Thailand’s economic outlook worst in 40 years

[NongKhaiKid]

I'm no economist or financial expert but after 37 years in Asia i do understand face.

What's the chances that even if devaluing the Baht was a Must Do there would be opposition simply because of the face aspect ?

[mommysboy]

The Thai baht, its goods and many services are overvalued by 30% or so.

[lostoday]

I think Thailand has reached a point where it is slowly becoming a service oriented sector. The manufacturing sector has slowed due to the rising wages.combine with the the slowdown in the world economy, its not surprising what is happening here. Its the same for any Asian country such as Malaysia, Taiwan, even China that were once manufacturing powerhouses but turned service to hi-tech oriented. Thailand is in this transition.

I think what would help the country is to cut back on taxes for everything in order to drive up consumption. That would greatly benefit the citizens to have a higher standard of living. Its not like the taxes collected were ever put to good use.

Would you compare Thailand taxes with Italy, UK and France? Thailand, Manufacturing - 34% Services 44%. Australia; Services 65% Manufacturing - 11%.

http://www.tradingeconomics.com/australia/gdp-growth-annual

Edited April 17, 2015 by lostoday

[lostoday]

I'm no economist or financial expert but after 37 years in Asia i do understand face.

What's the chances that even if devaluing the Baht was a Must Do there would be opposition simply because of the face aspect ?

The baht devalued swiftly and lost more than half of its value. The baht reached its lowest point of 56 units to the U.S. dollar in January 1998. The Thai stock market dropped 75%. Finance One, the largest Thai finance company until then, collapsed.

Thai government was eventually forced to float the Baht, on 2 July 1997, allowing the value of the Baht to be set by the currency market. On 11 August 1997, the IMF unveiled a rescue package for Thailand with more than $17 billion, subject to conditions such as passing laws relating to bankruptcy (reorganizing and restructuring) procedures and establishing strong regulation frameworks for banks and other financial institutions. The IMF approved on 20 August 1997, another bailout package of $3.9 billion.

http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

[Time Traveller]

Yet the Thai Baht grows stronger every day making Exporting harder and with a strong baht surely tourism must drop as well but what do i know .................................

Along with a good few other expats, my pension has taken a beating as the baht stays strong and the Aussie dollar and others slowly sinks.

From 31 baht last year to 24 baht now. Makes it tough especially when all medical and dental costs remain high and many of us cannot even get insurance.

That's because you have your income and expenses in different currencies.

So you will always be at risk of unexpected problems.

No government ever will change their exchange rate simply because a handful of foreign welfare recipients living in their country are complaining.

Edited April 17, 2015 by Time Traveller

[taabot]

When the whole world is in economic crisis Thailand will not be spared.There will be no economic recovery.The current economic system will collapse in the whole world.

[lostoday]

Thailand should be a power-house economy by now. But poor government administration, coups, corruption, wantabe politicians and deteriorated cultural ethics has done that in. And what are they relying on, bloody tourism. Pushing this "resource" to the max allows more money to be able to flow into the diverse pockets of the greedy. The Russian experiment failed, and now we have the Chinese ? Locusts.

1997 was bad, but wait and see what the next crash is going to be like for a population with virtually no personal saving, and heavily in debt. Jesus wept.

Gross national savings percent of GDP Sweden - 24.8% , Germany 23.9%, Australia 23.2%, Canada 21.1%

UK 10.8%

Thailand 29.8%

http://www.economywatch.com/economic-statistics/economic-indicators/Gross_National_Savings_Percentage_of_GDP/

Jesus did what?

[alfalfa19]

Isn't it against the law in thailand for a government official to tell the truth?

[gamini]

Ok, I understand that.....now, when will the baht drop against other currencies? I am talking a significant drop, not half a point!

That won't happen as far as the UK pound is concerned if labour wins the UK election or forms a coalition. Their tax and spend policies

are a disaster for the economy. Already the pound is down anticipating such a scenario. Let us hope the conservatives win

[Yunla]

I'm not sure about the "40 years" thing, and in a country that relies so much on foreign visitors and their investments, and foreign trade, to separate this from the wider global economic picture is difficult for me. Obviously we are on the tail-end of major mismanagement by successive regimes in this nation, and I can only hope and pray that this new post-2015 era will see the end of mismanagement and wasted potential.

But the wider picture is that the global economy is more volatile and in some cases more fragile that I can remember at any time in my life. I recently sold two properties in Spain, nice places with sea-views, low price, no offers for several years. And similar experience in selling a house in England recently, plenty of interest but people can't afford even the knock-down low price. And this obvious belt-tightening seen in EU/US etc. can only have knock-on effects around the world, especially in tourist nations / trade partners.

