- Production in Q4 Of 2008
- Agriculture: In the fourth quarter agriculture sector expanded by 1.8 percent, slowed down from 9.9 and 8.6 percent in the third and second quarter respectively. The deceleration in agricultural production was attributable to a contraction in the production of major crops such as rice and oil palm that declined by 0.2 and 0.7 respectively. In contrast, production of cassava and rubber increased by 1.6 and 4.7 percent respectively. The key determination factor for the reduction of agricultural production was natural disaster, for example, the Northern and Northeastern regions experienced with abnormal low temperature which damaged agriculture production in the areas. Likewise, flood in the Southern region and an overthrow of old crop generation of rubber trees caused rubber production to decline. World economic slowdown also played a vital role in reducing demand for agricultural products, particularly, rubber and cassava. Meanwhile, the deceleration of agricultural price in the world market caused domestic agricultural price to slow down. However, the government launched a pledging scheme to relief price reduction in some agricultural products such as rice, maize, cassava, rubber and oil palm. In addition, the reduction of oil price pulled down costs of agriculture production. In the fourth quarter, farm income increased by 17.1 percent, slowed down from the third quarter. This is attributable to the slowdown in both price and production. However, overall farm income in 2008 expanded by 34.0 percent. Total value added of agricultural sector in 2008 increased by 5.1 percent compared to 1.8 percent in 2007.
- Industrial sector contracted by 6.8 percent compared to an expansion of 6.1 and 7.7 in the third and second quarter respectively. Export oriented production contracted by 11.5 percent. This resulted from the decline in orders from importers as world economic condition worsened, especially in computer and parts, integrated circuits, televisions, wood furniture and leather products; with export values decreased by 49.1, 58.0, 57.5, 51.4 and 43.4 respectively. Likewise, domestic oriented production contracted by 1.2 percent which was attributable to the delay in mega investment projects and a slowdown in domestic consumption and investment spending which resulted in production contraction which included petroleum products, steel bar & shape steel, petrochemical, pulp and cement. In contrast, food and beverage production and passenger cars expanded. Production capacity utilization rate recorded 61.8 percent, slowed down from 69.6 and 71.1 percent in the third and second quarter at respectively. This indicated excess production capacity which would retain future investment from expansion. Values added of industrial sector grow by 3.9 percent in 2008 compared to 6.2 percent in 2007.
- Construction continued to slow down for three consecutive quarters. In the fourth quarter, construction sector contracted by 12.8 percent which lowered the whole year growth rate to 4.7 in 2008. The contraction of construction sector was attributable to a reduction in demand for resident and commercial building in tandem with the slowdown in income and general economic condition. Permitted areas for residential and commercial building declined by 1.8 and 3.4 percent respectively which suggested that construction sector will slow down further. Likewise, public constructions dropped by 26.2 percent. However, construction price index continued to increase by 3.7 percent compare to the fourth quarter last year but decelerated from last quarter, as price of steel fell by 3.1 percent from the same period of last year.
- Real estate sector contracted slightly by 0.3 percent due to the reduction of purchasing power and deteriorating consumer confidence. Moreover, financial institutions strengthened their lending standard for credits extent to home buyer and real estate developers, especially medium and small size developers. Delay in buying decision also played a vital role. Stocks of new houses in Bangkok and its vicinities at the end of 2008 were 110,812 units, increased by 2.0 percent from 2007, Majority of remaining supplies was single houses, which account for 32 percent of total stocks. The proportions of, townhouse and condominium were 27 and 29 percent, respectively.
- Hotel and restaurant contracted by 8.3 percent from the same period last year,compared to 5.9 and 0.2 percent expansion in the second and third quarter respectively. The reduction was mainly attributable to 1) a reduction in purchasing power of both domestic and foreign tourists due to worsening world economic condition 2) rising traveling cost and others expenses, which indicated by increase in average accommodation fees by 4.4 percent and 8.0 percent for Bangkok area, and 3) incident during the 25th of November through to 3rd of December which resulted in the shutdown of Suvarnnabhumi International Airport caused cancellation of several international flights to Thailand and raise concern over security issues among foreign tourists. As a result, in this quarter, foreign tourists declined by 19.4 percent due to a reduction of Chinese tourist (-56.6 percent), and South Koreans (-47.0 percent) while tourist from Malaysia increased slightly (3.2 percent). In the fourth quarter, occupancy rate recorded 50.1 percent drop from 62.2 percent in the same period of 2007, which equivalent to decline of 18.6 percent.
