SURVEY: Can the Thai Economy weather a global downturn?

[Scott]

There have been numerous threads about the Thai economy.   There are concerns that the trade war could have a negative impact on the Thai economy.     Which of the following best expresses your opinion on the future of the Thai economy?

 

Please feel free to leave a comment.

 

Here are some links on the economy.

 

https://forum.thaivisa.com/topic/1118550-thai-central-bank-to-cut-2019-growth-forecast-again-government/

https://forum.thaivisa.com/topic/1118654-encouraging-signs-emerge-amid-high-economic-risks-nesdc/

https://forum.thaivisa.com/topic/1119140-exports-up-428-last-month/

[Percy P]

The Thai economy is not good at the moment export shipping is very much down. Thailand has abundant amount of money in their foreign reserve more than enough to pay for their Foreign debt. Foreign debt can't be paid in Thai Baht. Foreign money is created by tourism . The Baht will stay high with more tourists coming . Each tourist is required to bring in to the Kingdom 20,000 Baht or equivalent money which adds to the Foreign reserve. Supply and demand, the more the tourists the more the demand for the Baht, so the Baht stays high.

[NightSky]

I think the global economy is teetering on the edge, if the larger economies go into recession so will Thailand's much smaller economy and as I understand there is a lot of personal debt floating about (credit card, car and home loans) therefore if certain events happen it could get ugly for many.

 

Of course Thais and Thailand will be OK, but the growth spurt may falter for a while.

 

 

[DrTuner]

Peasants will go back to rice fields to live in minimum existence and BKK cream gets richer. The usual.

[Kurtf]

Since much of the Thai economy is based on tourism, it is a no brainer to assume with a global economic downturn things like vacations will be put on hold. Ergo less tourists and less tourist dollars/pounds/Euro being spent in the land of smiles.

[simtemple]

The question is what impact will the Grand Solar Minimum, coupled with a severe economic downturn, the likes never before seen, have on Thailand and the rest of the World.

 

Chinese scientists warn of global cooling. 

https://electroverse.net/chinese-scientists-warn-of-imminent-global-cooling/

 

2020s Worst Recession in US History. 

https://www.google.com/amp/s/www.forbes.com/sites/johnmauldin/2018/05/24/the-2020s-might-be-the-worst-decade-in-u-s-history/amp/

[MartinKal]

IMF REPORT ON THE THAI ECONOMY
https://is.gd/A6ldak

“To support domestic demand, the team recommends an expansionary policy mix consisting of judicious use of fiscal space, fiscal reforms, and monetary easing consistent with a data dependent approach."

*What does it mean: "monetary easing"? 

It means increasing the money supply so more to invest and spend, ie more growth to make up for loss in exports and tourism that is causing the economy to slow.

*How is it done?

The Central Bank creates money and spends it buying bonds from the government, banks and pension funds. 

*What are the effects?

Means banks can lend more to companies and individuals for them to spend. So it stimulates the economy. Supposedly...

It pushes up demand for assets, so it increases their prices and reduces the return you get, reducing interest rates. The idea is to make money cheaper, you can borrow more for less, and so you spend more. And low interest rates don't exactly give you an incentive to save.

It's great if you are flush with assets. But if you have nothing, or if you have a little and rely on a pension or some investment for your income, you are going to be unlucky. You will be hard hit.

*Does Quantitative Easing (QE) work?

Yes. That's its real name. But it is a dirty word these days.

-The Japanese tried it first in the 1990s to arrest a period of turmoil, but they are still a stagnating economy almost 30 years later and now they have just about the biggest debt in the world after the States.

-The European Central Bank tried it starting in 2015. Then they gave it up. And now they are probably going to take it up again. Has it helped European economies at all? The evidence is no it hasn't and many people think the Euro and the EU will collapse in the next few years.

-QE was very quickly adopted by the US after the 2008 crisis. Maybe it has helped in part. And with Trump's tax reductions the economy seems to be running on 3-3-3. Means 3% growth, 3% unemployment, and 3% inflation. So this is the Goldilocks solution everyone is looking for.

-And finally, the UK started QE in 2009 and again it is very hard to prove whether it helped or not but the UK economy is running okay, there is enough credit and financial stability, and Brexit will doubtless spur the UK and wider world economy on to greater heights....but that's Brexit for you, not QE.

*What can go wrong?

At the moment, that IMF report shows that there is negligible inflation in the Thai economy. So the worry is of stagnation. But the longer term worry of having too much money chasing too few goods is rapid inflation.

And the other danger that people never talk about is that one day all this extra borrowing will have to be repaid. And how can this be done? Only out of profits (taxes) from really fast growth or by hyper inflation devaluing the debt. Neither of which are  pleasant. 

