News / Economy

No Quick Rebound as Clouds Gather Over Thai Economy

FILE - A sign indicating the closure of a main touristic road can be seen next to barricades of anti-government protesters near a main stage of the protest in Bangkok, Feb. 5, 2014.
FILE - A sign indicating the closure of a main touristic road can be seen next to barricades of anti-government protesters near a main stage of the protest in Bangkok, Feb. 5, 2014.
Reuters
Any comfort investors in Thailand draw from what happened four years ago, when economic growth, the stock market and foreign investment all surged despite deadly unrest in Bangkok, may be sorely misplaced.
      
The latest bout of political strife will delay major government spending projects and damage a lucrative tourism industry. And, even if Thailand's politics calm down, its economy will remain handicapped by weak private investment and rising household debt.
      
“If you look at the channels through which politics impacts real economic activity, it's virtually every demand side component of GDP,” said Euben Paracuelles, senior economist at Nomura. “But, where I have a bigger worry is on private consumption and private investment.”
 
Data released on Monday showed the economy slowed sharply in the fourth quarter of 2013, when street protests aimed at bringing down Prime Minister Yingluck Shinawatra's Pheu Thai Party government first began.
 
Over-optimistic
 
The national planning agency slashed its growth forecast to 3-4 percent for 2014, from the 4-5 percent it was predicting in November, when the protests began building a head of steam. Some private sector economists think that is still over-optimistic.
         
“The longer the power vacuum lasts, the worse it will be for the Thai economy,” said Krystal Tan, Asia economist at Capital Economists, who doubts growth will top three percent this year.
 
“Spending restrictions on the caretaker government leave it with limited ammunition to boost the economy,” she added in a note.
 
As well as the big-ticket infrastructure items now facing delays, the government will also be unable to pursue the populist policies that brought Yingluck to power in 2011.
 
A controversial rice subsidy that has run into funding problems cannot be renewed when it expires this month, which will hit rural demand.
 
“Another major downside risk to growth from government spending is the inability to pay the rice farmers under the pledging scheme when many of them are already facing a liquidity problem,” said Santitarn Sathirathai, an economist at Credit Suisse in Singapore. “Even the cautious economists in the market, including ourselves, have not fully factored this issue in.”
 
This time it’s different
      
While 12 people have been killed in sporadic clashes between protesters, security forces and government supporters, the unrest has so far been less violent than during the country's last major spasm of street protests four years ago.
 
More than 90 people were killed in April and May 2010, but that year saw foreign direct investment jump 88 percent, the stock market surged 41 percent and the economy bounded ahead by 7.8 percent, its best performance in 15 years.
 
Back then China, the biggest market for the exports that make up 60 percent of the Thai economy, was roaring back from the global financial crisis at a stimulus-fuelled, double-digit clip, while domestic private investment was picking up.
 
Though it expanded 7.7 percent last year, China's growth narrowly missed a 14-year trough.
 
The chill for Thailand is even more evident in private investment, which fell 13.1 percent in the fourth quarter of 2013 from a year earlier. The National Economic and Social Development Board sees it rising just 3.8 percent this year.
 
In 2010, private investment rose nearly 14 percent.
 
Tourism, whose share of Thailand's economy has been grown in recent years to account for around 10 percent of GDP, has been suffering. Just last week, Starwood Hotels & Resorts Worldwide warned that political unrest had “significantly” hurt its business in January.
 
Of greater concern over the longer term is the rapid accumulation of debt by Thai consumers, who splurged on loans for house and car purchases in recent years.
 
Household debt is now equivalent to around 80 percent of GDP, up from 56 percent at end of 2008, and the Bank of Thailand warned this month it was likely to rise further as consumer loan growth may be faster than economic growth.
 
That is likely to depress consumer confidence, which dropped for a 10th straight month in January, even after the political crisis is resolved, and will limit the ability of the central bank to cut interest rates too far to prop up growth.
 
“When we get some kind of resolution, tourism tends to recover very quickly,” said Nomura's Paracuelles. “But what I would caution is that maybe the recovery is not going to be as quick from the private consumption side as previous episodes have suggested, because the difference now is we have very leveraged households, which are spending a lot of their disposable income just to service that level of debt.”

You May Like

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.