Thailand surprised global economists with 4.2-per-cent economic growth
in the second quarter against the consensus of 3.1 per cent. However, hard
times are coming in the second half when the euro-zone crisis is set to deepen
and drag down Thailand's exports while creating greater volatility in capital
flows across Asean. Along the way, authorities need to stay fully alert.
In its "Credit Outlook"
report last week, Moody's Investors Service praised Thailand for the
unexpectedly strong quarterly results.
Thailand and some other Southeast
Asian nations have shown resilience in the face of the global crisis, bucking
the trend of lacklustre growth in other parts of Asia, particularly in China
and the newly industrialised economies of Hong Kong, Singapore, South Korea and
Taiwan. Thailand's economy grew 4.2 per cent year-on-year, up from 0.4 per cent
in the previous quarter. Indonesia's real GDP accelerated 6.4 per cent in the
second quarter from 6.3 per cent in the first quarter, while Malaysia's rose
5.4 per cent from 4.9 per cent. The Philippines economy, which grew 6.4 per
cent in the first quarter, is expected to show a similarly healthy
second-quarter performance.
Growth in other Asian countries
reliant on international trade was hurt more due to the weak demand in the US
and euro area. But as China's growth decelerated to 7.6 per cent year on year
in the same period, its lowest pace since first-quarter 2009, this raised the
threat of a negative spillover into the rest of Asia, given China's role in
stimulating the region's recovery following the global financial crisis.
Today, Commerce Minister Boonsong
Teriyapirom is calling a brainstorming session with exporters from key sectors.
After earlier setting a 15-per-cent export growth target, the ministry is now
under pressure to come up with a more realistic target. This month, the Bank of
Thailand, Fiscal Policy Office and Thai National Shippers' Council are expected
to revise downward their export growth forecast to 5-6 per cent, as the July
export slump pulled down exports in the first seven months of this year by 0.4
per cent.
Like Indonesia and Malaysia,
Thailand's exports significantly weakened economic growth but domestic demand,
particularly private consumption and investment, has offset the contracting
exports.
"In Thailand, the continued
recovery following last year's floods has driven construction activity and
private capital spending. Historically high rates of gross fixed capital
formation are partially attributed to Malaysia's wide reaching Economic
Transformation Programme and, in Indonesia, strong inflows of foreign direct
investment in recent quarters. In each of these countries, low inflation has
sustained favourable consumer sentiment and private household spending,"
Moody's said.
Amid the gloom in the euro zone
and US, the Asean-5 economies - Indonesia, Malaysia, the Philippines, Thailand
and Vietnam - have been able to withstand the headwinds well.
According to Moody's, the
relatively small contribution of public consumption to overall growth year to
date suggests a degree of policy flexibility for these governments to pursue
stimulus spending. Benign inflation and relatively healthy external buffers
contribute to stable financing conditions. The buoyancy of fiscal revenue
reflects healthy labour markets and the continued profitability of businesses,
both of which are correlated to high economic growth. Nevertheless, commodity
price volatility will have differing effects on fiscal revenue, while
expenditures will likely be muted by smaller subsidy bills.
"Although developing Asean's
immunity to external headwinds may not last for long, central banks in these
countries have the flexibility to cut rates to stimulate activity and relieve
pressure on fiscal authorities to increase deficit spending, thereby raising
debt ratios. Thailand has already cut its policy rate twice to aid flood
reconstruction," it said.
According to HSBC Global
Research, with relatively strong economic fundamentals, Thailand saw its real
GDP return to its pre-crisis peak within five quarters of the Lehman Brothers
fiasco in 2008. The suffering lasted nine quarters when it faced the Asian
crisis in 1997.
Challenges lie ahead, though.
Forecasting a 0.6-per-cent contraction in the euro zone this year and expecting
the situation in the zone to stabilise in the next 6-12 months, HSBC said
capital flows would be a big issue for Thailand and the other Asean-5, based on
the fact that capital flows have had a big impact on credit growth in Asia over
the past 20 years. These countries are more vulnerable to capital flows, inward
or outward. If the global economy enters a deep recession, massive capital
outflows would tighten credit and hurt growth. On the other hand, if things
improve and capital inflows rise substantially over 12 months, there's a risk
of a credit bubble.
Thailand along with Asia has
attracted inflows now, providing relatively safe investment bets. This year,
foreign investors have remained net-buyers of Thai shares by over Bt60 billion.
A larger amount is going to the bond market. Concurrently, in June and July, banks
showed loan growth of over 16 per cent. The Bank of Thailand has insisted that
there is not yet a sign of a bubble, particularly in real-estate lending, which
sparked the 1997 crisis. According to HSBC, greater capital inflows are
anticipated in 12 months and this may ignite tightening measures. But the
outflow scenario is also on the cards.
Expecting mild recession in the
euro area, HSBC noted that Asean-5 still has scope to manage the crisis this
time. In both Thailand and the Philippines, fiscal policy is already geared to
provide support this year, which will help cushion against the impact from
capital reversals and global headwinds more generally.
ACHARA DEBOONME
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com
No comments:
Post a Comment