Edited April 17, 2015 by Yunla

[oneday]

What a completely useless report.

[Lupatria]

I'm very surprised! Now that the junta adopted the Hellas model of running down a country's economy our Greek expert can't find the way to the keyboard. C'mon Costas give it a try to explain the mess created by your idols.

[Orac]

I'm no economist or financial expert but after 37 years in Asia i do understand face.

What's the chances that even if devaluing the Baht was a Must Do there would be opposition simply because of the face aspect ?

The finance ministers comments today running in another thread hint at an active policy of devaluation:

"In theory, you cannot not just lower the policy interest rate by 50-75 basis points in one go because you have to lower it by 25 basis points at a time to make people believe that the rate is on its way down and that would help depreciate the baht," Sommai said."

http://www.thaivisa.com/forum/index.php?/topic/817895-MPC-could-trim-policy-rate-again%3A-Sommai

[djjamie]

The world outlook is not much better.

Australia might even be worse off than Thailand with China's progress grinding to a halt. Like Australia, Thailand's economic prosperity relies heavily on China's economy.

Thank goodness there is a competent govt in power to weather this upcoming storm.

[geriatrickid]

Lower the THB will show immediate results...

When the AUD and CAD nose dived against the USD, did it help their respective economies?

These currencies are two of the most stable in the world, but it meant nothing as the US economy recovered.

Keep in mind that Thailand imports some of its most vital resources to fuel its economy: Petroleum and Natural gas, Iron and steel, Organic chemicals, heavy machinery and medical/technical equipment. These are the components that allow Thailand to run some of its most vital sectors such as agriculture. Devaluing the baht would make these key economic inputs more expensive and it would cause turmoil in Thailand. Personal energy rates are lower than industrial rates for a reason. (In many developed countries, industrial rates are significantly lower than personal rates. If industry had to pay higher energy costs, it could make some manufacturers even less competitive than others in the region. People would take to the streets if their cost of electricity or cooking fuel increased 10%.

The agricultural sector can't take any more input cost increases if it is to compete with India and Vietnam for the rice markets. The farmers have no money. Auto manufactures who saw an increase in the costs of manufacturing components and energy, would close their plants. While it might be good for some foreigners who get paid in foreign currency, it would hurt most Thais.

It's a delicate juggling act for the MoF.

[lostoday]

The price of oil has dropped 50% how does that effect the price of manufacturing and farming?

Manufacturing 34% of the economy and agriculture 13% I think. The drop in the price of oil should lower the costs of both sectors.

Edited April 17, 2015 by lostoday

[harada]

But what about the Stats, I think that this guy would be on the attitude adjustment express by now.

[BuaBS]

Baht too high ? Have you seen the graphic for the last 10 years?

2 years ago , still under yingluck , it was around 29 B/USD , now 32,5 , that's more than 10 % lower.

The euro , aussie ,yen, ruble.......are much lower , but it has nothing to do with thailand.

The yuan /thb is pretty steady for the last 2 years @ 5,2B/yuan.

Selfish as I am , I would like the thb to get even stronger ( 15thb/euro is fine for me), but it is not going to happen.

The last time we heard some noise from the BoT , devaluation started , yes about 2 years ago , from 28,6 to 33 thb/usd.

So I expect a weakening of the baht in the coming weeks or months.

Edited April 17, 2015 by BuaBS

[tonbridgebrit]

I think a lot of people are being a bit silly here !

Okay, all this talk about the Thai baht being too strong, and how it is harming exports and tourism. It's only partly true. If YOU feel that the baht is too strong, if YOU feel that Thailand is heading for serious economic problems, and if YOU reckon the baht is going to crash, okay, fine, keep your foreign currency right now, and you can buy loads more baht after the baht has crashed !

I really do think that the baht is unlikely to crash in the near or medium term. People are trying to say that Thailand has got it wrong, and that the Thai baht should drop by ten or twenty percent. Well, off-course, you're saying that because you're getting a bad exchange-rate, you want the baht to weaken, that way, you get more baht for your pounds/dollars, more beer money in Thailand's bars for you !

The baht has strengthened, no more 65 baht per pound, we're seeing 48. It still turns out that the baht is "cheap". Consider tourists going to London, and also going to Bangkok. They can buy either a thousand pounds or fifty thousand baht. A thousand pounds is the same as fifty thousand baht, but fifty thousand baht buys a lot more in Bangkok than it does in London. Or we can say that a man is in London, what can he buy with his one thousand pounds ? He can buy a lot more if he changed his money into fifty thousand baht and spent it in Bangkok.

