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Thailand Economic Monitor 2013

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The Thailand Economic Monitor is a free publication produced by Avondale Investment Management (UK) and is a periodical overview of the Thai Economy .Complete with the latest key economic information …

The Thailand Economic Monitor is a free publication produced by Avondale Investment Management (UK) and is a periodical overview of the Thai Economy .Complete with the latest key economic information including a table of key economic indicators.

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  • Hi there,

    I just wanted to say thank you for supporting and liking my publication.

    You might also like my newest publication, A brief guide to ASEAN & the AEC..

    The next Thailand Economic Monitor will be out in January 2014 ,watch this space or just log onto my website.

    sincerely

    Antony Randall
    CEO
    Avondale Investment Management
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  • 1. Thailand Economic Monitor Avondale Investment Management (UK) ‘Company Report’
  • 2. Thailand Economic Monitor
  • 3. Avondale Investment Management (UK) www.avondaleinvestment.com Copyright© 2013 Tony Randall Page 2 An overview of the Thai Economy 2013 The Thai Economy 2012 The economy in 2012 rebounded from the severe floods but continues to be affected by the slowdown in the global economy. Real GDP in 2012 grew by 5.5 per cent supported by the rebound in household consumption and greater investments by both the private and public sectors as part of flood rehabilitation and the government’s consumption-stimulating measures. Capital inflows especially foreign direct investment (FDI) remained strong. In 2012, inflation remained low at around 3 per cent, and is expected to continue to be low throughout this year. Net exports, on the other hand, contributed negatively to GDP growth as exports were affected by production disruptions in the first half of the year and the sharp slowdown in demand from the EU, China, and ASEAN in the second half. The Thai Economy 2013 The economy in 2013 is projected to grow by 5 per cent as manufacturing production fully recovers from the floods and the global economy sees a modest recovery. Exports in 2013 are projected to grow by 5.5 per cent in US dollar terms compared to only 3.6 per cent in 2012. Moreover, domestic demand, particularly investments, will continue its momentum from this year as FDI rises sharply. The Government will also step up its investments particularly in water resource management projects – using around Bt60 billion of the Bt350 billion (USD 11 billion) fund that was approved earlier this year under the Emergency Decree for Water Management. Household consumption growth, on the other hand, may slow down somewhat from that of 2012 as the government’s consumption stimulus measures, such as the First Car Programme, which finished at the end of 2012. The main challenge this year for Thailand’s growth continues to be the high uncertainty in the global economic prospects, particularly related to the Eurozone crisis. Policies of which may have an impact and which have to be closely monitored in 2013 include the rice paddy pledging scheme and the nation-wide rise in minimum wages. For the longer term, issues of skills development and the need to reduce inequalities in incomes and opportunities will be priorities for Thailand. Budget deficit will be 2.5 per cent of GDP for FY2013 in addition to the off-budget spending for water resource management projects in FY2013. The overall budget for FY2013 is set at Baht 2.4 trillion, a 0.8 per cent increase from that of last year. Budget deficit is estimated by the Government to be at Bt300 billion in FY2013, compared to Bt400 billion (2.7 per cent of GDP) in FY2012. However, the FY2013 budget will be supplemented by the off-budget spending on water resource management projects which is estimated to be around Bt60 billion (under the Emergency Decree for Water Management).
  • 4. Avondale Investment Management (UK) www.avondaleinvestment.com Copyright© 2013 Tony Randall Page 3 Public debt is estimated to be close to 50 per cent of GDP in 2013. Much of the Government’s borrowing planned for FY2013 will be used to finance the off-budget water resource management projects under the Emergency Decree on Water Resource Management and the Government’s major policy programmes. The former could amount up to Bt330 billion or around 2.8 per cent of GDP. Borrowing will also be used to finance the Government’s major policy programs. These programmes are estimated to cost around 2.4 per cent of GDP in 2013, while costing 5.5 per cent in 2012. Given these, public debt is estimated to be close to 50 per cent of GDP by end- 2013 from around 45 per cent in end-2012. While this rise in debt level needs to be managed prudently, it is not excessive. Moreover, the structure of Thailand’s public debt is such that over 90 per cent of the debt is domestic debt and long-term. However, because many of the programmes, such as the rice paddy pledging scheme, are also financed through the government’s specialised financial institutions (SFIs), these could weaken their balanced sheets in the future and are contingent liabilities to the Government. Minimum wages were raised by 40 per cent nation-wide in 2012 and have been raised again this year to a uniform rate of Bt300 per day nationwide. On April 1, 2012, minimum wages were