Thailand 'the laggard in Asean GDP growth'

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Thailand 'the laggard in Asean GDP growth'
THE NATION

BANGKOK: -- THAILAND will trail all Asean countries in growth because its open economy and export dependence leave it directly exposed to the global and Chinese slowdowns, according to the World Bank.

Thai gross domestic product this year is expected to grow by 2.5 per cent, while the East Asia-Pacific region is expected to race ahead by 6.5 per cent this year, 6.4 per cent next year and 6.3 per cent in 2017. This is down from 6.8-per-cent actual growth last year.

Among the large Asean economies, growth conditions will be most buoyant in the Philippines and Vietnam. In Indonesia and Malaysia, the outlook for business profits and household incomes is clouded by weak global commodity prices. In Thailand, uncertainty and economic vulnerabilities will continue to weigh on growth.

Most of the smaller economies will see stable or slower growth this year before picking up again.

Thailand's GDP is predicted to grow by 2 per cent next year and 2.4 per cent in 2017. This is down from expected growth of 2.5 per cent this year because China's slowdown continues to pressure Thailand's export sector.

Thailand's outbound shipments will increase by 0.8 per cent this year, 1.7 per cent next year and 1.3 per cent in 2017.

Shabih Mohib, programme leader on equitable growth, finance and institutions in East Asia and the Pacific, said yesterday that the World Bank was not confident that the Thai government's spending on infrastructure projects would be tangible next year.

The economic stimulus packages launched recently are also short-term, he said. Outdated technologies make products from Thailand unable to meet global market demand, so Thailand should emphasise technology development together with manpower efficiency and infrastructure investment, he said.

"Thailand will turn to meet healthy growth in the future based on three key points. First, the integration of the Thai economy to comply with the global economy to help benefit trading and exports.

"Second, technology and innovation development, and finally, the integration of the Thai economy through infrastructure investment," he said. Sudhir Shetty, chief World Bank economist for the East Asia and Pacific region, said: "Developing East Asia's growth is expected to slow because of China's economic rebalancing and the pace of the expected normalisation of US policy interest rates.

Financial volatility

"These factors could generate financial volatility in the short term, but are necessary adjustments for sustainable growth in the long term." The baseline growth projections for China assume a further gradual slowdown in 2016-17. If China's growth were to slow more than expected, the effects would be felt in the rest of the region through both trade and financial channels, the World Bank says.

The key trade effects will be mediated through developments in commodity prices, exports of non-commodity merchandise to China and receipts from Chinese tourists. Financial spillovers will arise through a decline in outward foreign direct investment from China and an increase in volatility.

Thailand's SCB Economic Intelligence Centre also notes that China's slowing is an ongoing structural shift that will cast a lasting shadow on the Thai economy.

The slowing external demand prompted the EIC to cut its forecasts for Thailand's GDP growth this year to 2.0-2.5 per cent from 3 per cent. It projects Thailand's GDP growth next year at 2.5-3.0 per cent.

Thailand's exports are being dragged down by the decline in China's investment spending on property and manufacturing capacity, which reduces demand for industrial products and commodities.

Thai exports to Asean nations are suffering from lower demand due to depreciation of their currencies and the region's economic reliance on shipments to China.

Tourism and government stimulus measures will be the Thai economy's main drivers next year, the EIC believes.

Capital outflows are a key risk to the Thai economy in the near term.

The slowdown in China and the prospect of the US Federal Reserve's first interest-rate increase in nearly 10 years have roiled financial and capital markets, marked by the flight of capital from emerging markets. This has dragged down the currencies of Asean nations and lowered their foreign-exchange reserves relative to foreign debts, potentially leading to a crisis, the research housed of Siam Commercial Bank said.

Thai businesses should keep a close watch on risks in neighbouring countries. As for Thailand's own stability, there is little risk of either severe capital outflows or sharp depreciation of the baht.

This should facilitate the Bank of Thailand's accommodative monetary policy by allowing interest rates to remain low, the EIC said.

Source: http://www.nationmultimedia.com/business/Thailand-the-laggard-in-Asean-GDP-growth-30270264.html


-- The Nation 2015-10-06

[ChrisY1]

"Outdated technologies make products from Thailand unable to meet global market demand,"

Quite worrying, and especially so with a backward thinking, paranoid military government in control.

This alone must be detering better investment here....that and the ridiculous attempt and IT control could be the final straw.