But there is a third way and that is to kill your creditors: this is called War. And that is a real danger imho. That is where this US-China Trade War could be heading. Or with Iran. It's just an excuse to turn the competition's economies and ibfrastructure to rubble and spend a lot of money on your military doing that.

*My personal take and it's  from reading the newspapers as anyone can do:

 

Sort out the problems locally, on the ground (and they are very well documented in that brief report) and don't go down the addictive route of debt dependence, it's too easy - no such thing as a free lunch. It's just a scam by the US to drag you into a solution for their own problems ( remember the Tom Yum Goong crisis of '97).

If you do want to print money, don't give it to the private sector as it will only benefit the elite, impoverish further the poor which can only promote civil unrest again, and exacerbate original inequalities. Give it on infrastructure projects which involve the whole country and the whole Workforce.

If you really do believe that the end of the world is nigh, then get into gold and use that to pick up some really good bargains at the other end of Armageddon.

[overherebc]

As long as the tourist numbers go up it could weather WW3.

[Brunolem]

During the massive international financial/economic crisis coming soon, Thailand will fare "better" than the so-called developed countries, because it is not hampered by massive social costs/promises. 

 

In the West, a huge number of people rely on the state for their daily lives (pensions, unemployment, food stamps, you name it...). 

 

These already bankrupt states will resort to huge budget deficits and massive money printing, for a while, until hyperinflation will settle, and their currencies will go down even further against the baht, and other East Asian currencies. 

 

Meanwhile, Thailand and a large part of East Asia will wait things out (which will be long). 

 

People having lost their jobs will go back to the family farm and live on the cheap, something unthinkable in the West. 

 

Tourism will go down to zero, like during the SARS crisis in 2002, but for a much longer time. 

 

There will be a lot of repossessions of unpaid cars and bikes, and the prices on the second hand market will crash. 

 

As usual, all the constructions in seaside resorts will stop overnight. 

 

Like in every major crisis, it will be a time of opportunities for those having money on the side.. 

 

After all, what are crisis for, if not for transferring more assets from the have not to the haves... 

[khunPer]

Circa 20% of Thai foreign currency originates from tourism, which from latest stats are still slightly up by 1.5 percent in incoming numbers for first half of 2019.

 

Export in general, for the first time in four years, is predicted to hit a 0.64 percent drop for the full year 2019.

Source: Thaivisa News "UTCC forecasts export downturn in 2019’s second half"

 

A major problem is the strong Thai baht, and increase of interest rate by 0.25 last December, but a strong currency, and high interest rate, can also be a sign of good financial health, and a tool to work with for increasing export and tourism.

 

However, it seems like a lot of the usual tools to predict economy are not working in the "negative interest-rate era", so we can both head towards a changing World, or head towards Global financial meltdown; the Domesday activists has talked about the latter almost ever since the last financial crisis.

 

World economy seems more unpredictable than ever before – and the large dollar-economy's present leader also seem fairly unpredictable – who would have believe that one can borrow money on private real estate, and getting paid for borrowing; that's the situation right now in my Scandinavian home country, however the payment after various credit insurance fees is rather small, but still in positive favor of the borrower.

 

The SET stock market seem to have more a life of it's own, than just following the market trends, and foreign currency moves might locally affect the SET different compared to International stock market.

 

I think Thai economy will bumble through...????

[1FinickyOne]

All three and same for every economy... each will be hurt, each will bumble through... 

 

Do you think they are going to put the place up for sale? Like Greenland? 

 

They have lasted this long through downturns, wars, depressions and a tsunami... 

[NightSky]

[NoshowJones]

1 hour ago, overherebc said:

As long as the tourist numbers go up it could weather WW3.

The tourist numbers going up as far as I know, will be with the Indians and Chinese, and they are not big spenders. I was in Bangkok last week and it was conspicious by the absence of Farangs, yet when I go to the UK next week on holiday, I will bet the plane is full.

[Pedrogaz]

I am concerned at the quality of political and economic leadership, and the reasoning behind decision making which is often obscure and rarely if ever based on understandable analysis of actual data. It is government by sound bite, obfuscation and outrageous corruption. 

This will hurt Thailand's ability to 'bumble' along.

Today there is no economic direction, in total contrast to the days of the hated Thaksin (where we had the society moving into the 20th century with a health service, plenty of schools and hospitals and the beginnings of a pension scheme).

Now we have nothing but the fear of the loss of face of individual members if the leadership, and some of them are pretty hard-faced and shameless.

[moonseeker]

4 hours ago, Kurtf said:

Since much of the Thai economy is based on tourism, it is a no brainer to assume with a global economic downturn things like vacations will be put on hold. Ergo less tourists and less tourist dollars/pounds/Euro being spent in the land of smiles.

Tourism is a relatively small part of the TH economy. It is just that we read daily about it, what makes it appear much bigger. There are major export industry.

