- The Thai economy in Q4 of 2009 grew by 5.8 percent, the first expansion after a prolonged contraction of 7.1, 4.9 and 2.7 percent in the first three quarters of the year. For the year 2009, the Thai economy contracted by 2.3 percent, indicating a faster-than-expected recovery. Household consumption, private investment and export continued to improve following global economic recovery. Regarding the domestic factors, farm income rose due to higher prices of agricultural products while confidence of foreign tourists has been restored since the political conflict started to alleviate.
- Seasonally adjusted GDP in Q4 continued to expand from the previous quarter by 3.6 percent, the third consecutive expansion in 2009 indicating a clear sign of recovery particularly in the manufacturing sector where capacity utilization has improved while unemployment rate continued to decline.
- For the whole year of 2009, the headline inflation recorded a contraction of 0.9 percent. Value of export, in term of US dollars, declined by 1 3 .9 percent, unemployment rate stood at 1 .5 percent while current account registered a surplus of 7.7 percent of GDP.
- In 2010, the Thai economy is expected to grow in a range of 3 .5-4.5 percent depending on the magnitude of global economic recovery. However, the resumption of Thai economy is expected to concentrate in a few sectors. Meanwhile, the sustainability of global economic recovery remains uncertain especially in the second half of the year as the volatility in global economy and financial market is expected to prevail. Besides, interest rate is expected to increase in accordance with rising inflationary pressure while exchange rate is projected to appreciate. Other economic indicators are forecasted as follows: i) The headline inflation to be in a range of 3.0-4.0 percent ii) a current account surplus of 4.1 percent of GDP and iii) Dubai oil price to be in a range of 75-85 US dollars per barrel.
- In order to support economic recovery in 2010, economic management should emphasize on maintaining the momentum of economic growth, broadening the growth-based as well as monitoring and preparing contingency measures in response to potential fluctuation in global economy and financial markets. In addition, key economic measures consist of: i) Implementation of well-balanced monetary and exchange rate policy to facilitate economic recovery and maintain economic stability as well as to mitigate the risks from global economic and financial fluctuation ii) Speed up key investment projects under the second stimulus package (SP2), which are essential for building up potential growth in order to offset the reduction of government spending in regular budget, and to assure the momentum of economic recovery iii) Resolve investment problems and reestablish investors’ confidence to prevent the bottlenecks that obstruct the investment recovery in spite of picking up capacity utilization and Thai baht appreciation that lowers the import costs of imported capital iv) Minimize downside risks and maintain farmers’ income by extending the income guarantee scheme and mitigating the impacts of drought.
1.1 In the fourth quarter of 2009, Thai economy expanded by 5.8 percent compared to the same period last year, with the improvements in house hold consumption, private investment, and exports. For the year 2009, Thai economy contracted only 2.3 percent, attributed to the global economic recovery as well as the ease of the domestic political tension which in turn helped restore the foreign tourists’ confidence to visit Thailand. Moreover, the manufacturing productions both for exports and domestic consumptions accelerated from the previous quarter. The seasonally adjusted growth of economic activities during the fourth quarter of 2009 was at 3.6 percent compared to the previous quarter. This is the third consecutive expansion, from 2.1 and 1.7 percent expansions in the second and third quarter respectively, which reflect a clear trend of economic revival.
Key Highlight
Global economy improved, particularly in the f inancial sector, productions sector and international trade. The world economy grew by 2.3 percent in the fourth quarter, compared to 3.5, 1.9, and 0.2 percent contraction in the first three quarters. The Purchasing Manager Index (PMI) in the major industrial countries have increased continuously exceeding 50 level, indicating the more stable condition of economic recovery. Furthermore, the greater export volumes in many countries led to the rise of the world trade. In addition, the Chinese credit-and-investment expansion policy helped boost its economy as well as the trade volume within the region. This is the key factor that will support other countries in this region to revive and exit the recession.