Stimulus plans are as described above, simply short term spending policies are just a band-aid solution.

[Toknarok]

The World Bank has obviously got it wrong, the P.M. predicts a growth rate of 3.5 to 4.5 percent. http://www.thaivisa.com/forum/topic/784475-thai-pm-confident-next-years-growth-35-45/

[NongKhaiKid]

Wasn't there an article yesterday saying the Asian Economic Community was only 80 odd days away and Thailand's leadership was sought ?

Leading from the rear ?

[gandalf12]

The world wont give you what you want unless they get what they want and Thailand is failing in all respects of this

[zaphod reborn]

"Thailand will trail all Asean countries in growth because its open economy"

Where does the Nation come up with this nonsense? Nothing in the article even mentions Thailand having an absence of trade barriers. We all know it isn't true. Thailand has some of the highest protectionist tariffs in the world. Try to import a car or computer into Thailand and see how much the customs department will extort from you.

[Fiddlesticks]

THAILAND will trail all Asean countries in growth because its open economy and export dependence leave it directly exposed to the global and Chinese slowdowns

I thought it was because Thailand doesn't produce anything of any quality that the world wants except for rice. I also thought that it was because the level of education in Thailand is so low that the country is devoid of innovation. I also thought that the work ethic in the country is non-existent with reliance on tourist handouts and foreign kickbacks. Glad to find out that it is really the fault of the Chinese!!! What a relief to have these misconceptions dispelled!

[trogers]

THAILAND will trail all Asean countries in growth because its open economy and export dependence leave it directly exposed to the global and Chinese slowdowns

I thought it was because Thailand doesn't produce anything of any quality that the world wants except for rice. I also thought that it was because the level of education in Thailand is so low that the country is devoid of innovation. I also thought that the work ethic in the country is non-existent with reliance on tourist handouts and foreign kickbacks. Glad to find out that it is really the fault of the Chinese!!! What a relief to have these misconceptions dispelled!

As long as a Thai worker can read and write his or her name, this worker is qualified for a high tech job.

Pressing buttons to run some machines is chicken feed to pressing buttons on a smartphone...

[Christie Paul]

Interesting how "capital outflows" gets only a light mention, yet its effects can be way more devastating than trade etc.

Foreign capital is already avoiding the place and smart money here is discretely packing its bags.

[hakuho]

I am uncertain whether the Thai slowdown is the drag effect of the military clampdown or if it is coming from the bottom-up insouciance and xenophobia embedded in the culture itself.....prob a combo of both plus other factors, like the competitive differentials in salaries among Vietnamese, Cambodian, Laotian and Myanmar workers....investment follows the money and we should as well.

[phoenixdoglover]

A comparison of Thailand and Vietnam. Obviously, Vietnam has managed to sustain growth despite a high reliance on exports and the slump in worldwide demand.

Thailand is much more dependent on Tourism. One would expect tourism spending to be highly sensitive to worldwide economic conditions. Hence the near-panic on the Thai tourism front right now.

But look at the "FDI" as a % of GDP. There is the big story. Three times greater in Vietnam.

Thailand

Population 67 million

GDP 374 billion (USD)

GDP Growth 2.8% (projected)

Exports 216 billion (58% of GDP)

Tourists 28 million

International Tourism revenue, 46 billion (USD) (12% of GDP)

Foreign Direct Investment, Latest Quarter 3.8 billion (USD) (As % of GDP, Annual basis, 4%)

Vietnam

Population 91 million

GDP 186 billion (USD)

GDP Growth 6.6% (projected)

Exports 168 billion (90% of GDP)

Tourists 8 million (est.)

International Tourism revenue, 7.5 billion (USD) (4% of GDP)

Foreign Direct Investment, Latest Quarter 2.6 billion (USD) (As % of GDP, Annual Basis, 12%)

[quandow]

"Thailand will trail all Asean countries in growth because its open economy"

Where does the Nation come up with this nonsense? Nothing in the article even mentions Thailand having an absence of trade barriers. We all know it isn't true. Thailand has some of the highest protectionist tariffs in the world. Try to import a car or computer into Thailand and see how much the customs department will extort from you.

Importing ANYTHING is quite cost prohibitive. I shipped some scuba equipment into the kingdom and essentially got RAPED over import taxes. I even tried explaining it was used gear, THAT fell on deaf ears. Cha CHING - taxed as if new.