raised to Bt300 per day in Bangkok and five other vicinity provinces of Bangkok, plus Phuket province (a 40 per cent increase from the previous minimum wage level in 2012) and by 40 per cent in the rest of the country. In January 2013, minimum wages were raised to Bt300 per day nationwide, raising the national average minimum wage by 22.4 per cent from that of 2012. These hikes are significantly larger than the previous minimum wage hikes which averaged around 2.5 per cent per annum from 2001-2011. However, despite in the rise in wages, unemployment did not rise, but underemployment (number of workers who work part time i.e. less than 35 hours per week and seeking to work more) rose by 14.4 per cent year-on-year in the third quarter of 2012. This is a reflection of a tight labour market in which employers adjust to the higher wages and the slower business activities by not firing workers but by reducing the number of hours demanded from each worker. Special Topic – The Rice Paddy Pledging Scheme The paddy pledging scheme is estimated to cost around 3.5 per cent of GDP each year, while the actual losses will be realized once the rice stocks are sold. Since October 2011, Thailand’s paddy pledging scheme has been expanded to cover all domestically produced rice for sale. The pledged price is set at around 50 per cent or around $200 above international rice prices per metric ton of milled rice. This scheme has cost the government around THB376 billion ($12.5 billion) for the 2011/2012 harvest season (October 2011 to September 2012) or around 3.4 per cent of GDP.
  • 5. Avondale Investment Management (UK) www.avondaleinvestment.com Copyright© 2013 Tony Randall Page 4 The pledged amount is expected to rise from 21.7 million metric tons last harvest season to 25 million this season. Thus, the government is expected to spend around THB 450 billion ($15 billion) or around 3.8 per cent of GDP for the 2012/2013 harvest season. The government has not sold its rice stock so far. The actual losses from the program and the impact on the fiscal stance will be realized only when the government sells it stocks. Given the trend of international rice prices as projected by the World Bank, the losses are estimated to be in the range of Bt115-150 billion (1.0-1.3 per cent of GDP) per harvest season. Source: AIM (UK), The World Bank, and BOT. See also overleaf Appendix 1 Thailand Key Economic Indicators January 2013
  • 6. Avondale Investment Management (UK) www.avondaleinvestment.com Copyright© 2013 Tony Randall Page 5 Thailand Key Economic Indicators January 2013 Item Key Economic Indicator Headline inflation + 2.9% CPI (y-o-y) Private investment + 16.2% (y-o-y) Public Debt 43.9% of GDP GDP Growth + 5.5% Year end 2012 GDP 369.8 Billion USD$ Year end 2012 GDP Per Capita 5,470.9 USD$ Year end 2012 Unemployment rate 0.6% unemployment rate (out of a total of 39 million workforce) Policy Interest rate 2.75% (Bank of Thailand) Official foreign reserves 181.4 USD$( 3.1 times short-term foreign debt) Current account balance 27 Billion .USD$ Private Consumption + 6% (y-o-y) Tourist numbers for Q4 2012 5.3 million + 8.3% (y-o-y) Exports Imports 59.3 Billion USD$ - 3% (y-o-y) 54.3 Billion USD$ - 2.5% (y-o-y) Global competiveness ranking 38th out of 144 global economies, up one place from 39th y-o-y World doing business ranking 17 world ranking doing business second in Asia– Pacific region
  • 7. Avondale Investment Management (UK) www.avondaleinvestment.com Copyright© 2013 Tony Randall Page 6 If you have found this report interesting and want to know about Thailand and other SE Asian country’s or you have any questions relating to this report or investment in Thailand and SE Asia ?SE Then please visit our investment library which has an ever growing number of reports, guides and other literature which are all intended to assist you in finding the right investment opportunity. Alternatively we will be very happy to deal with enquires direct by contacting us at Avondale Investment Management Limited. Company contact details of which can be found by navigating to the contact page of the website at www.avondaleinvestment.com On the other hand, you can mail us at either tonyrandall@avondaleinvest.com or avondaleinvest@hotmail.com Every possible effort has been made to ensure that the information contained in this report is accurate at the time of publication and we make know no warranty about the accuracy or completeness of the content to the maximum extent permitted. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the company and author. Copyright The right of Antony Randall to be identified as the author of this work has been asserted by his accordance with the Copyright, Designs and Patents Act, 1988. All rights reserved. No part of this publication may be reproduced, transmitted in any form or by any means, stored in a retrieval system without the prior written permission of either the author or publisher, or in the case of reprographic reproduction a license issued in accordance with the terms and licenses issued by AIM UK Ltd. Avondale Investment Management (UK) Limited 2013
  • 8. Contact: Avondale Investment Management (UK) Suite 72 Cariocca Business Park , 2 Sawley Road , Manchester. Lancashire. M40 8BB. United Kingdom. Telephone: +44 (0) 7542 701564 +66 (0) 861029556 E mail: tonyrandall@avondaleinvest.com avondaleinvest@hotmail.com Website : www.avondaleinvestment.com “ Inspired Investment Solutions”

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