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“Too good for its own good” – The Thai economy

Thaiger

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Bloomberg has written an opinion piece about the robust Thai economy, sharing its fears along with some pats on the back.

“Thailand really should let its hair down. The currency is strong and the current-account surplus is big versus the neighborhood, while there’s a lot of scope for fiscal expansion. The Bank of Thailand has been grudging in cutting interest rates, in contrast to the easing party under way not just in Asia but in emerging and developed markets the world over.”

The article recognises the Thai ‘lever pullers’ resistance to doing anything too drastic following all the lessons learned over the past two decades since the Thai economy led the rest of Asia down the rabbit hole which became known as the 1997 Asian Financial Crisis.

“But Thailand may have learned the lessons too well. Its policy settings look like they are primed for truly dire times – few predict a coming catastrophe – and insufficiently calibrated to prolong growth or mitigate a shallow recession.”

Whilst commentators and keyboard experts seem bemused by Thailand’s current position as a ‘safe haven’ for investors and currency players, the Thai government keep plodding along with a still-growing, if not sluggish, economy and a reluctance to drop the base rate of the Bank of Thailand any further to make the Baht less ‘interesting’.

The IMF (International Monetary Fund) wants more budget activism and appears to push back against hoarding reserves and the hefty current-account surplus.

“Many directors considered that Thailand’s external position remains substantially stronger than warranted by medium-term fundamentals and desirable policies.”

So far the Thai baht is up 7% against the USD, the next best performing regional currency, the Indonesian Rupiah, has advanced little more than 1% against the USD.

“Two decades ago, a perky currency would have been a great problem to have. Today, the baht’s strength masks an array of problems, some of them distinctly first world in nature. Inflation is virtually non-existent; consumer prices rose just 0.3% from a year earlier in September. Productivity is low and wages are high for the region.”

Read the rest of the Bloomberg article, and it’s suggested remedies to diffuse the Thai baht, HERE.

 

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Economy

Stimulus package gives more back the more you spend

Neill Fronde

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PHOTO: A new stimulus package aims to get the middle class spending. (via Flickr - Marco Verch)

A new stimulus package targeting middle and high-income people aims at increasing spending by offering more e-voucher the more you spend. Ying Chai Ying Dai, which translates to “the more you spend the more you get”, will reward those who spend between 46,000 and 70,000 baht with a 7,000 baht e-voucher. This part of the government’s 225 billion baht stimulus package hopes to encourage 4 million qualifying middle- to upper-class people to spend more money by refunding 10-15% back, according to the Finance Ministry’s Fiscal Policy Office.

People wishing to participate must register and make their purchases through a government e-wallet system. The system works by refunding 10 to 15% of purchases with a maximum of 7,000 baht. So at 15%, a person who spent 46,000 baht would receive back the full 7,000. On the 10% scheme, 70,000 baht in spending would be necessary to reach 7,000 cashback. No details were available on what determines the percentage level.

An additional 2,000 baht will be available for people participating in the “Section 33 Rao Rak Kan” and “Rao Chana” scheme. The plans are expected to push 85.5 billion Baht back into the economy as recipients must spend the cash by the end of June.

The 50/50 stimulus program that has been popular with the government covering half of what people spend for half for food, drink, and other items up to 150 baht per person per day will also be expanded. That plan began on October 23, and ended at the end of 2020, covering 10 million people with each receiving 3000 baht. The second phase of the popular program added 5 million more people and raised the limit to 3,500 baht per person.

A third phase of the “Khon La Khrueng” stimulus plan is expected to begin in July with participants getting a maximum of 3,500 baht each to spend, and opening the program to 16 million new people. This massive expansion though will stipulate that anyone participating in this program cannot also participate in the Ying Chai Ying Dai scheme.