Thai economy grew by 5.8 percent in the fourth quarter, the first expansion in 2009. The main reasons are: i) the restoration of export growth following global economic recovery, especially exports to major countries such as the US and Asian countries, ii) the continual foreign purchasing orders, and iii) the improvement of domestic demand. All three components have contributed to the 22.9 percent increase in export-manufacturing production and 7.5 percent rise in domestic-consumption-manufacturing production. These lead to the higher demand for employment and the reduction of unemployment rate continually. Meanwhile, the rise of agricultural products’ prices pushed up the consumers’ confidence. The household expenditures in the fourth quarter expanded for the first time in 2009. Moreover, the economic recovery as well as the ease of the domestic political conflict helped increase foreign tourists to Thailand.
Positive signals in Q4/2009
(1) Exports improved significantly following the continual global economic recovery. The export values in US dollar term rose by 12.2 percent, the first expansion in 2009, led by 7.4 percent rise of vehicles and equipments, 14.1 percent gain in computer, and 40.5 percent growth of integrated circuit. While exports to new markets such as China, Hong Kong, Taiwan, and India picked up by 54.2, 23.8, 27.3 and 20.4 percent respectively. Similarly, exports to the major markets increased by 4.5 and 18.3 percent in the US and Asian market correspondingly.
(2) Private consumption grew by 1.4 percent, the first expansion in 2009. The main supporting factors to this improvement are the rise of agricultural products’ prices which pushed up the farmers’ income and the continual economic revival that stimulated employment. Moreover, the extension of “6 months 5 measures” policy and the approval to raise minimum wage, which is effective on Jan 1, 2010, generated the higher consumer confidence. This was reflected in the increase of Consumer Confidence Index to 76.5, in the fourth quarter, from 74.5 in the previous quarter. The improvement products are in food, vehicles, electrical appliances, and electronic equipments.
(3) Manufacturing production expanded by 9.9 percent accelerated from the last quarter. The global and domestic economic recoveries fueled the export-manufacturing production and the domestic-consumption-manufacturing production to grow at 22.9 and 7.5 percent respectively. The industries that notably expanded are food, rubber and rubber products, metal and metal products, vehicles and equipments, and electronic equipments. The manufacturing capacity utilization stood at 67.2 percent, compared to 58.1, 59.2, and 62.5 percent in the first three quarters of 2009.
(4) Tourism revived considerably. The global economic recovery as well as the ease of the domestic political situation improved the confidence of foreign tourists’ toward Thailand. The number of tourists grew by 40.8 percent to be 1.63 million persons in December, the highest figure in 2009. In the fourth quarter, total number of tourists recorded at 4.2 million persons expanded by 26.2 percent from the same period of last year. Furthermore, the occupancy rate in the fourth quarter picked up from 49.6 percent last year to 54.6 percent this year, making the hotels and restaurants and transportations sectors expanded by 13.5 and 6.9 percent correspondingly.
Economic Stability Remained Favorable
(1) Domestic economic stability remained favorable but this is caution on the possibility of impact from a rising production cost.
- Headline Inflation: the headline inflation in the fourth quarter climbed to a positive territory for the first time in a year. The headline inflation was at 1.9 percent, compared to -0.3, -2.8, and -2.2 percent in the first-three quarters respectively. An upward trend was attributed by i) the increase in rice price as a result of the implementation of farm income guarantee scheme, ii) rise in domestic oil price due to an increased world oil price, and iii) an upward revision of liquor and tobacco excise taxes. The average headline inflation was at 0.1 percent during the fourth quarter and -0.9 percent during the year of 2009. The producer price index increased by 6.7 percent which has increase upward pressure on production cost. For the year 2009, producer price index decreased by 3.8 percent.
(2) Unemployment rate: an unemployment rate remained low with an average of 1.0 percent, lower than the unemployment rate of 2.0, 1.8 and 1.2 in the first 3 quarters. The number of unemployed persons stood at 384,000 persons in the fourth quarter. The improvement in labor market indicated recovery in the economic condition leading to a significant increase in an employment in every sector except agricultural sector.
(3) External stability remained strong: current account surplus and international reserve remained high.
