Recent Development of Thai Economy – Opportunities and Challenges
CHANTAVARN SUCHARITAKUL
Senior Director, International Department
Bank of Thailand 1
Recent Economic Development and Outlook
2
Emerging Asia
3
ASEAN economies picked up and recovered fairly quickly after the 2008 Global Financial Crisis.
Bankruptcy of Lehman Brothers
Greece enters IMF program
%YOY
-10
-5
0
5
10
15
20
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
GDP Growth
ASEAN-5 China Japan US EU TH
Accommodative monetary policy and fiscal stimulus both help to support the Thai economy during the 2008 global financial crisis
5
%p.a.
0
2
4
6
3.25
Dec 2011
Policy Rate
“
“Strong Thailand project “ (FY 2009 -2012), totaling around 3.5% of GDP
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2
Fiscal Balance
Greece Thailand
-10.42%
% of GDP
-2%
Nov 2010
Fiscal room available from years of prudent macroeconomic policies
6
13.5
57.8
45.2
42.3
0
10
20
30
40
50
60
70
% of GDP
Sep 2011
Public debt 4,448 billion baht
42.3 % GDP
Fiscal sustainability framework (60 %of GDP)
Figure 1: Thailand’s Public Debt
Fiscal YearSource: Public Debt Management Office
7
Changing Structure of the Thai Economy
0
5
10
15
20
25
30
35
40
Agriculture Mining andQuarrying
Manufacturing Construction Electricity, Gasand Water
Supply
Transportationand
Communication
Wholesale andRetail Trade
Breakdown of GNP by Industry
1980
2001
% of GNP
Recent Economic Development
8
The recovery which began to gather momentum during 2009-2010, was interrupted by domestic and external shocks, economic growth for 2011 is likely to turn out weaker than previously assessed.
% QoQ
Flood
Japanese Natural Disaster
Note: Q4 GDP growth is BOT Staff’s forecast
Global Financial
Crisis
Political Unrest
Source: BoT staff’s forecast at Nov 30, 2011
70
80
90
100
110
120
130
140
Aug-
08
Feb-
09
Aug-
09
Feb-
10
Aug-
10
Feb-
11
Aug-
11
Nov 11
Recent Economic Development
9
Preliminary estimate of total output loss due to the flood is projected at around 2.0% of nominal GDP with manufacturing and agricultural production as well as tourism being among the most severely affected sectors.
1.01%
0.40% 0.07%
0.33%
0.31%
Estimated loss due to the flood for each production sector (%NGDP)
Manufacturing
Agriculture
Restaurants andHotelTrade
* 3 mma and SA
Index* (Pre-crisis = 100) Economic Indicators
Private Investment Export
Private Consumption Manufacturing Production
Comparison of Effect from disasters - NZ earthquake: - 0.6 % of GDP - JP Tsunami: - (2.25 - 4) % of GDP
Export Growth Despite improvement in export growth since the financial crisis in 2008, exports to major export
markets had slowed down since August 2011 and contracted for the first time in October 2011. The contraction is attributed largely to the fall in manufacturing products due to the flood.
Bankruptcy of Lehman Brothers
Greece enters IMF program Flood
%YOY
Nov 11 -13.1
10
11
(%)
Share %∆ 2010
%∆ 2011
Contribution to GDP
2010 H1 Q1 Q2 Q3 Oct Nov YTD Nov-11
ASEAN 22.7 36.5 22.1 20.6 23.5 34.7 14.4 3.2 25.2 0.7
EU (27) 11.2 20.2 20.7 21.7 19.7 22.5 -12.4 -28.0 17.6 -3.0
New EU 1.3 24.1 9.9 5.0 15.2 1.4 -21.6 -19.9 3.8 -0.2
China 11.0 33.2 23.8 24.8 22.7 62.8 21.1 -9.8 35.6 -1.1
Japan 10.5 29.8 28.7 30.2 27.2 21.0 4.2 -8.8 26.0 -0.9
USA 10.3 21.3 19.3 21.3 17.5 5.2 -5.5 -13.9 11.8 -1.4
Hong Kong 6.7 38.5 48.6 70.3 30.1 37.9 -15.1 -43.6
38.3 -3.2
Middle East 4.9 10.1 15.0 15.5 14.6 16.4 -9.8 -32.2
12.9 -1.6
Australia 4.8 9.2 -20.1 -1.3 -
34.5 10.8 -30.3 -33.8
-12.9 -1.4
India 2.2 36.3 23.1 14.8 32.9 19.1 3.2 2.1 19.9 0.0
Growth of Thai Exports to Major Markets
Source: Compiled from Customs Department’s data
12
Breakdown of Goods Exported by Sector (% of Total export goods)
Source: Compiled from Customs Department’s data
2008 2009 2010 2011
1. Agricultural Products 9.0 8.2 8.8 10.8
2. Fishery Products 1.5 1.6 1.5 1.4
3. Manufactured Products 88.0 88.9 88.7 86.6
A. Labor intensive products 9.3 10.8 9.8 9.0
B. High-tech products 62.7 60.6 61.9 58.5
C. Resource-based products 10.5 11.8 11.0 11.8
D. Others 5.5 5.8 6.0 7.3
4. Forestry Products 0.1 0.1 0.1 0.1
5. Mineral Products 1.4 1.1 0.9 1.1
Economic Outlook Economic growth is projected to rebound firmly in 2012 on the back of
domestic demand to help cushion some possible weakness in exports due to global demand slowdown.