- Financial sector expanded by 5.3 percent owing to 21.2 percent expansion of total loans. Loans for industrial and personal consumption rose by 8.9 and 15.5 percent respectively. Consumption credits for purchase or hirepurchase of housing and cars & motor-cycle expanded by 13.3 and 22.9 percent respectively. Net Interest Margin (NIM) increased by 3.4 compared to 3.3 percent in the fourth quarter of 2007. All in all, financial intermediation sector grow by 8.1 percent in 2008.
- The overall energy efficiency continued to improve with a more balance and flexible energy structure
- A ratio of petroleum usage to GDP continued to decline which indicated an improvement of overall energy efficiency. In the fourth quarter of 2008, the ratio of oil consumption to GDP stood at 0.8855 percent, slightly increased from 0.8502 percent in the third quarter but lower than that of 0.8938 percent in the fourth quarter of 2007.
Overall, in 2008, the average ratio of oil consumption to GDP was at 0.8956 percent, decreased from 0.9447 percent in the fourth quarter of 2007. This indicated a significant shift of oil consumption structure towards alternative energy which is currently available at lower cost than traditional benzene and diesel. Effectively, GDP was generated at lower cost as the utilization of petroleum products became more efficient and more concentrated in cheaper fuel.
Petroleum Consumption
(%YoY) 2007 --------------- 2008 --------------
year year Q1 Q2 Q3 Q4
Benzene 1.69 3.0 -1.9 -5.2 -7.3 2.7
Octane (91+95) -6.1 -33.1 -26.4 -32.0 -40.1 -34.6
Gasohol 37.8 92.4 112.0 94.1 91.3 81.5
Diesel 2.13 -5.74 -0.4 -4.0 -14.4 -4.8
HSD+LSD -1.2 -23.3 -10.2 -20.4 -33.9 -30.1
B5 1360.6 502.4 787.3 645.0 499.0 384.6
LPG 14.3 6.16 17.6 20.8 27.1 1.8
NGV 117.6 229.4 190.5 220.2 268.9 224.2Source : EPPO
- Domestic consumption of petroleum products: Alternative energy consumption continued to grow noticeably. In the fourth quarter, consumption of gasohol increased by 81.5 percent with average daily usage of 11.6 million litre (equivalent to 48 percent of benzene consumption), increased from 9.6 million litre in the third quarter. Bio-diesel (B5) consumption grew by 385 percent with average daily usage of 15.0 million litre. Moreover, consumption of NGV expanded by 224.2 percent while consumption of LPG slightly increased by 1.8 percent.
In contrast, consumption of traditional benzene 95 and 91 and diesel continued to decline by 76.8, 25.6 and 30.1 percent respectively. These figures showed a shift in the structure of energy consumption towards the alternative energy such as gasohol and Bio-Diesel which prices are evidently lower than those of the traditional energy. Furthermore, the government announced anti-inflation measure (“6 months 6 measures” economic package) to encourage gasohol usage by reducing the excise tax on gasohol 91 and 95 by 3.30 baht/litre, high speed diesel by 2.30 baht/litre and diesel B5 by 2.10 baht/litre (effective on 25 July 2008 — 31 January 2009). This measure shifted the energy consumption behavior toward alternative energy usage.
Overall, in 2008, high speed diesel and low speed diesel consumption declined by 23.3 percent while diesel B5 consumption grew by 502.4 percent. Consumption of benzene 95 and 91 decreased by 33.1 percent but consumption of gasohol increased by 92.4 percent. Moreover, consumption of LPG and NGV increased by 16.6 and 229.4 percent respectively.
- Fiscal Balance: large deficit in the first quarter of FY 2009.
In the first quarter of FY2009 (October — December 2008), the total of government revenue was at 275,337 million baht, a 16.6 percent decrease compared to the same quarter of FY2008. Tax collections from almost every main source were lower than the target whereas government expenditure was at 404,340 millions baht, a 2.8 percent increase compare to the same period of FY2008. Budget balance recorded a deficit of 129,003 million baht compare to that of 62,996 million baht in the same period of FY2008. Including a deficit of off-budget balance of 79,131 million baht, cash balance (before borrowings) registered a deficit of 208,134 million baht, compared to a deficit of 116,221 million baht in the same quarter of FY2008. In order to finance deficit, the government issued bonds worth 40,000 million baht. Therefore, cash balance including borrowings registered a deficit of 168,134 million baht.
