Thailand economy

By Dan Gallucci, Asean Confidential

General Prayuth Chan-ocha, leader of the May 22 coup d’état that returned Thailand yet again to a state of military rule, has repeatedly emphasised the country’s need for a “return to happiness” following months of political chaos. He has even released a song about it.

The coup-makers appear to have so far accomplished this task according to some yardsticks: consumer confidence is up nationwide (see chart), and in Bangkok the streets are safer and traffic is no longer disrupted by protests. Many Thais approve both of the coup itself and the job the generals have done managing the country since. 

Ben Simpfendorfer, Silk Road Associates

Walk along the chilled meat aisle in Wellcome, a Hong Kong supermarket chain, and Betagro’s pork products stand out. The company is one of Thailand’s largest poultry and pork producers exporting nearly $700m annually with the large share shipped to Europe and Japan, where buyers are attracted by not just the product’s price, but also its quality.

Indeed, it’s the latter that makes Betagro’s pork products stand out from its competitors in Hong Kong. Each package has a QR code that allows customers to trace the product’s origins right back to the farm-gate, a major attraction in a market where food health safety concerns are an increasingly big driver of consumer preferences, local and foreign. 

Dan Gallucci, Asean Confidential

Whatever progress toward a stable democracy Thailand has lost with the military’s ouster of the elected Puea Thai government, an economic analysis of the country’s latest coup must confront the following facts. First, the Yingluck Shinawatra administration had severely mismanaged the Thai economy even before the political crisis began. Second, the economy has been far more impacted by this turmoil than headline numbers currently reveal.

It will be difficult for any government the junta installs to do worse. 

By Gavin Bowring, Asean Confidential

It might seem odd to think of Cambodia as a haven of political stability. Labour unrest in Cambodia’s garment factories turned violent in January this year, while the country’s opposition party, the Cambodia National Rescue Party (CNRP), has boycotted Parliament for six straight months in protest of last year’s “flawed” general elections.

Nevertheless, in the space of a week, Cambodia has seen thousands of Chinese residents in Vietnam fleeing across the border as a result of escalating tension between China and its southern neighbour, Vietnam. Meanwhile, the recent military coup in Thailand led to implicit suggestions by the lawyer of former prime minister Thaksin Shinawatra that Cambodia might be willing to host his “government-in-exile”, though these suggestions have been denied by Cambodian Prime Minister Hun Sen. 

By Adithep Vanabriksha, Aberdeen New Thai Investment Trust

Thailand, the famed ‘Land of Smiles’, has been a lot less joyful during months of anti-government street protests in Bangkok.

Violent demonstrations, legal challenges, a botched election and the fallout from a misguided policy of rice subsidies that the government is struggling to honour have rocked the administration of Yingluck Shinawatra, the prime minister. 

Has the Bank of Thailand blinked in the face of the country’s escalating protests? In a surprise move, the bank cut its policy interest rate on Wednesday by 25 basis points to 2.25 per cent a year, highlighting weaker than expected growth in the third quarter and the “ongoing political situation”.

Indeed, growth is expected to be weaker towards the end of 2013 and through 2014. But has the bank made the wrong call? 

Thailand’s GDP figures were a bit of a disappointment on Monday, showing growth in Q3 of just 2.7 per cent.

The main culprit was domestic demand, which fell 1.2 per cent year on year. That’s a particular blow as local consumption has up to now been one of the most consistent drivers of growth: since 2007, domestic demand has fallen only in the exceptional circumstances of the global financial crisis of 2008-09 and Thailand’s huge floods of 2001. So what’s the problem now? 

Thailand’s central bank held rates on Wednesday at 2.5 per cent, despite concerns over both the global economy and a slowdown in domestic activity.

Having dropped rates in four 25 basis points steps since late 2011, is that it for the cutting cycle? 

It was one of those moments that investors and analysts in Thailand have been waiting for: insight into the government’s massive Bt2,000bn ($68bn) infrastructure spending plan.

But rather than a big press conference, it came in a little-publicised lunch talk by Chadchart Sittipunt, Thailand’s transport minister, to members of the Japan-Thailand Association last Friday. 

By any comparison, 2012 was a bumper year for new issues on the Thai stock market. Companies and property funds listing on Thailand’s bourse raised $1.8bn – the most since 2002.

With stock prices strong, investors can expect a lot more in 2013 – the Stock Exchange of Thailand forecasts that the market capitalisation of new listings will climb from Bt116bn ($4.03bn) in 2012 to Bt120bn ($4.2bn) 

The yen shock has sent shudders around Japan’s Asian exporter rivals, not least Thailand.

The baht has soared spreading consternation among exporters. But even in a country where exports are over 75 per cent of GDP, the picture isn’t as simple as it seems. First, currency isn’t the only determinant of export competitiveness in a world of complex trade flows. And second, there could be benefits to Thailand in the expected outflow of Japanese money seeking higher yields in emerging markets. 

Where's my iPad?

A Thai government deal to supply 1.8m school children with tablet computers, the largest contract of its kind in the world, could tempt about 10 manufacturers to bid.

At just under $100 a tablet, the margins will be wafer-thin. But there will be considerable kudos for the winners. In a fiercely-competitive market that will do no harm. 

What rebound? After the catastrophic floods of late 2011, Thailand should by now be hoping for something closer to normality in terms of trade.

Instead, it’s got the biggest trade deficit on record in January – a whopping 5.5bn, the largest since 1991. What’s going on? 

Thailand has done it again – exceeding all expectations, even those of its own central bank. The government said on Monday that GDP grew 3.6 per cent in the fourth quarter of 2012, up 18.9 per cent on the same period in 2011 and bringing full-year growth to 6.6 per cent. The fourth quarter figure is the highest since records began in 1994 and was received as excellent news for the Kingdom – but has also fuelled concerns that a bubble is in the making. 

Thailand’s appetite for construction and public debt appears far from sated, judging by a huge infrastructure spending bonanza now poised for approval by the government.

At a time when most capitals are scrambling to reduce national debt, the Thai government is finalising plans for a long-promised infrastructure building spree estimated at Bt2,000bn ($67bn) that some critics warn will tip public debt over 50 per cent of GDP, from its current 41 per cent level.