The Tourism Council of Thailand yesterday further dropped its tourist arrival target from 14 million to 13 million this year, and revenue target from Bt600 billion to Bt480 billion, as the political violence escalates in Bangkok.
Thehad originally aimed for 15.5 million arrivals.
Siam Commercial Bank’s Economic Intelligence Centre said the arrivals growth target could likely plunge by 10 percentage points, as 10 major countries – the US, Hong Kong, Vietnam, Taiwan, Germany, the UK, Saudi Arabia, United Arab Emirates, Spain and China – have issued travel warnings against Bangkok visits.
Four- to five-star hotels in Phuket, Pattaya, Chiang Mai, Krabi and Koh Samui are expected to suffer heavily, as they are the most popular destinations for tourists from the 10 countries.
During the second and third quarters, the number of tourists from the 10 markets could plunge 35 per cent from last year’s level. According to the five-year record, tourists from these countries account for 30 per cent of the total. From 2005-2009, they generated nearly Bt200 billion in tourism income, or 33 per cent of total income.
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Public investment will expand only slightly next year as the 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 approved Financial Institution Business Act (FIBA) facilitates increase in foreign ownership in Thai foreign institutions. The Financial Institution Business Act (FIBA) became effective on 3 August 2008 as planned. The FIBA allows financial institutions to raise the foreign limit from 25 percent to 49 percent with permission from the BOT and foreign investors may own more than 49 percent equity stake in Thai banks with permission from the Ministry of Finance and recommendation by the BOT. The increase in foreign limit would encourage Thai banks to seek foreign strategic partners to strengthen the capital base, improve core banking business, IT platform, know-how and add inorganic growth to Thai banks.
Fiscal stimulus in China offset the decline in Thailand’s exports and is playing a role in the region’s rebound
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.
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