Honda Automobile (Thailand) maintains the schedule to manufacture its eco-car in Thailand in 2011, with the plan to launch the model at the Bangkok International Motor Show later this month.

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Eco car’s concept model launched in BKK

The Thai baht has appreciated, but only to the extent of other regional exchange rates. The baht has appreciated 4.9 percent in 2009, compared for example to over 30 percent of the Brazilian real.

Key risks to the outlook are (i) political uncertainty and (ii) the timing of the withdrawal of fiscal and monetary stimulus. Increased political tensions may have a long-lasting impact on investment, and withdrawal of stimulus (in Thailand and the advanced economies) must be precisely timed to avoid macroeconomic imbalances (including new asset bubbles) while also ensuring that the recovery is on a sufficiently solid footing.

Long-term growth will require improving productivity and greater focus on distributional issues. Imbalances present before the crisis remain, but the crisis has increased the urgency of reforms to improve productivity, enhance competitiveness, and promote more equitable growth. Openness to trade and investment have been – and will continue to be – essential to Thailand’s long-term growth. However, a return to high growth will require boosting domestic consumption and developing additional sources of external demand.

Despite the rebound, Thailand’s export recovery is still subject to several downside risks


The key risk to the global recovery lies in the need to get the timing of withdrawing fiscal and monetary stimulus just right. Withdrawal of fiscal stimulus too early may lead to another negative demand shock and a negative expectations spiral, whereas withdrawing the stimulus too late may lead to high inflation, further weakening of the US dollar, and possible asset price bubbles. In Thailand, for example, more than ten years since the 1997/1998 financial crisis banks still have bad loans in their books and the government still holds a large amount of debt related to the recapitalization of financial institutions. Given the expected length of recovery, it is important not to withdraw stimulus programs too soon, before the recovery is on a firm footing. On the other hand, macroeconomic imbalances are accumulating and eventually fiscal and monetary authorities, especially in the US, must consolidate their fiscal position and withdraw liquidity.

honda eco car

Eco car’s concept model launched in BKK

The export collapse in 2009 has been the most severe in Thailand’s recent history. The magnitude of the decline has been unprecedented. Since 1957, there have been nine episodes where exports contracted for at least six consecutive months. Losses to date are more than double those in the 1997-98 Asian financial crisis and the 2001 “dot.com” bubble turmoil. Thailand’s export performance tracked developments in world merchandise trade, which dropped around four and eight percent in the 1997 and 2001 meltdowns, respectively, but 22 % so far during the current global financial crisis.

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