the only thing thailand looks forward to is the next meal time

[joshstiles]

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i just dont understand how this can happen, thailand is so perfect and everyone wants to live here, can you feel the love?

oh yeah....I feel the love and I apply ointment every time I feel it.

[toybits]

Poor choice of word with Flat Lining. In the medical world, a Flat Line means the heart has stopped beating. In other words - DEAD! The economy should be portrayed as something growing or at least something that has movement which could be negative, static or positive. The OP probably was referring to NO GROWTH in the economy and not referring to it as DEAD.

Edited August 29, 2014 by toybits

[SureNDT]

Took only four posts for someone to blame Thaksin.

Never mind there have been organised disturbances specifically with the intent of causing harm and instability by his opponents for over 8 years.

And never mind that the junta (and Democrats) continued the vast majority of Thaksin's policies when they took over.

No, no, it's all Thaksin's fault.

let's just sit back and watch the junta make it all better shall we?

[SteveFong]

wait until the real numbers are reported

with debt rising, and consumers tapped, and vendors being pushed off already quieter streets;

hotels still close to empty,

restaurants and bars closing

layoffs that were supposed to be temporary, now, permanent

wait

Edited August 29, 2014 by SteveFong

[worgeordie]

All governments think about is growth,growth is whats killing the world,make more

sell more,yes humans want the best of everything,thats how we are,instead of all

this growth,just make do with what we have,the World has finite resources,better

to slow down the growth and make what we have left available for future populations.

I want it.and want it now,thats how people think today,

regards Worgeordie

[ldnguy]

Another of these Yes - No, Up - Down stories a la tourist figures. It's hard to know which reports are the most accurate so for economy I rely on my bills at the supermarket and I am paying more for less.

Inflation is not really a guide of economic growth. If inflation is 5% and growth 10% it would be good thing. If inflation was 3% and growth 1% it would be a bad thing. So checking your shopping prices won't tell you anything about growth in the economy. Richer economies generally have food that's more expensive, but their economies are better than Thailand's. Maybe you need to have a think through about what you wrote.

[ldnguy]

Its very simple. Less people want to invest here for many self evident reasons and commercial policies that encourage foreign private investment are out dated and uncompetitive. Thailand needs foresight and aggressive commercial change throughout the system. Until then, watch the decline continue.

If you rely on foreign investment for growth you are giving other countries power over your economy. This is generally a bad thing, because one day they will leave.

[NongKhaiKid]

Another of these Yes - No, Up - Down stories a la tourist figures. It's hard to know which reports are the most accurate so for economy I rely on my bills at the supermarket and I am paying more for less.

Inflation is not really a guide of economic growth. If inflation is 5% and growth 10% it would be good thing. If inflation was 3% and growth 1% it would be a bad thing. So checking your shopping prices won't tell you anything about growth in the economy. Richer economies generally have food that's more expensive, but their economies are better than Thailand's. Maybe you need to have a think through about what you wrote.

I'm a simple shopper not an economist and many of them are no smarter than me it seems.

[ldnguy]

Today we have the headline " Economy flatlining ", and only yesterday, " Bloomberg " reported Prasarn saying " Thailands economy will grow 5% for the next 4 quarters ".

I know who I believe.

One is looking backward and one is looking forward. An economy can be i recession with growth forecast for the next year when it recovers. There is nothing inconsistent in this at all.

[cloudhopper]

Central banks the world over have been competitively devaluing their currency as interest rates have been manipulated for 30 years toward zero. To the extent global economic growth has been the malinvestment of unrepayable credit, the inevitable deflationary (or hyper-inflationary a la Venezuela now, depending on the political control over the central bank) collapse will be global as well.

Edited August 29, 2014 by cloudhopper

[recycled]

Took only four posts for someone to blame Thaksin.

Never mind there have been organised disturbances specifically with the intent of causing harm and instability by his opponents for over 8 years.

And never mind that the junta (and Democrats) continued the vast majority of Thaksin's policies when they took over.

No, no, it's all Thaksin's fault.

let's just sit back and watch the junta make it all better shall we?

Give it a rest and move on.

[SteveFong]

Its very simple. Less people want to invest here for many self evident reasons and commercial policies that encourage foreign private investment are out dated and uncompetitive. Thailand needs foresight and aggressive commercial change throughout the system. Until then, watch the decline continue.

If you rely on foreign investment for growth you are giving other countries power over your economy. This is generally a bad thing, because one day they will leave.

dont you think Bangkok has over done it with the malls and the retails, and lord have mercy, the 7-11?

[catweazle]

No wonder private investments took a nose dive. With the staccato of anti-foreign stances, rules and visa restrictions in he past months it is a miracle that it went down by just 4.4 per cent... Destroying the livelyhood of beach vendors throughout Thailand and leaving them without any options will not help much to increase local spendings, in the contrary - crimes will go up, further foreigners will pull out and along with them, their cash. Well done, Thailand!

[Thai at Heart]

Domestic monopoly/oligopoly and barriers to investment.

Good luck breaking up those entrenched family businesses.

[SteveFong]

No wonder private investments took a nose dive. With the staccato of anti-foreign stances, rules and visa restrictions in he past months it is a miracle that it went down by just 4.4 per cent... Destroying the livelyhood of beach vendors throughout Thailand and leaving them without any options will not help much to increase local spendings, in the contrary - crimes will go up, further foreigners will pull out and along with them, their cash. Well done, Thailand!

just beach vendors?

did the bar girls all get rehired?

the soapy girls?

the hotel waitresses in the lobby restaurants that have no customers?

the cooks?

the bus boys?

this has taken a much deeper cut into the Thai every day person