All of these cash and voucher benefits aimed at supporting vulnerable groups, along with cash handouts for people who have state welfare cards, are part of 245 billion baht the government is spending in an attempt to keep the economy from collapsing. This falls under an emergency loan decree allocating the government 1 trillion baht total to cope with Covid-19.

SOURCE: The Phuket News

 

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Economy

Thailand increases durian exports to China by 14% this year

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Thailand has exported 14% more durian to China in this year’s first quarter over the same period last year. The Trade Negotiations Department Director General says Thai durian auctions in the first quarter secured 186 million, making up 88% of the total amount of Thai durian exports to world markets.

Last year, Thailand exported US1.5 billion worth of durian to China, a 78% increase from 2019. China’s share accounted for 73% of total Thai durian exports to world markets. 18 countries have free trade agreements for fruit with Thailand. Thailand is actively exporting fresh fruit with its top buyers being Australia, Chile, China, Hong Kong, Indonesia, Malaysia, the Philippines, and Singapore. The most popular fruits are the national delicacy of durian, along with mango, mangosteen and longan.

Despite the increases in durian exports, farmers have been worried about Covid-19′s effect on the industry. Earlier in 2021 health authorities in China circulated a press release stating that imported cherries from Chile had been tested and found to have Covid-19 contamination. This statement prompted a huge drop in Chilean cherry prices. Thai growers are worried the same might happen to durian imports. As the seriousness of the Coronavirus in Thailand reaches new widespread levels, one instance of a durian container being linked to Covid-19 could spur a total ban on importing fruit from Thailand.

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SOURCE: MENAFN

 

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Economy

GDP forecast dropped to 1-2% with best, middle and worst case scenarios

Neill Fronde

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FILE PHOTO: Economic predictions continue to fall with Covid-19 spread and slow vaccination.

Mass vaccination will be the key stop the slump in economic growth after the Bank of Thailand revised their 2021 GDP forecast to between 1 – 2%. They had previously estimated a 3% growth in the gross domestic product but are now creating tiered predictions of a base level, worse situation, and a worst-case scenario, according to the Bank of Thailand’s Monetary Policy Committee.

The base GDP forecast, which you could call a best-case scenario, expects a 2% growth predicated on some rosy numbers like foreign tourism growing to 1.2 million people and unemployment staying around 2.7 million. It also operates on the assumption that Thailand reaches 100 million vaccines distributed by the end of the year which would allow herd immunity by the beginning of 2022.

The middle ground prediction is a 1.5% GDP growth if 64.6 million vaccines are administered, delaying herd immunity to the third quarter of 2022. It also allows for unemployment to grow by another 100,000 people, and tourism to reach only 1 million foreign visitors. If we don’t get this tourism growth and unemployment and underemployment expands to 2.9 million or above, and we distribute less than 64.4 million jabs, the worst-case scenario would be only a 1% GDP growth and herd immunity not being possible until the end of 2022 at the earliest.

The worst-case scenario would be a 5.7% drop in the GDP this year, a loss of 890 billion baht. The middle ground forecast would cost about 460 billion Baht, about a 3% drop in Thailand GDP.

The BOT had originally forecast stronger GDP growth but reduced from 3.2% to 3% before dropping their predictions to the 1% to 2% figure. With the devastating effect of the third wave of Covid-19 being much more far-reaching than originally expected, this new prediction was released now instead of when it was scheduled in June. They did state that government economic stimulus packages could still have a positive effect and allow the economy to grow 3 to 5.7%, assuming mass vaccination goes into effect quickly.

The tourism sector and small-to-medium-sized enterprises would be the most affected by the delays in vaccination. The Monetary Policy Committee stressed that the economy hinges on the speedy importing and administering of vaccines. Faster vaccination will prevent mutations, new strains, and new outbreaks, as well as allowing international borders to fully reopen more quickly and more successfully. They stress that government efforts to support the economy must continue as the government has recently announced they will extend cash stimulus programs and allot money to more low-income assistance.

SOURCE: Bangkok Post

 

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