14
2.5
-2.3
7.8
1.8
4.8
-4
-2
0
2
4
6
8
10
2008 2009 2010 2011f 2012f
% Y
oY
GDP Growth
Weak global demand
Ineffective government policies (flood prevention and stimulus program)
Relocation of production bases if flood recovery delays
Downside Risks
Source: BoT staff’s forecast at Nov 30, 2011
15
Examples of Government Flood-Relief Measures
Income Support Measures
Expense Support Measures
Credit Measures
-Tax exemption for flood victims
Income tax exemption
Import tax exemption for machinery imports
-Extension of period for tax payment
- Up to 2 years leasing fee exemption for flood-affected property owners
- Provision of free rice seeds for flood-affected farmers
- Expressway toll fee exemption
- Financial assistance scheme for flood– affected households
๐ 5000 Baht Emergency fund
๐ 30,000 Baht Residential restoration fund
๐ 10,000 Baht Household asset restoration fund
Source: Cabinet synopsis, Royal Thai Government website www.thaigov.go.th
Extension of repayment timeframe, exemption or partial payment of interest and waive transfer fees for transfers to flood-affected area
Loan for Micro businesses total 90,000 million Baht
Loan for SMEs total 235,000 million Baht
The Cabinet has approved in January 2012 a set up of the Flood Recovery and Restoration Committee on Infrastructure with a budget of 11,026.607 million baht to specifically focus on flood rehabilitation issues.
Cross Border Collateral Arrangement (CBCA)
16
• In October 2011 Bank of Thailand and the Bank of Japan have collaborated to implement an arrangement for liquidity provision in Thai Baht to Financial Institutions in Thailand utilizing Japanese Government Securities as collateral
• One aim of this measure is to facilitate the funding of financial institutions operating in Thailand including Japanese banks, which provide financial services to firms, including Japanese firms operating in the flood-affected areas of Thailand.
17
Total FDI Gross Inflow from Japan
4,228 5,067
7,825 7,894
3,732
5,505 5,120
0
2,000
4,000
6,000
8,000
10,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2005 2006 2007 2008 2009 2010 11M 2011
Agriculture, Forestry, and Fishing Mining and quarrying
Manufacture of motor vehicles, trailers and semi-trailers Manufacture of electrical equipment
Manufacture of rubber and plastics products Manufacture of machinery and equipment not elsewhere classified
Manufacture of chemicals and chemical products Manufacture of fabricated metal products, except machinery and equipment
Manufacture of computer, electronic and optical products Manufacture of basic metals
Manufacture of of food products Other Manufacturing
Other Sectors Total(RHS)
Million USD Million USD
Challenges and Opportunities
18
19
Where is Thailand?
Source : Michael E.Porter
20
Thailand
Rising China
Troubling U.S. & EU
Realization of AEC
Megatrends
Challenges and Opportunities
Opportunities Challenges
Crises in US and EU
Middle Income Trap
ASEAN Economic
Community
Growing Chinese
middle-class
21
Development of Economic Integration
Source: AEC 2015: Ambitions, Expectations and Challenges (Kanithasen, Jivakanont and Boonnuch, 2011)
22
Opportunity from AEC: Thailand’s strategic location Heart of ASEAN Logistic hub, gateway to Indochina Resource cluster: energy, labor, minerals
23
Dawei (Tavoy) Deep-sea Port Project
Source: Dawei Port: Thailand's Megaproject in Burma by Pavin Chachavalpongpun
Land bridge linking India, Africa and Europe with China and East Asia nations
Lowers transport time of goods by an average of 10 days when compare to tradition sea route through the Malacca Strait
Easier access and transport of energy resource
24
Growing border trade among neighboring countries
THB mn
0
20,000
40,000
60,000
80,000
100,000
120,000
2003 2004 2005 2006 2007 2008 2009 2010
Trade Value
Thai-Cambodia Thai-Laos Thai-Burma Thai-Southern China
• Signed in April 2003 and effective in November 2007
• Extends beyond ordinary FTA schemes to include 3 pillars of
25
Japan-Thailand Economic Partnership Agreement (JTEPA)
Liberalization and Facilitation
•Trade in goods
•Rules of original of products
•Trade in services
•Investment
•The movement of natural persons
Cooperation in 9 areas
•Agriculture, forestry and fisheries
•Education and human resource development
•Financial services
• Information and communication technology
•Science technology
•Energy and environment
•Small and medium enterprises
•Tourism
•Trade and investment promotion
Special Cooperation in 7 projects
•“Kitchen of the World” Project
•“Automotive Human Resources Development Institute” Project
•Japan-Thailand “Steel Industry Cooperation Programmer”
•Cooperative Project in the Textile and Garment Industry
•Energy Conservation project
•Value-Creation Economy Project
•Public-Private Partnership
26
Structure of ASEAN+3 Macroeconomic Research Office (AMRO) as of end 2011
Director
Senior economist
Senior economist
Supporting staff
(Admin) Economist Economist Economist Economist
Members: Distinguished and
respected economists
Advisory Panel
Members: Finance and Central Bank Deputies of ASEAN+3 countries
Executive Committee
(Group 1) (Group 2)
provide strategic, technical and professional guidance to AMRO
Setting broad policy and overseeing operation of AMRO
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