And the myth of Chinese not spending money. Think again or ask your watch, jewelers, brand shops in tourist areas at home.... You will be surprised...The links below just for general information.  Regards. MS>

 

https://en.m.wikipedia.org/wiki/Economy_of_Thailand

 

https://thethaiger.com/news/opinion/why-the-chinese-are-infinitely-more-important-than-western-tourists-to-thailand

[akampa]

5 hours ago, Percy P said:

The Thai economy is not good at the moment export shipping is very much down. Thailand has abundant amount of money in their foreign reserve more than enough to pay for their Foreign debt. Foreign debt can't be paid in Thai Baht. Foreign money is created by tourism . The Baht will stay high with more tourists coming . Each tourist is required to bring in to the Kingdom 20,000 Baht or equivalent money which adds to the Foreign reserve. Supply and demand, the more the tourists the more the demand for the Baht, so the Baht stays high.

Just because you have to bring in 20,000 Baht does not mean you have to spend it, most people buy flights and hotels before arriving, so adding to foreign  reserves not so much.

[hansnl]

9 minutes ago, Pedrogaz said:

I am concerned at the quality of political and economic leadership, and the reasoning behind decision making which is often obscure and rarely if ever based on understandable analysis of actual data. It is government by sound bite, obfuscation and outrageous corruption. 

This will hurt Thailand's ability to 'bumble' along.

Today there is no economic direction, in total contrast to the days of the hated Thaksin (where we had the society moving into the 20th century with a health service, plenty of schools and hospitals and the beginnings of a pension scheme).

Now we have nothing but the fear of the loss of face of individual members if the leadership, and some of them are pretty hard-faced and shameless.

The T era also had the murder of a few thousand so-called drug figures, the shameless use of public  money for personal use, the sale of public land to private persons for huge profits for the latter, the official aknowledgement of black money, the repression of the non red shirts, the violent actions against oppositions, and the destruction of millions worth of public property etc, etc, etc.

You forgot all that?

[Fex Bluse]

15 minutes ago, moonseeker said:

Tourism is a relatively small part of the TH economy. It is just that we read daily about it, what makes it appear much bigger. There are major export industry.

And the myth of Chinese not spending money. Think again or ask your watch, jewelers, brand shops in tourist areas at home.... You will be surprised...The links below just for general information.  Regards. MS>

 

https://en.m.wikipedia.org/wiki/Economy_of_Thailand

 

https://thethaiger.com/news/opinion/why-the-chinese-are-infinitely-more-important-than-western-tourists-to-thailand

Tourism is estimated by some to be up to 20% of Thai GDP. And if we add the sex and other illegal tourism trade of 10%, it could be as high as 30+% of Thai GDP. 

 

THAT is why we hear about it so much. 

[Skeptic7]

I voted "bumble", as it is the most bumbling place I've ever been...other than India. It's bumbled thru coups, corruption, scheming, floods, droughts, violent protests, bombings, airport shutdown, Bangkok Shutdown (multiple major intersections blocked for days) and constant political unrest and bad decision making. All this while the economy keeps chugging along unfazed. It's off the backs of horrendous near zero labor costs of their citizens and off the backs of all of our foreign currency pouring in...and now alot of it being held hostage. 

 

Rumble...Bumble...but almost never seems to Stumble. Not in over 2 decades anyway. Hoping for the BIG STUMBLE, but not holding breath.  

[onera1961]

 

42 minutes ago, moonseeker said:

Tourism is a relatively small part of the TH economy. It is just that we read daily about it, what makes it appear much bigger. There are major export industry.

And the myth of Chinese not spending money. Think again or ask your watch, jewelers, brand shops in tourist areas at home.... You will be surprised...The links below just for general information.  Regards. MS>

Export is almost 65% but again Thailand has a large informal economy (government does collect any VAT) and Thais will survive as most Thais depend on this informal economy. The tourism industry will also survive (may be at a reduced level) and that will keep the foreign currency coffer full. May be it will arrest the Baht appreciation which is going out of control. May be Thailand needs to slow down the economy to prevent further rise of Baht. 

[RotBenz8888]

3 hours ago, Skeptic7 said:

I voted "bumble", as it is the most bumbling place I've ever been...other than India. It's bumbled thru coups, corruption, scheming, floods, droughts, violent protests, bombings, airport shutdown, Bangkok Shutdown (multiple major intersections blocked for days) and constant political unrest and bad decision making. All this while the economy keeps chugging along unfazed. It's off the backs of horrendous near zero labor costs of their citizens and off the backs of all of our foreign currency pouring in...and now alot of it being held hostage. 

 

Rumble...Bumble...but almost never seems to Stumble. Not in over 2 decades anyway. Hoping for the BIG STUMBLE, but not holding breath.  

