Thailand's free-falling economy
Thailand's free-falling economy
A pessimistic view of Thailands economy from the Asia Times:http://www.atimes.com/atimes/Southeast_ ... 0Ae01.html
Lots of stats to back that article up, this paragraph hit the nail on the head for me:
As far as I can see we're in reverse at the moment.There is a significant political risk to a further decline in the local economy. Bangkok's business elite largely supported the military's move to oust Thaksin, whose government was perceived by many foreign and local investors as corrupt. However, few foresaw the military-appointed government's nationalistic approach to economic policy, which has alienated big foreign investors.
Who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed? - Hunter S Thompson
The Central Bank has controls in place to ensure the Baht is not speculated on the world market. Unlike all Western Currencies.
To further confuse the issue is the new Onshore and Offshore rates.
Impossible for me to understand.
This article by ANZ Bank is interesting allthough their forecast for June 07 AUD - THBT was way out. Probably because the AUD is very high at the moment. Currently about 84c to USD.
http://www.anz.com/business/info_centre ... 9Feb07.pdf
To further confuse the issue is the new Onshore and Offshore rates.
Impossible for me to understand.
This article by ANZ Bank is interesting allthough their forecast for June 07 AUD - THBT was way out. Probably because the AUD is very high at the moment. Currently about 84c to USD.
http://www.anz.com/business/info_centre ... 9Feb07.pdf
You only live once.
Can you believe anything you read in a newspaper?
First we get the pessimistic view, now we get this in the BKK Post.
Who is right?
Quote.
Thai exports hit historic high
(dpa) - Despite the strengthening of the baht currency against the dollar, Thailand's exports grew 20.9 per cent last month to reach $13.05 billion, an historic high for the month of May, the commerce minister revealed on Wednesday.
During the first five months of this year Thailand's exported goods were valued at $58.74 billion, up 18.8 per cent year-on-year, compared with imports worth $53.42 billion, up 4.4 per cent year, leaving the kingdom with a trade surplus of $5.32 billion, said Commerce Minister Krirk-Krai Jirapaet.
Thailand's top three export items include electronics, electrical machinery and vehicles and parts, which account for more than 70 per cent of its exports. The country is also the world's leading exporter of rice and rubber.
Thailand's robust export performance has continued this year despite a steep appreciation of the baht against the US dollar of more than 3 per cent during the first five months, although there are signs that the strong baht may be affecting Thai exports to the US market.
"We experienced an export growth in every market, except in May where the US market dropped 0.7 per cent," Krirk-krai said.
First we get the pessimistic view, now we get this in the BKK Post.
Who is right?
Quote.
Thai exports hit historic high
(dpa) - Despite the strengthening of the baht currency against the dollar, Thailand's exports grew 20.9 per cent last month to reach $13.05 billion, an historic high for the month of May, the commerce minister revealed on Wednesday.
During the first five months of this year Thailand's exported goods were valued at $58.74 billion, up 18.8 per cent year-on-year, compared with imports worth $53.42 billion, up 4.4 per cent year, leaving the kingdom with a trade surplus of $5.32 billion, said Commerce Minister Krirk-Krai Jirapaet.
Thailand's top three export items include electronics, electrical machinery and vehicles and parts, which account for more than 70 per cent of its exports. The country is also the world's leading exporter of rice and rubber.
Thailand's robust export performance has continued this year despite a steep appreciation of the baht against the US dollar of more than 3 per cent during the first five months, although there are signs that the strong baht may be affecting Thai exports to the US market.
"We experienced an export growth in every market, except in May where the US market dropped 0.7 per cent," Krirk-krai said.
You only live once.
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The understudy
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Ja Ozuncle
I believe that Thailand cannot survive alone through exports. If de export market getz too nurished it could easily drop like a stone in de watar. Foreign investments and a high domestic investments and consumption plus a strong export hafta work together in balance for us to have a strong economy. Right now I can see Foreign investments still in waiting position 4 clearin skies on da political Horizon and the Domestic Consumption is still laglusrtre.
Da burden is too much on exports which can be risky if de market getz to over saturated and Thailand can't sell them products. If da export market slows down we could well see a burst of the econ bubble. if Thailand ain't have something to cushion the slowdown by the da two factors above as I mentioned.
A Raegge music fan concerned of Thailands future
Your's the understudy!!!
I believe that Thailand cannot survive alone through exports. If de export market getz too nurished it could easily drop like a stone in de watar. Foreign investments and a high domestic investments and consumption plus a strong export hafta work together in balance for us to have a strong economy. Right now I can see Foreign investments still in waiting position 4 clearin skies on da political Horizon and the Domestic Consumption is still laglusrtre.