Edited October 6, 2015 by quandow

[gandalf12]

A comparison of Thailand and Vietnam. Obviously, Vietnam has managed to sustain growth despite a high reliance on exports and the slump in worldwide demand.

Thailand is much more dependent on Tourism. One would expect tourism spending to be highly sensitive to worldwide economic conditions. Hence the near-panic on the Thai tourism front right now.

But look at the "FDI" as a % of GDP. There is the big story. Three times greater in Vietnam.

Thailand

Population 67 million

GDP 374 billion (USD)

GDP Growth 2.8% (projected)

Exports 216 billion (58% of GDP)

Tourists 28 million

International Tourism revenue, 46 billion (USD) (12% of GDP)

Foreign Direct Investment, Latest Quarter 3.8 billion (USD) (As % of GDP, Annual basis, 4%)

Vietnam

Population 91 million

GDP 186 billion (USD)

GDP Growth 6.6% (projected)

Exports 168 billion (90% of GDP)

Tourists 8 million (est.)

International Tourism revenue, 7.5 billion (USD) (4% of GDP)

Foreign Direct Investment, Latest Quarter 2.6 billion (USD) (As % of GDP, Annual Basis, 12%)

Vietnam has something Thailand doesnt and that is a nation of people who are hard workers. It kind of makes a big difference.

[Christie Paul]

Both macro and micro capital is attracted to pragmatic leadership, in which economic progress is a priority. It doesn't care much about politics, human rights or what name is given to the system of government. It has no particular loyalty and it is generally on the verge paranoia.

A dull autocratic leadership, that has no economic plan scares prospective capital away. If and when this is combined with blatant mismanagement of core income streams, indigenous capital starts unwinding and packing its bags.

They'll blame the "shorts" for betting against the economy, but they aren't the real culprit. It will be the "longs", that have quietly left the market place and moved assets out of harms way.

In all likelihood, Viet Nam, Cambodia, Philippines, Laos and to a lesser degree Indonesia will move ahead of Thailand in virtually every economic metric.

[fred Kubasa]

Thailand laggard ? Nice words for always coming in 11 th in a 10 horse race !

[swissie]

A rare occurrence, but most posts actually reflect the "way things are". Post # 7 summarizes it quite nicely. Many weak points of the Thai Economy have been mentioned.

The one point that must stand out is: "Work Ethic" , Surrounding countries (especially Vietnam) will run circles around Thailand. Remove the "Import-Duty" (= the Economic-"Berlin-Wall" surrounding Thailand) and see what will happen to the Industrial-Sector.

Replacing European/US tourists with "Cheap-Charlie" Chinese Package-Tour Tourists?

Rice Exports? The US and other major players have not achieved their standing in the world by selling potatoes overseas.

Is this a good time to buy a Condo in Pattaya ? Tell me !

Cheers.

[Srikcir]

THAILAND will trail all Asean countries in growth

This is NOT news:

"Thailand's growth prospects "dimmest" among ASEAN nations" - Moody’s Report, May 15, 2015

"The country also remains one of Southeast Asia's most indebted economies, discouraging consumer confidence." - TMB Bank 2015-05-18

"Escap forecasts 3.9-4 per cent economic growth rate for Thailand in 2015 and 2016. This is below the Asean average of 4.9 per cent in 2015 and 5.1 per cent in 2016." - The Nation 2015-05-20

Somkid needn't worry about a three-year prediction. He won't be in the cabinet beyond 2016 at the rate the Thai economy is slowing.

[Thian]

The easy way out is just depreciate the Thai Baht. And it will happen.

[Praematura]

It starts with education. Thais are way behind their neighbors and they are headed the wrong direction as shown by the cut in school hours. The quality of education is severely lacking. Fact is the elites here desire to keep a system of disenfranchised people who are uneducated, ignorant and with little skill sets beyond agriculture. Therefore Thailand will remain a mess for a very long time.

In addition there are studies showing significant negative impacts on gdp in the years following military coups.

[IsaanUSA]

The easy way out is just depreciate the Thai Baht. And it will happen.

Why do you think this is a good solution?

[farangmick]

The World Bank has obviously got it wrong, the P.M. predicts a growth rate of 3.5 to 4.5 percent. http://www.thaivisa.com/forum/topic/784475-thai-pm-confident-next-years-growth-35-45/

Yes, the World Bank has got it wrong. Everyone in Thailand who does not want their attitude adjusting knows that it really is possible for one man to be a first rate military commander, a brilliant statesman-like politician and top economist.