During the first quarter of FY 2009, revenue collections were lowers than the target by 16.1 percent (or 52,334 million baht) which is attributable to the decline in revenue collection from the main sources; especially personal income taxes, value added taxes (VAT), gasoline taxes, automobile taxes, import duties and income from state enterprises. At the same time, rebate for VAT was relatively high. Meanwhile, the collection of corporate income taxes, petroleum income taxes, and beer taxes were higher than estimation and the collection in the same period of FY2008. On expenditure side, the total disbursement was at 19.8 percent, lower than a target of 22.5 percent. Because of the two-week delay in an enforcement of the B.E.2552 (A.D.2009) Budget Act, capital budget disbursement was only 6.9 percent of total capital budget. Nevertheless, the government has accelerated budget disbursement, especially capital expenditure, to meet the disbursement target of FY2009 at 94 percent.
Public debt at the end of November 2008 stood at 3.42 trillion baht, which was 37 percent of GDP (36.92 percent at the end of September), included 23 percent of direct government debt. In addition, public outstanding debt increased 231,322 million baht at the end of November or 7.3 percent of September outstanding debt. The increase was mainly from Non-financial SOE debt.
- Financial conditions: Policy rate was lowered and money market interest rate declined accordingly. Real interest increased as inflation declined at a faster pace than the increase of nominal market rate. Commercial banks’ deposit expanded while loans growth rate slowed down both loan to business sector households and thus excess liquidity picked up. Thai baht depreciated while stock market index declined continually from previous quarter. Bond market expanded.
World Policy Rate --------------------------------------------------------------------------------------------------------
Country Q1 | Q2 | Q3 | Q4 | Jan-Feb |Present Rate(%) | Inflation Rate(end of Jan 09) Thailand - | - | +0.50 | -1.00 | -0.75 | 2.00 | -0.4 United State -0.75 | -0.25 | - | -0.75 | - | 0.25 | 0.09 (Dec) Euro - | - | +0.25 | -1.75 | - | 2.00 | 1.58 (Dec) China - | - | -0.27 | -1.89 | - | 5.31 | 1.0 Japan - | - | - | -0.4 | - | 0.1 | 0.4 (Dec) Taiwan +0.125 |+0.125 |-0.125 | -1.5 | -0.5 | 1.5 | 1.59 Malaysia - | - | - | -0.25 | - | 3.25 | 4.39 (Dec)
Source: CEIC
- Policy rate was lowered from 3.75 percent at the end of Q3 to 2.75 percent at the end of Q4. Due to weakening world and domestic economic condition and the deceleration in rate of inflation in tandem with the reduction in oil prices and commodities prices, the monetary policy boards agree to deploy easing monetary policy to stimulate economic activities while downside risks to economic growth heightened and the positive impact from fiscal stimulation takes time before to be realized. Policy rate in oversea market were lowered as global economic recession tends to be deeper and longer than previously expected. Together with the risks of deflation in some countries, central banks around the world turned to easing monetary policy to stimulate economic activities. In Q4, the Federal Reserve Board lowered its policy rate twice to 0.25 percent; Bank of Japan cut its policy rate to 0.1 percent; European central bank and the People Bank of China lowered their policy rates to 2.5 and 5.3 percent respectively.
Throughout 2008, Bank of Thailand raised its policy rate twice in the third quarter (totally 50 bps) in order to maintain economic stability as inflationary pressure heightened by oil price surge. In the fourth quarter, as economic condition deteriorated, the policy rate was lowered by 100 basis points to 2.75 percent at the end of December, lower than at the end of 2007 by 50 bps. In January 2009, the policy rate was lowered further by 75 bps, to 2.00 percent.
- Commercial banks’ deposit and lending rates declined in tandem with a reduction of policy rate. Meanwhile, inflation rate decelerated throughout the fourth quarter and pushed real interest rate back to its positive zone in November and December. At the end of the fourth quarter, an average 3- month and 12-month time deposit rates of the five commercial banks declined to 1.62 and 1.88 respectively while MRL lending rate decreased to 6.875. However, the rapid deceleration of inflation rate to 0.4 percent at the end of fourth quarter turned the real 12- month time deposit rate from a negative rate of 3.13 percent per annum at the end of the third quarter to a positive rate of 1.48 percent per annum while real lending rate increased from 1.4 percent per annum to 6.48 percent per annum. Throughout 2008, both commercial deposit and lending rates declined by 44 and 12 bps respectively, inline with policy rate reduction of 100 bps in December. A further policy rate cut by 75 bps in lowered 3-month and 12-month time deposit rate to 1.25 and 1.5 percent per annum respectively, while MRL lending rate declined to 6.62 percent per annum. As inflation decelerated to -0.4 percent in January, the deposit and lending rate was in positive zone for three consecutive months.