(4) Current account registered a surplus of 4,274 million US dollars, equivalent to 142,276 million baht. This was mainly due to trade balance surplus of 2,673 million US dollars and net service, income and transfer balance surplus of 1,601 million US dollars. The surplus of net service, income and transfer balance was a result of an increased income from foreign tourists and a reduction in repatriation of the investment income and dividend. For the year 2009, the current account recorded a surplus of 20,291 million US dollars, equivalent to 700,368 million baht.
- International reserve at the end of January 2009 stood at 142.40 billion US dollars, excluding Net Forward Position of 12.57 billion US dollars, which was equivalent to 5.9 times of short-term foreign debt or 9.7 months of import.
- An average exchange rate in the fourth quarter was at 33.26 baht per US dollar, appreciated by 1.9 percent from the last quarter and by 4.4 percent from the same period last year. In January, an average exchange rate was at 32.99 baht per US dollar while the average exchange rate during 1-18 February was at 33.11 baht per US dollar.
Thai Economic Condition in 2009
(1) The Thai economy in 2009 contracted only by 2.3 percent as a result of a better than expected recovery. A global conomic recovery and the improved domestic demand generated a recovery in both manufacturing production and ervice sector, especially in tourism sector.
(2) In 2009, the headline inflation was at -0.9 percent while export value in term of US dollar dropped by 13.9 ercent. Furthermore, a current account balance experienced a surplus of 7.7 percent of GDP.
Thai Economic Outlook for 2010
(1) Thai economy is expected to continually expand from the fourth quarter of 2009, mainly driven by the xpansion in export sector and the domestic private emand. Domestic private demand is likely to gradually mprove as the result of the recovery of Thai economy during he second half of 2009. The capacity utilization level of most anufacturing sectors increased (greater than 75 percent of total capacity). This would lead to a new investment in order to support the expanding production line. Domestic liquidity is expected to be adequate and favorable to the future expansion of domestic demand.
(2) Economic projection in 2010: the economy is forecasted to expand by 3.5-4.5 percent, compared to a contraction of 2.3 percent in 2009 with 3.0-4.0 percent headline inflation. In US Dollar term, export is projected to expand by 12.7 percent with current account surplus of 4.1 percent of GDP.
1.2 Economic performance in the fourth quarter of 2009:
Household consumption expenditure expanded for the first time in 9 months. Household consumption in the fourth quarter increased by 1.4 percent, improved from the 2.0 percent contraction in the first three quarters. The supporting factors for consumption expansion are as follows: i) the increase of employment in trade and hotel sector, ii) the increase of farm income as a result of rising price in agricultural products and the decrease in global supply due to unfavorable weather, iii) the improvement in consumer confidence due to the approval of public investment project under the governments’ second stimulus package (SP2-“Thai Khem Kaeng 2012”) together with the extension of the 5 measures stimulus package which help to reduce cost of living and the cabinet approval of rising minimum wage rate on December 25, 2009 which was effective on January 1, 2010. These attributed to the increase in consumer confidence for economic recovery and household expenditure even though consumers still concern about the uncertainty in political situation and the vulnerability of economic recovery in the next period.
For 2009, private expenditure declined by 1.1 percent. This was resulted from the decrease in durable goods, semi-durable goods and non-durable goods by 8.1, 6.7, and 0.1 percent respectively. The contraction of non-durable goods was contributed by the 1.4 percent increase of food consumption and the 1.1 percent decrease of non-food consumption.
Private Investment showed a recovery sign. Private investment in the fourth quarter declined by 4.6 percent, compared to a contraction of 17.8, 16.1and 12.2 percent during the first three quarters respectively. Investment in machinery and equipment decreased at a slower pace by 6.3 percent, compared to an average contraction rate of 17.6 percent in the first three quarters. However, investors postponed their investment in machine and equipment because capacity utilization has not yet reached its full level and fragile economic recovery. Investment in construction increased by 2.0 percent in line with the improvement of the sale of construction materials. The spike of the construction Investment was attributed by housing and other construction, whereas construction in industrial plant and commercial building decreased.