The government of Cambodia has officially returned the operation of Cambodia Air Traffic Services (CATS) to its owner, Bangkok-listed Samart Corp Plc, Samart executive vice chairman Sirichai Rasameechan said on Monday.
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Political unrest and the shutdown of the two airports in Bangkok in late November severely affected tourism and consumer confidence in Thailand. Real GDP is projected to contract by 2.7 percent in 2009, as the global outlook remains negative and external demand continues to contract. The fiscal stimulus and monetary expansion implemented by the authorities are likely to partially mitigate the impact of the slowdown, allowing growth to resume in the fourth quarter of 2009 assuming a better outlook for the global economy in 2010.
Private investment in Thailand has been subdued in the past three years due to uncertainty about the political situation.
In 2006-2008 investment grew by an average of 2.7 percent a year (compared with real GDP growth of 4.3 percent on average), down from 14.8 percent during 2003-2005. This earlier retrenchment of investment has dampened the impact of the financial crisis, most notably on foreign direct investment (FDI). While little new FDI is expected, there has been no rush to exit from foreign investors. Growth of private investment in 2008 came mainly from Thai investors, as gross FDI inflows declined from 2007 levels. Private investment is expected to contract 5 percent in 2009 as capacity utilization remains low (around 50 percent). However, growth could resume in the fourth quarter on the back of increased public investment. Public investment has been sluggish in Thailand since the 1998 crisis, but is expected to increase in 2009 given increased political stability and the political imperative to respond to the slowdown in the export sector. The share of public investment in real GDP averaged only 5.7 percent during 2004-2008 compared more than 10 percent before the 1998 crisis. In 2008, public investment contracted by nearly 5 percent as a result of political uncertainties, which delayed investment decisions. Public investment is projected to grow at 7 percent in 2009 as the implementation of large infrastructure projects step up.
Thailand’s economic growth is falling by more than earlier expected amid a sharp and continuing decline in global trade.
With unemployment on the rise, the number of people living under the poverty line will likely increase. Employment opportunities for workers in the urban informal sector, such as contract workers in manufacturing, in construction, and in tourism are shrinking, and it is unclear if they can go back to agriculture. As the government plans another economic stimulus program, considerations should be given to measures that will boost employment and specifically target these workers.
The Thai government announced an economic stimulus program totaling 117 billion baht ($3.34 billion). The program included a host of short-term measures to boost household consumption and assist lower-income families. The government is now preparing a second stimulus package worth 1.6 trillion baht ($45 billion). Among other initiatives, this package focuses on public investment in infrastructure projects, which the government hopes will help create 1.6 million jobs. “The infrastructure investments, if implemented, will help generate growth and improve Thailand’s competitiveness,” said World Bank. “However, it is worth noting that financing for infrastructure has been available for the past few years. What has suppressed investment was not funding, but rather political and institutional constraints.” While the impact on the real sector has been larger than expected, the global crisis has not shaken the Thai financial sector. The World Bank attributed this to Thailand’s strong macroeconomic fundamentals; low external debt coupled with high international reserves; and a sound financial sector, which has undergone a series of reforms following the 1997 crisis.
Private consumption in Thailand and investment also grew by more in 2008 than they did in 2007, despite the sharp increase in food and fuel prices. On the other hand, public consumption and investments in real terms have contracted in the first three quarters as a result of slow disbursement rates amidst political instability and slow project completion as raw material prices rose sharply.
Thailand’s real GDP is projected to grow by 0 to 1 percent next year. This will be the lowest growth Thailand has seen since 1998, when real GDP contracted.The major factor weighing down growth next year is the sharp slow down in the global economy, particularly the contraction of the economies that are Thailand’s major export markets – US, EU, and Japan.This will have a large negative impact on Thailand’s exports of both goods and services which has been the major source of income and the driver of the output growth in the past few years. The US dollar value of exports of goods is expected to expand by only 8 percent in 2009, compared to around 20 percent this year.
From September 15th to November 25 th before the takeover of the airports, the baht has depreciated by 2 percent against the US dollar. It has, however, appreciated against regional currencies by 6 percent. Similarly, the nominal effective exchange rate (NEER) had appreciated by 2 percent.
A large share of loans in 2008 was for working capital as the cost of raw materials and fuel increased significantly in the first half of the year.Next year, loans will be more scrutinized for credit quality. Large corporations will increasingly turn to domestic borrowing as the cost of off-shore borrowing increases rapidly. Bank loans to large corporations will therefore to continue to expand, as their credit quality is generally high, but those to small and medium enterprises (SMEs) may not.