News / Economy

Thais Brace for Recession as Crisis Nears Crunch Time

FILE - A Thai vendor weighs a bag of rice at a market in central Bangkok.
FILE - A Thai vendor weighs a bag of rice at a market in central Bangkok.
Reuters
The golden Buddha statues, amulets and lucky charms that festoon Sakuntala Mettawong's tiny Bangkok cellphone shop are not helping business.
 
It's peak time, but customers are scarce at the usually bustling mobile phone bazaar in the MBK Center, which sits on the fringe of a mile-long cluster of gleaming malls that symbolize the rapid growth of Thailand's consumer class.
 
“Business has been very bad. Many shops have left here, some moved to find cheaper spots or changed hands,” said Sakuntala, almost drowned out by the noise of bored shop owners playing computer games behind her.
 
“The top phone models are more difficult to sell... more people are selling their phones back to shops, to use simple ones, or sell because they need money,” said Sakuntala.
 
An economy known for its dynamism is ailing, headed towards recession and held hostage by another crippling bout of turmoil in an eight-year power struggle being fought in Bangkok's commercial heart and in its politicized courts.
 
The intractable crisis centers on the political dominance of the billionaire Shinawatra family, and the slim prospect of a resolution has been sapping consumer confidence, which sank in February to a 12.5-year low.
 
Economists say five months of sporadic violence and anti-government blockades that have scared off tourists could cost 300 billion baht ($9.3 billion) in lost revenue.
 
Some businesses fear the Teflon coating on what's for years been one of Asia's most resilient economies could finally be wearing off.
 
“Consumers have no mood to spend. We've seen demand falling in every segment of our products,” said Boonkiat Chokwatana, chairman of consumer product distributor I.C.C. International Pcl, which saw first-quarter sales fall 20 percent.
 
“In more than 43 years in business, we've never needed to cut our costs, even during the 1997 financial crisis. This year the situation is quite critical,” said Boonkiat.
 
With legal cases stacking up against Prime Minister Yingluck Shinawatra, the confrontation pitting royalists, tycoons and scions tied with the old and new political orders against each other could get much worse.
 
Yingluck's mostly rural, working class supporters are convinced powerful forces in Thailand's establishment are  conspiring to overthrow her, most likely via a court ruling, and they have vowed to fight back.
 
The outlook for the economy looks just as grim, with some economists forecasting growth of less than 2 percent or even contraction if growth of exports, worth 60 percent of gross domestic product, falls short of the 4.5 percent forecast by the central bank.
 
The International Monetary Fund (IMF) last week projected growth of 2.5 percent this year, the slowest among Asian economies and less than the 2.7 percent seen by the Bank of Thailand following two revisions since October, when tension resurfaced.
 
Thailand's credit-hungry consumers are paying the price, with household debt at the end of 2013 hitting a record at 82.3 percent of GDP, compared with 77.3 percent a year earlier and 45 percent a decade ago.
 
“We're not aggressive on loan growth this year,” said Siam Commercial Bank president Kannikar Chalitaporn. “We'll offer [clients] any assistance to prevent loans from turning into bad debt.”
 
The Thai Industries Sentiment Index in February hit its lowest since July 2009, interest in buying property is at its lowest in almost nine years, while domestic auto sales dropped nearly 45 percent in February from a year earlier, after a similar drop in January.
 
Recession looming?
 
The central bank has cut the benchmark interest rate by 25 basis points to 2.0 percent, the lowest since December 2010, and expects the economy to shrink in the first quarter. If that trend continues for another quarter, Thailand would be in recession for the first time since early 2009.
 
“There's a huge risk of technical recession in Thailand,” said Gundy Cahyadi, an economist at DBS Bank in Singapore. “Export growth remains the only support right now, but this alone can't hold up the economy for too long.”
 
Central bank chief Prasarn Trairatvorakul last week said a big rate cut wouldn't help the economy plagued by both a lack of confidence and a policy vacuum.
 
Parliament remains empty after a Feb. 2 election was disrupted, leaving Yingluck heading a caretaker government.
 
The Constitutional Court has not helped. It has ruled consistently against Yingluck's party, annulled an election it probably won and declared illegal a 2 trillion baht ($62 billion) infrastructure spending plan.
 
The Board of Investment said projects worth about 660 billion baht have been on ice, awaiting approval by a new committee the caretaker government has been unable to appoint.
 
The government is at its weakest and any administration that replaces it is almost certain to face the same kind of opposition, meaning many more months of weak business for retailers, the tourism sector and exporters.
 
Hotel occupancy has been hovering at about 50 percent, down from the usual 80 percent, and exports grew just 0.2 percent in the first two months compared with a year earlier.
 
TISCO Bank Pcl cut its forecast for domestic car sales this year to about 900,000 vehicles from 1.1 million-1.2 million, even with a host of zero-interest loans offered by car dealers.
 
Some Thai companies are looking to expand abroad. Handset distributor Jay Mart Pcl said it may revise its target of 35 percent growth this year and aimed to tap high demand in neighboring Myanmar, as Thailand's appetite for top-end smartphones sags.
 
According to market research group Gfk, consumers have been choosing cheaper models from Nokia and iMobile since the protests began, with Apple's sales down from 127,000 units in November to 100,600 in February.

You May Like

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

Audio 'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Study: Insecticide Damaging Wild Bee Populationsi
X
April 24, 2015 10:13 PM
A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.

VOA Blogs

World Currencies

EUR
USD
0.9238
JPY
USD
119.51
GBP
USD
0.6614
CAD
USD
1.2119
INR
USD
63.562

Rates may not be current.