Da burden is too much on exports which can be risky if de market getz to over saturated and Thailand can't sell them products. If da export market slows down we could well see a burst of the econ bubble. if Thailand ain't have something to cushion the slowdown by the da two factors above as I mentioned.
A Raegge music fan concerned of Thailands future
Your's the understudy!!!
In Love with Hua Hin since 19naughty9 and it ain't fading!!!
(My fable for All Things Japanese knows no boundaries!) Proud Student of Stamford University Hua Hin Campus from 1999 to 2004 (5th Batch of Graduates.)
“Once you survive Stamford U Hua Hin Campus only you can survive anything!!!”
(My fable for All Things Japanese knows no boundaries!) Proud Student of Stamford University Hua Hin Campus from 1999 to 2004 (5th Batch of Graduates.)
“Once you survive Stamford U Hua Hin Campus only you can survive anything!!!”
The contradiction between the pessimism in the AT article and the present strength of the baht relates to the prospects for long term growth versus the benefits presently accruing from sound decisions made in the several years after the 97 meltdown. The real problem is that current policies are being directed away from those policies and away from globalisation at a time when nearly every country in the world recognises that growth is dependent on integration into the global economy. I have predicted that when Thais realise this and that their future standard of living will be adversely affected that there will be a serious backlash. It would be nice to be able to pick and chose when you are going to join the world economy and when you want to live in isolation from the world economy. But such wishful thinking is incredibly naïve.
It is a bit like having say US$50,000 to spend on a car, bearing in mind that you can only have one car and that you will use it as your daily car. You have a choice of two cars both of which cost the same. Do you buy say a 40 year old classic, that you dreamt of owing in your youth, even though the car lacks modern fuel economy, power steering, suspension, ABS braking etc. and try and live out your dreams, or do you spend the money on a new car with all the latest technology? I fear that Thailand wants to buy the 40 year old classic. Great for nostalgia, but is it practical?
It is a bit like having say US$50,000 to spend on a car, bearing in mind that you can only have one car and that you will use it as your daily car. You have a choice of two cars both of which cost the same. Do you buy say a 40 year old classic, that you dreamt of owing in your youth, even though the car lacks modern fuel economy, power steering, suspension, ABS braking etc. and try and live out your dreams, or do you spend the money on a new car with all the latest technology? I fear that Thailand wants to buy the 40 year old classic. Great for nostalgia, but is it practical?
I can't fathom it either, other than knowing that the Thais are being extremely protective of their currency at the moment. That was the reason for the 30% capital controls on transfers over 20k US and these blasted onshore/offshore rates.ozuncle wrote:The Central Bank has controls in place to ensure the Baht is not speculated on the world market. Unlike all Western Currencies.
To further confuse the issue is the new Onshore and Offshore rates.
Impossible for me to understand.
This article by ANZ Bank is interesting allthough their forecast for June 07 AUD - THBT was way out. Probably because the AUD is very high at the moment. Currently about 84c to USD.
http://www.anz.com/business/info_centre ... Thaibahtup
date-9Feb07.pdf
At least if you live here, you get the onshore rate from an ATM/bank if you withdraw money from abroad. I think the discrepancy between the two rates is about 3 Baht to the pound at the moment.
I'm only guessing here, but perhaps there's some concern within Thailand that if they let the Baht float freely again, it'll get hit big time, like it did in 1997.
Then again, as gaijin says, what goes around comes around, and no matter what the Thais want, the valuation of the Baht may well need to be adjusted in the longer term.
I'm also surprised that there's such a claim for exports. It wasn't long ago that Thai exporters were shouting from the rooftops about the damage the strong Baht would have on their businesses. Maybe, as with a lot of economics, published figures are by their nature historical and the real effect, whilst being felt right now, isn't being backed up yet by statistics? Wait another 3-6 months?
Either way, I also reckon the Thais are living in cloud cuckoo land to an extent. Just look at petrol prices. They were kept artificially low for years and when price increases came in a couple of years ago, people naturally started getting jittery. My wife was always complaining about how it was costing more to fill up and that's just from a "everyday level". The overall effect was inflation. I'd reckon that our expenses here have gone up at least 10% over the past year or so and that's without any increase in rent. A normal Thai person is sure to be feeling the pinch now.
Just my tuppence worth. I really should try to understand the situation more fully.