 

Almost like a self-fulfilling prophesy, the longer they resist any economic downturn, the less likely it'll ever occur, a teflon economy.

[Guitarzan]

Part of the trade war is the theft of copyrights. To open a business in China one must turn over and submit all data to the Xhubese government. The communists don’t care if your company goes out of business because there are hundreds of other Chinese companies who now have all of your intellectual property and are happy to copy it. 

 

I see this trade trade war as a good thing for countries like Thailand to attract all the business that will be fleeing China in the next 5 years. Seize the moment as they say.

 

The trade war is good for other south east Asian countries as well. 

[bowerboy]

I live in the Rayong area and the scale of the investment into road upgrading and modification is truly enormous...

 

The entire area from Klaeng to Pattaya to Bangkok to Chachangseo is one massive road works. To my untrained eye much of it looks like useless or superfluous work (knocking down already existing bridges and extending them by 200 meters for no apparent benefit, underpasses that are hard to imagine adding any benefit etc). What they all have in common is being large scale EXPENSIVE projects where smaller and cheaper more effective projects may of been better suited.

 

One cannot help but feel that all of this roadwork is purely a vehicle for corruption. I cannot see any other reason or benefit.

 

Houses, hotels and shopfronts are springing up absolutely everywhere as well as new homeware stores  and car showrooms. It is a real “build it and they will come” approach.

 

I know Teflon Thailand always seems to bumble along but you do really need to see the full extent of what is happening on the eastern seaboard.

 

Where will all these people be coming from and for what reason? There are no new factories being built and no jobs created that I can see or have heard of (other than building the houses and staff for the homeward stores). 

 

They had better come.....because if they don’t then we are headed for 1997 again in my my opionion

[RickTik]

The "Global Moderators" may not like this answer. ????

However, the answer is YES!

In fact, Thailand will benefit from a global economic downturn.

Why? For a couple of reasons.

1. Less tourists takes pressure off of Thailand's natural resources.

2. The junta's continued "heat" on forcing western expats out of Thailand lessens inflationary pressure on housing and utilities.

 

All the way around, things look good for Thailand.

It can easily handle, and benefit, from a slow economy. 

[lamyai3]

13 hours ago, Skeptic7 said:

I voted "bumble", as it is the most bumbling place I've ever been

Indeed - they put the TIT in ineptitude. 

[WeekendRaider]

the USA needs new production bases.... in Los Angeles the average factory worker wage, according to this morning's Nikkei Asian Review, is well over $3,000 US a month.  in contrast, I wonder how many Thai can someone hire near the Thai port for 100,000 THB a month?  people that run robots and machines.

anyone know? I'm curious on this.

 

plus, how is it anyways that huge consumer spending and huge government entitlements on top of that, all funded with debt, don't result in a trade deficit no matter what girlie man talk you tweet to your country's #1 trading partner?

[soalbundy]

18 hours ago, DrTuner said:

Peasants will go back to rice fields to live in minimum existence and BKK cream gets richer. The usual.

So no difference to now

[NCC1701A]

15 hours ago, possum1931 said:

The tourist numbers going up as far as I know, will be with the Indians and Chinese, and they are not big spenders.

the Chinese spend the most of all tourists in Thailand. It is a myth that they don't spend money.

[wreckingcountry]

During the massive international financial/economic crisis coming soon, Thailand will fare "better" than the so-called developed countries, because it is not hampered by massive social costs/promises. 
 
In the West, a huge number of people rely on the state for their daily lives (pensions, unemployment, food stamps, you name it...). 
 
These already bankrupt states will resort to huge budget deficits and massive money printing, for a while, until hyperinflation will settle, and their currencies will go down even further against the baht, and other East Asian currencies. 
 
Meanwhile, Thailand and a large part of East Asia will wait things out (which will be long). 
 
People having lost their jobs will go back to the family farm and live on the cheap, something unthinkable in the West. 
 
Tourism will go down to zero, like during the SARS crisis in 2002, but for a much longer time. 
 
There will be a lot of repossessions of unpaid cars and bikes, and the prices on the second hand market will crash. 
 
As usual, all the constructions in seaside resorts will stop overnight. 
 
Like in every major crisis, it will be a time of opportunities for those having money on the side.. 
 
After all, what are crisis for, if not for transferring more assets from the have not to the haves... 

“Money on the side “ “haves and have nots “ The generation who were never taught to save money deserve all it gets !


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[Nyezhov]

Before I left I had dinner with some currency traders.

 

They, and many other traders in the USA, are betting on a strong Thai economy. They feel that Thailand will be the major beneficiary of the move out of China by not only US, but by other major economies.

 

Simply put, it is cheaper in the long run to do business in Thailand. And they are friendlier to western business, especially to usa business. 

 

I make no judgement as to whether a global economic crisis is coming.