About 30 red-shirted supporters of the United front for Democracy against Dictatorship (UDD) on Thursday morning rallied outside the office of the Stock Exchange of Thailand (SET) on Ratchadaphisek road.
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“Countries like Thailand that have been dependent on manufacturing exports are most affected,” said Verghis, who covers Thailand and four other Southeast Asian countries. The World Bank released its latest forecasts for Thailand and other economies in East Asia and Pacific on Tuesday. The global economic slump shut down what has been, for the past three decades, the main engine for Thailand’s economic growth: exports. As a result, the manufacturing sector has been badly hit. The Thai government estimated that one million or more workers would lose their jobs this year due to the slowdown. In January, the unemployment rate stood at 2.4 percent of the total workforce – a full percentage point higher than the 1.4 percent recorded in December 2008.
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.For the year 2008, the Thai economy decelerated from the previous year, particularly in the last quarter where global economic downturn and internal political unrest adversely affected manufacturing production and tourism. Nonetheless, farm income still expanded well from higher major crop production and price compared to the previous year.The political unrest in the last quarter of 2008 will continue to dampen tourist confidence into at least the first half of 2009. In addition, the slow down in growth of the economies from which a large number of tourists come to Thailand, such as EU and Japan, will reduce tourist receipts next year. With the slow down in exports capacity utilization is expected to fall; which will negatively affect private investment.Household consumption growth will also continue to be dampened as income growth will be slower next year with employment increasing minimally, and consumer confidence falling, even though inflation will be significant lower at only around 2 percent compared to 6 percent this year. Significant downside risks remain to the growth projection should political instability heighten, the global economy decelerate faster than projected, and implementation of the fiscal stimulus is delayed.
Strong external accounts have enabled Thailand to withstand the contraction in global liquidity. International reserves remain relatively large and external debt – especially short-term debt – is low.
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.