Your post was indeed a very good explanation of the current mismatch between the Baht and other currencies gajin.gaijin wrote:The real problem is that current policies are being directed away from those policies and away from globalisation at a time when nearly every country in the world recognises that growth is dependent on integration into the global economy.
But didn't the Baht start it's up - up and away flight under the former Thaksin regime?
If it did; how is it possible that a military coup have no infliction at all to the domestic stock exchange, or the other Asian stock exchanges?
It's weird!
I intend to live forever - so far so good.
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JimboPSM
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I have been struggling to correlate the movements of the THB over the last few years with economic data, natural disasters, political events etc as they do not seem to make any sense when compared with the value of the THB since 1997(ish).
A comment I read on another forum reminded me of the THB values prior to 1997 and that may help offer some explanation.
The USD/THB rate up to 1997 was in the 25 (ish) range and GBP/THB was in the 40(ish) range.
Looking at long term charts now (mine go back to 1981), I think the level the THB subsequently settled at after the initial fall off the cliff edge in 1997 may have been an over-correction.
What we have seen since may have been that over-correction starting to unwind.
This unwinding would explain the apparent lack of impact of all of the various negative data from recent times.
Please remember, this is only a very simplistic theory, but it’s the best I’ve come up with so far – I hope the theory is wrong (and that some of you can constructively tear it to pieces) – if the theory is right it means that the THB could continue to rise further heading back towards 25 THB/USD and 40 THB/GBP and that is scary.
A comment I read on another forum reminded me of the THB values prior to 1997 and that may help offer some explanation.
The USD/THB rate up to 1997 was in the 25 (ish) range and GBP/THB was in the 40(ish) range.
Looking at long term charts now (mine go back to 1981), I think the level the THB subsequently settled at after the initial fall off the cliff edge in 1997 may have been an over-correction.
What we have seen since may have been that over-correction starting to unwind.
This unwinding would explain the apparent lack of impact of all of the various negative data from recent times.
Please remember, this is only a very simplistic theory, but it’s the best I’ve come up with so far – I hope the theory is wrong (and that some of you can constructively tear it to pieces) – if the theory is right it means that the THB could continue to rise further heading back towards 25 THB/USD and 40 THB/GBP and that is scary.
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Wanderlust
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JimboPSM,
Interesting theory but I don't think it holds water, simply because the US dollar is going through a period of correction itself so you can't really use it as a benchmark. The pound is probably a better one to compare with, and to be honest that has been relatively stable against the baht, although there was a short period when it was running at a bit over 70 baht to the pound before the currency controls and the onshore/offshore rates started, but since then it has been floating around the 64 to 67 baht to the pound level.
I haven't got any tables to check but from memory, when I first came to Thailand in 1998, for at least 2 years the pound was at about 60, but seemed to be edging, on average, a little higher every year, and had reached an average level of 65 last year. I predict this will be about 66 or even 67 as an average by the end of this year. I have been surprised at the baht's resiliance after the coup, but I am pretty sure it is being supported by interested parties, namely the Bank of Thailand under the instruction of the current regime. Once that support ends we could see the pound go to 75 or even 80, but the dollar is a different ball game, and your prediction of it continuing to drop could well come true.
Interesting theory but I don't think it holds water, simply because the US dollar is going through a period of correction itself so you can't really use it as a benchmark. The pound is probably a better one to compare with, and to be honest that has been relatively stable against the baht, although there was a short period when it was running at a bit over 70 baht to the pound before the currency controls and the onshore/offshore rates started, but since then it has been floating around the 64 to 67 baht to the pound level.
I haven't got any tables to check but from memory, when I first came to Thailand in 1998, for at least 2 years the pound was at about 60, but seemed to be edging, on average, a little higher every year, and had reached an average level of 65 last year. I predict this will be about 66 or even 67 as an average by the end of this year. I have been surprised at the baht's resiliance after the coup, but I am pretty sure it is being supported by interested parties, namely the Bank of Thailand under the instruction of the current regime. Once that support ends we could see the pound go to 75 or even 80, but the dollar is a different ball game, and your prediction of it continuing to drop could well come true.
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JimboPSM
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Wanderlust, your comments just caused me a day creating a new set of data and charts using annual averages of the buy/sell rate; they actually make (for me) an interesting comparison against my daily and monthly charts for most they would just be a good cure for insomnia.
As you arrived in 1998, these are the average annual rates, with movements and percentages since then (the charts I have show it better, but I can’t upload them):
Looking at the GBP side of the GBP/THB equation is much tougher as HMG does an excellent job in the obfuscation or (Tony) Blurring of its performance. The average rate for the year to date is 69.2 (a fall of 0.5 THB or 0.7%).
