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

Ukraine: Mysterious 'Roaming Tank' Reportedly Takes Aim at Smugglers

Ukraine's TV, print media, Facebook abuzz with reports a 'roaming tank' is on the loose, destroying vehicles of those involved in smuggling More

US Wildlife Service Begins Probe of Killing of Cecil the Lion

Minnesota man accused of killing beast is in hiding, has been asked to contact US officials; White House to review extradition petition More

Video Kerry Five-Nation Tour to Cover Security, Iran Nuclear Deal

Secretary of state will visit Egypt, Qatar, Singapore, Malaysia, Vietnam to discuss security issues, Iran nuclear deal, Trans-Pacific Partnership More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs

World Currencies

EUR
USD
0.9066
JPY
USD
123.75
GBP
USD
0.6394
CAD
USD
1.2954
INR
USD
63.904

Rates may not be current.