Today, the Bank of Thailand published the latest monthly data of the Thai economy (See the data or report). As far as economic growth is concerned, the figures certainly look so depressing and worrying enough that I decide to postpone my blog on “When I fall in love” and write a blog on Thailand’s economic conditions instead.
The latest economic data strongly suggests that we are indeed in a recession.
Private investment continues to slow down, as reflected by the slower growth of the MPI (Manufacturing Production Index) and the negative year-on-year growth of the PII (Private Investment Index). Private consumption is also very sluggish, with the PCI (Private Consumption Index) exhibiting negative year-on-year growth.
The tourism sector continues to grow, albeit at a slow rate. VAT and corporate income tax collections, both of which are indicators of current economic activities, also exhibit very low and negative growth rates respectively. The only two bright sides of the economy are the low-inflation environment and the export sector, whose growth remains very strong.
If things continue to be as they are right now, this year’s economic growth is expected to be around 4%, lagging behind the growth of most other emerging economies. Moreover, if domestic demand does not start to recover soon, the vulnerability of the economy to external shocks will become increasingly threatening. A slowdown in our major trading partners’ economies will have severe impact on our economic growth. Worst of all, if the price of oil keeps rising, we could end up with a high-inflation and sluggish-growth environment – a difficult situation indeed for economic policymakers.
This may seem overly pessimistic to some observers but it is my personal belief that, when it comes to public policy-making, being reasonably risk-averse and cautious is more beneficial to the society than being overly confident and optimistic.
So, what should we do now to boost growth and avoid serious recession? Macroeconomic-wise, given the latest economic information, the policy choice is clear: expansionary fiscal and monetary policy.
In its next meeting, it is likely that the Monetary Policy Committee will further lower the policy interest rate, quite probably by 50 basis points. However, monetary policy takes a long time to affect the economy and its effectiveness depends on whether the available transmission mechanisms work well or not. So, fiscal policy should play an active and leading role in stimulating the economy this year.
Anyway, these macroeconomic policies are short-run economic stabilizers. The long-term future of the Thai economy is still unclear. The most serious and challenging question we need to address is: how do we increase the competitiveness of Thai firms? After all, long-term economic growth is driven by productivity improvements. And I wonder, what have our governments – past and present - done about this?
I think our beloved country desperately needs a vision and a well-defined strategy of where we want to go from here. Unfortunately, amid all the current political and economic uncertainties and conflicts, I can’t really see how we could practically come up with that vision or strategy. It seems like everyone is trying to survive each day, which is difficult enough, and doesn’t really care what the future lies.
What should we do?
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2 comments:
Well... this should be satisfied by those so-called "sufficiency economy" advocates, isn't it? Hahaha enough of the satire!
I surmise the recession root cause is simply - people do not eager to spend (or to invest). This economic downturn is somewhat differ to the 1997-2000 crisis. The 2007 economic slump do not involve with financial sector mess up, overvalue currency blah blah blah.
My company had huge direct investment project but the plan was halted due to political instability and I guess this postulate applies across private sector.
People actually has anticipated economic downturn since late Thaksin regime hence they carefully spend every baht out of their pockets.
I will not talk about economic fundamental factors (e.g. declining competitiveness, energy cost-push and so on) because these factors have already been affected slower economic growth when compare post-crisis (2000-2004) and pre-crisis (1988-1995) periods.
Thai economy will even more suffer due to these factors.
To answer your question; what shall we do? My answer is clear - bring back political stability ASAP. I mean to have an elected civilian government the one is not interfered by supra-consitution power and, most importantly, militants.
We have lost time for two+ years in a silly political contest amongst those so-called patriotic politicians (and quasi-politicians). Now, the figure shows how much the fight cost to everyone. The bill does not only charge to them but to everyone of us!! How sad everyone is vitimised by insolent foolish game...
We should stay at home, watch football, and sleep. Then have a good dream about being a husband of Miss Universe (if Paradorn can do it, then you can do it).
Or you can go abroad and study hard, get a Phd, then become a Prime Minister. You do a good job on economic policy, and avoid getting a coup, people live hapily ever-after.
In either way, you can constantly remind yourself that...the worse for political situatiom in Thailand is probably yet to come. So, watch this space....
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