Looking at the THB side of the equation, the list of negatives is large with the only significant positive being the balance of trade surplus (as long as you believe the reported figures) even that now appears to have peaked and be in decline.
The trend lines which I have on my charts (which are only mathematical projections from historical data) show 72 for GBP and 35 for USD at the end of the year and should be taken with a large pinch of salt.
Before thinking of GBP/THB rate getting to 75, think what that would actually require in GBP/USD and USD/THB, for example to get 75 you would need one of following sets of circumstances:
Unfortunately, I’m afraid all of the above still doesn’t give any answers to the resilience of the THB.
As you arrived in 1998, these are the average annual rates, with movements and percentages since then (the charts I have show it better, but I can’t upload them):
- GBP/THB
1998 - 68.4
1999 - 61.2 – 7.2 THB or 10.6% Fall
2000 - 60.7 – 0.5 THB or 0.8% Fall
2001 – 64.0 – 3.3 THB or 5.4% Rise
2002 – 64.5 – 0.5 THB or 0.8% Rise
2003 - 67.8 – 3.3 THB or 5.0% Rise
2004 - 73.7
– 5.9 THB or 8.7% Rise
2005 - 73.1 – 0.6 THB or 0.7% Fall
2006 – 69.7 – 3.4 THB or 4.6% Fall
USD/THB
1998 - 41.3
1999 - 37.8 – 3.5 THB or 8.5% Fall
2000 - 40.1 – 2.3 THB or 6.1% Rise
2001 - 44.4 – 4.3 THB or 10.8% Rise
2002 – 43.0 – 1.4 THB or 3.3% Fall
2003 - 41.5 – 1.5 THB or 3.4% Fall
2004 - 40.2 – 1.3 THB or 3.0% Fall
2005 - 40.2 – no change
2006 - 37.9 – 2.3 THB or 5.8% Fall
- 1. US Government expenditure was 2.97 Trillion dollars more than its income in the 6 years from 1st Oct 2000 to 30th Sep 2006.
2. The annual US trading deficit is now heading to a Trillion dollars.
Looking at the GBP side of the GBP/THB equation is much tougher as HMG does an excellent job in the obfuscation or (Tony) Blurring of its performance. The average rate for the year to date is 69.2 (a fall of 0.5 THB or 0.7%).
Looking at the THB side of the equation, the list of negatives is large with the only significant positive being the balance of trade surplus (as long as you believe the reported figures) even that now appears to have peaked and be in decline.
The trend lines which I have on my charts (which are only mathematical projections from historical data) show 72 for GBP and 35 for USD at the end of the year and should be taken with a large pinch of salt.
Before thinking of GBP/THB rate getting to 75, think what that would actually require in GBP/USD and USD/THB, for example to get 75 you would need one of following sets of circumstances:
- 1. GBP/USD rate of 1.70 and USD/THB rate of 44.1
2. GBP/USD rate of 1.80 and USD/THB rate of 41.7
3. GBP/USD rate of 1.90 and USD/THB rate of 39.5
4. GBP/USD rate of 2.00 and USD/THB rate of 37.5
5. GBP/USD rate of 2.10 and USD/THB rate of 35.7
6. GBP/USD rate of 2.20 and USD/THB rate of 34.1
7. GBP/USD rate of 2.30 and USD/THB rate of 32.6
8. GBP/USD rate of 2.40 and USD/THB rate of 31.3
9. GBP/USD rate of 2.50 and USD/THB rate of 30.0
Unfortunately, I’m afraid all of the above still doesn’t give any answers to the resilience of the THB.
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Wanderlust
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JimboPSM,
Thanks for that - I was obviously talking of the actual rates I was getting against the pound, rather than the money markets but other than that the general movements were as I thought. The average rate in 1998 was obviously somewhat distorted between the beginning and the end of the year - when I arrived in the September it was definitely around the 60 mark for tourists. I still think that, probably late this year or in the first half of 2008 it will rise above 70 and stay there (obviously dependent on the pound not suffering some disaster!).
Thanks for that - I was obviously talking of the actual rates I was getting against the pound, rather than the money markets but other than that the general movements were as I thought. The average rate in 1998 was obviously somewhat distorted between the beginning and the end of the year - when I arrived in the September it was definitely around the 60 mark for tourists. I still think that, probably late this year or in the first half of 2008 it will rise above 70 and stay there (obviously dependent on the pound not suffering some disaster!).