Businesses lost at least three hundred million baht in revenue this week endbecause of the anti-government rally blocking Ratchaprasong intersection, Thanawat Polwichai, director of the Economic and Business Broadcasting Centre at the University of Thai Chamber of Commerce, said on Saturday.
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Thailand’s capital, unnerved by nearly four weeks of turmoil, has braced for renewed anti-government demonstrations as protesters announced they would shift to a new location after paralyzing Bangkok’s commercial heart over the weekend.
The weekend protests forced the closure of at least six upscale shopping malls and tough security measures at nearby five-star hotels, with economic losses estimated at up to 500 million baht (US$15 million) a day.
Prime Minister Abhisit Vejjajiva has repeatedly refused demands of the so-called Red Shirts that he immediately dissolve Parliament and call new elections, despite protracted protests in the capital and unsuccessful negotiations last week.
Thai Kem Kaeng Program will just about compensate for the reduction in the government’s on-budget investment in 2010.
The medium-term outlook is sobering, with growth expected at 3.5 percent in 2010 and likely remaining below potential for the next three years. Because the Thai economy is largely dependent on final demand in advanced economies, a return to pre-crisis rates of economic growth (a full recovery vs. a rebound to pre-crisis levels) will require a combination of (a recovery of demand from advanced economies and a rebalancing of the sources of growth to reduce Thailand’s dependence on demand from advanced economies. Neither process is likely to be swift. Recovery from a financial crisis is a lengthy process that involves the rebuilding of balance sheets, and the IMF estimates that half of the losses in the financial system in advanced economies are yet to be recognized.
The domestic content of automotive output in Thailand varies between 50 and 90 percent and averaged about 62%. For Isuzu (the largest pickup producer), domestic value-added is probably closer to 90 percent. Electronic and computer components are largely imported (from Japan), as are most transmissions (from the Philippines and India). Electronic components are of high value added and are used globally by the producers. Moreover, their development requires substantial R&D expenditures. Car manufacturers, as a result, prefer to concentrate the production of these electronic components in their home country – notably Japan – limiting technological spillovers. Only Toyota has a local transmission plant, with the remainder imported from India and the Philippines.
Against the backdrop of a weakening US dollar and mounting trade surpluses, East Asian currencies and Thai baht have appreciated only modestly
Despite the rebound, Thailand’s export recovery is still subject to several downside risks. A recent export pickup in East Asia benefits mainly from coordinated and massive policy responses in G-3 economies and China that have boosted their demand for imports, and inventory re-stocking worldwide that followed a swift and large de-stocking in early-2009 as orders fell less than production. These two factors are temporary, as governments have to unwind injections to maintain fiscal discipline and companies resume their normal stocking levels. In fact, data shows that US inventory-to-shipment ratios for computers, electronic products, and electronic appliances started to rise again in August and September, thus leading to weaker new orders. This likely adds pressure on Thailand’s electronic shipments to the US in the coming months.