Basically, a lot of pounds/dollars/euros is being used to purchase baht, because 'things' in Thailand are cheaper than in the 'rich' nations. And I think, it's this purchasing of baht that is preventing the baht from crashing. Like I said, IF it is the case that Thailand (Bank of Thailand) is 'artificially' keeping the baht up, well, they can't do it forever, it will crash later. Have a grin on your face, waiting for the crash. But I don't think it's going to happen. That's because it's not really being artificially kept up !

Yes, I'm in pain, my pounds are buying a smaller amount of baht. I still remember when a pound bought 70 baht !!

[Jim walker]

4.1 percent has been revised down to 0.4 quite a significant change that’s what happens when you put a brain dead soldier in charge of things outside his comfort zone left right left right that’s the soldiers job not looking after the country’s finances. What they need is TAT in charge of the figures they can always make them sound or at least look good.

[TheMacMan]

From month to month the figures and prospects change... up, up more, record breaking...and then disappointing figures, Songkran visitors down, bleak 40 year prospect.

Maybe, just maybe it might have to do (and these are just some..) with the following

Tourist visas harder to renew

Border runs clamped down

Beach raids and properties being torn down (what outside business would want to invest in Thailand if they can just change rules and the investor loses!?)

Overseas visitors being denied shade, umbrellas and snacks on the beaches

Beach "police" seizing tourists OWN umbrellas and mats in "no umbrella zones" (imagine the dories told when the quality tourist returns home!?)

Total confusion over new rules for foreigners having 30+30+30 leases on property they have PAID for being deemed illegal. (They are quality foreigners... they bring in millions of but to spend on property, home, furniture, gardeners, maids, food, drink...! The confusion with the rule changes is madness!)

Businesses being set up and run and paid for by foreign investors, but 51% owned by Thai (very enticing!)

Setting up small companies to work requires 4 thai staff and multiple visits and interrogations by rude Social Security officers

Police stops and shakedowns for tourists

Murders on islands

Ineffective police force or at least the appearance of, and faith in

Corruption (at all levels)

Red/Yellow supporters and accusations of bombings

bomb blasts in shopping centres (always attracts the quality tourist, that does!)

Immigration officials at airports making up rules and deciding that 6 visits on tourist visas in a year is too much and you cannot enter

Those that stay (me!) will want to! Those that love Thailand and the people will 'endure' in the hope that things will improve.

Others will leave (Fact!)

But ask yourselves this... does any of the above encourage tourism, outside investment for business, entice people to retire and buy, to invest their savings, in their dream home in the sun....

????

I think not!

Address these major problems, not least being business or property investor security and things could turn around!

Thailand is still many people's idea of nirvana, currently just going through a bad patch!

Edited April 17, 2015 by TheMacMan

[Robert24]

@asianscouser: I thought a recession is 2 consecutive quarters of negative growth.

I also don't get why the author of this article thinks that 3-4% GDP growth should be the worst outlook in 40 years economically? Surely there were many times with a lower GDP forecast in the last 40 years.

[enough is enough]

What I find truly astonishing is how your forecast can be revised down from an optimistic 4.1% growth to 0.4%.

Also another overly optimistic 13% growth in Tourism soon to be revised down to 5% in the not too distant future.

[somsa]

The world is not in a recession ,but much worse in a depression that stands for a deepening in recession/ level beyond.So how can you expect growth.

[Robert24]

What I find truly astonishing is how your forecast can be revised down from an optimistic 4.1% growth to 0.4%.

Also another overly optimistic 13% growth in Tourism soon to be revised down to 5% in the not too distant future.

You are talking about export growth that was revised down. That revision if correct will lead to a reduced GDP growth of 3.1%. Still ok in my opinion. Most countries would still be very very happy with such economic growth data. And slowing exports are driven mainly by a slowdown in demand from countries like China.

[somsa]

For growth of the export you have to lower the Thai baht because the euro is also very weak.

[Robert24]

The world is not in a recession ,but much worse in a depression that stands for a deepening in recession/ level beyond.So how can you expect growth.[/

Sorry but there is no depression in the world. By definition a depression is a very deep and prolonged recession characterized by negative economic growth over years, very high unemployment, reduced debt availability etc. People usually refer to the 1930s as an example for a depression. Hope this helps people understand the terms recession and depression better.

[somsa]

Keep on dreaming.

[elgordo38]

Ok, I understand that.....now, when will the baht drop against other currencies? I am talking a significant drop, not half a point

I think it is being manipulated for some reason possibly pegged to the American dollar. I notice it rises and falls in tandem with the USA greenback. Bad news takes time to filter into exchange rates. I am waiting for a big move to bring money over.

[lostoday]

Keep on dreaming.

http://www.economist.com/news/leaders/21592613-good-news-about-global-growth-risks-pushing-interest-rates-up-and-politicians-appetite-reform