3.3 The Thai Economy trend in 2009
3.3.1 Key themes
- The Thai economy in 2009 tends to slowdown from 2008. In the first half of 2009, the global financial crisis continues to influence Thai economic performance with the tendency of sharp export slowdown from a high base in 2008. Private investment is likely to moderate further with low business confidences as global recession heading to its bottom. However, in the second half of the year, government spending and the disbursement rate of grass-root projects are expected to vigorously accelerated. That will help stimulate private expenditure and investment, especially the progress in government Mega-projects to boost up private confidence. While global economic and financial turmoil are expected to surpass its lowest level during the first half of the year and the stimulus effects from loosen fiscal and monetary policy since the second half year of 2008 thru the first half year of 2009 materialize.
- Export of goods and tourism services tends to moderate due to the global economic deceleration, in particular, export that sensitive to income and commodities resembling capital goods such as electronic, vehicle & transport equipment, electrical appliances, and gems& jewelry. The tourism sector will be subjected to the slowdown of global economy and domestic uncertainty. However, the situation is expected to be improved in the second half. The promotion campaign for tourism might assist the situation during the high season in the end of 2009.
- Economic management in 2009, government spending and investment should play a leading role in stimulating domestic spending and investment in order to substitute the vigorously decline in export. Other measures aim to ease the effect of global recession to the low income group and disadvantaged group as well as small-medium enterprises (SMEs). The measures should emphasize both on a long-term self-reliance capacity building and increase competency. Moreover, the ease of monetary policy and the clarification of the government action plan for accessing liquidity will play a vital role to increase consumer confidence and improve consumption and investment spending.
- Source of economic growth in 2009 increasingly relies on domestic demand expansion, which would be a broader expansion base to support economic growth than net export.
- Oil and commodities prices tend to decline from high based, which sharply increased in 2008. The weak demand for product and services will contribute the rapidly decline in inflation rate in 2009. Demand of product and service that highly correlates with inflation should be monitored closely, as price could continuously reduce and finally could turn into deflation. As many countries such as US, South Korea, and Japan start to worry about the deflation.
3.3.2 Supporting factors for economic recovery in 2009. The expansion of consumption and investment in 2009 will be underpinned by the following supportive factors:
(1) The implementation of fiscal deficit policy and accelerating government project to stimulate economic activity and inject liquidity into economic system especially, budget spending for rural people and enhance productivity of rural area for supporting the household expenditure during 2008, and also for enhancing long term self-dependency. In addition, the additional budget allocation of 100 billion baht will stimulate consumption and investment spending. Some parts of addition budget are designed to boost grass-root economy and increase liquidity for SMEs including measures for senior citizen and disadvantaged group.
(2) The implementation of the government measures to speed up the recovery of consumption and investment as well as to strengthen competitiveness in private sector, which are including tax measures to raise disposable income and support disadvantage people, tax measures to stimulate investment and strengthen competitiveness, tax measures to support SMEs, financial measures to strengthen production and management efficiency for small and medium scale enterprises, financial measures for people and grassroots economy, and tax measure to stimulate real estate sector.
(3) Other factors that enhance the expansion of consumption and investment are loosening monetary policy, decrease in oil and raw material prices, and the deceleration of inflation rate.
3.3.3 Risk factors associated with growth prospects of the Thai economy in 2009
(1) The global economy expected to slowdown, which subsequently will affect Thai export and tourism starting in the later half of 2008 though to 2009. Global economic slowdown is expected to be more board-based covering most of Asian market, which is Thailand’s major export destination. Meanwhile supply of agriculture products that start to build up, as world production has increased. In addition, drainage of rice stock by China and Vietnam, and rubber stock by China, will adversely affect export of Thai agricultural products.
(2) Slowdown in private investment during 2008 with reduction in government investment will inevitably impact overall investment atmosphere. Therefore, in 2009, progress and clear decision over government mega projects will play a vital role in driving national investment.
(3) Consumer confidence and business sentiment declined from the impact of global financial crisis and domestic political uncertainty. With news like further write-off in financial sectors, slow down in exports and deterioration of global trade situation will certainly have an impact on consumer confidence and investment decision.