2.3.4 Projection Condition for high and low cases
(1) The high case scenario of 4.5 percent: The Thai economy in 2010 is likely to grow by 4.5 percent or higher under the following conditions (i) the global economy grow at least by 4.2 percent without sharp deceleration in the latter half and without systemic risk in global financial system; (ii) domestic problem of political instability and conflicts are not escalate to jeopardize the recovery of consumer and business confidence; (iii) the budget of the second stimulus package (SP2) can effectively disbursed and offset the reduction in planned regular budget, whereas the disbursement from regular current and investment budget (including SOE investment budget) can meet the target of an average 94 percent; (iv) average Dubai crude oil prices for the whole year of 2010 is not exceed 75 US dollar per barrel; and (v) favorable weather condition for agricultural production expansion without serious droughts.
(2) The low case scenario of 3.5 percent or lower: The Thai economy in 2010 will expand by 3.5 or lower under the case of: (i) the global economy grow by less than 3.8 percent; (ii) the domestic problems of political instability and conflicts escalate and jeopardize the momentum of economic recovery; (iii) the budget of the second stimulus package (SPII) cannot be effectively disbursed to prevent the contraction of government spending caused by the reduction in regular government budget; (iv) average Dubai crude oil prices for the whole year of 2010 increase to higher than 85 US dollar per barrel.
2.3.5 Production side: Overall production in 2010 expected to expand from 2009 level. Production side outlook is as follows:
(1) Agriculture sector: In 2010, the agricultural production is expected to decline from worsening climate conditions coupled with high probability of droughts. Nevertheless, overall agricultural price remains on upward trends due to i) rising demand for agricultural products as a result of global economic recovery, ii) government measures to support agricultural production for instance, farmers’ income guarantee scheme, covering producers of 3 major crops: paddy, cassava, and maize, and iii) promotion of qualified agro-processing products development and product improvement to better serve both domestic and foreign demand. Outlook for major agricultural production is as follows:
(1.1) Paddy: Production volume of paddy in 2010 is likely to decline as a result of farmers shifting from paddy production to rubber production in major cultivating areas of the North, Northeast, and the South regions, coupled with problems of widespread brown plant hoppers which have devastated rice production in some regions. In spite of this supply side factors, paddy price is expected to increase, caused by i) rising global demand, and ii) world rice production having significantly dropped as a result of the adverse effects of natural disasters including serious droughts and floods on major rice production countries such as Philippines, India, and Vietnam. This has manifested into rising international demand for rice in order to substitute loss of production and rebuild country’s rice stock in 2009.
(1.2) Rubber: Rubber production is expected to decrease due to unfavorable weather condition. Nonetheless, rubber price is likely to increase in tandem with the better global economic conditions which have pushed up demand for rubber in automobile industry and other related industries, particularly in China, India, Japan, and the US. In addition, during the first quarter of 2010 demand for rubber is expected to remain high as entrepreneurs has place large amount of buying order to stock up their inventory before entering the winter season. Furthermore, another important factor behind the expected rise in price is the implementations of price stabilization scheme by the government, which aim to encourage more valueadded processes in rubber production while balancing demand and supply in the market.
(1.3) Cassava: It is expected that domestic cassava production will declined from its 2009 level, mainly from outbreak of pinkish cassava mealy bugs which have caused radical shifts towards other agricultural productions to break the life cycle of the bugs. Likewise, global cassava production has also experienced considerable declines as major producers including Vietnam and Indonesia encountered serious flood. Conversely, cassava price displays some tendency to increase in accordance with rising cassava demand for ethanol production in China. Together with, rising cassava price in the future commodity market is expected to have positive effects on the price of exported cassava products.
(1.4) Sugarcane: Price is likely to increase due to initially low levels of global sugarcane stocking. This is exacerbated by reduction of sugarcane production in Brazil — the world’s largest sugarcane producer - which has been experiencing persistent heavy rainfall. Moreover, India has also turned its position from sugar exporter to being an importer as a result of serious drought. The two major factors will unavoidably tighten the global sugar market. Thus, domestic sugarcane production is expected to increase.
(1.5) Fishery: Shrimp production is anticipated to remain stable, while shrimp export (including processed shrimp) is likely to decline by 5 percent. Meanwhile, the price of fishery products is likely to remain at the level close to that of 2009. Nevertheless, downside risks still exist, including: i) upward trend in oil price, which will increase fishery cost of production, ii) the appreciation of Thai baht, and iii) the imposition of anti-dumping measures by export-competing countries such as the introduction of the IUU (Illegal , Unreported and Unregulated) by EU, which require traceability reports from the export country, and compliance with corporate social responsibility especially in the areas of foreign workers employment.
(2) Manufacturing sector is forecasted to expand compared to 2009 as a result of the recovery in both global and domestic economy. Demand for Thais’ manufacturing product is likely to increase as counterpart country economies has shown clearer sign of recovery, such as USA, EU (15), Japan and China. The improvement in manufacturing sector was notably seen in i) electronic appliances, ii) electronic products, iii) vehicles and parts, partially caused by investment promotion policy on Ecocar, iv) rubber and rubber products, following expansion in automobile industry, v) textiles and textile products, as a result of FIFA world cup Festival and windfall of JTEPA and AJCEP agreement that has raise export to Japan, vi) jewelry, according to master plan for competitiveness improvement, and vii) frozen seafood industry. Similarly, domestic-oriented products are also projected to expand, including, i) food industries, ii) construction materials, in tandem with acceleration of government construction under stimulus package 2 and improvement in private construction, iii) wood products and furniture tend to increase as a result of an expansion of real estate sector.
However, there are some risks which can impact the manufacturing sector in 2010, including, i) global economic recovery still in fragile stage, with USA and EU unemployment rate remained high and unexpectedly high inflation rate in China, ii) exchange rate volatility remained high, which in turn can impact import price, iii) imposition of non-tariff measures such as tighter restriction in Sanitary and Phytosanitary regulations enforced in both USA and EU, iv) uncertainty in political situation, v) interest rate is expected to hike in the second half year, this could tighten capital accession of SMEs, vi) impact from slow down in certain project in Mabtabhud industrial zone, and vii) the labor shortage situation in some industries.
(3) Construction sector is expected to expand from its 2009 level. Public construction likely to accelerate following implementation projects under stimulus package 2. Likewise, private constructions outlook tend to improve especially in residential, commercial and industrial components. Supporting factors for expansion in private constructions are i) relaxation of credit approval, ii) new real estate opportunities arise following new construction of mass-transit and outbound routes, and iii) price of construction materials remained low, especially in the first half year.
However, there are some foreseen risks, including, i) uncertainty in political situation which might affect fiscal disbursement and reduce business sentiment, ii) higher price of construction materials, especially in the second half year, iii) tighter restriction on environmental impact control.
(4) Real estate sector in 2010 expected to improve from 2009, as a result of i) higher private and consumer confidence toward economic recovery, as shown in improvement of Housing Development Sentiment Index (HDSI) from 75.9 in the third quarter to 75.6 in the fourth quarter, ii) slow adjustment on average in residential price, as housing stocks remain high, iii) relaxation of credit approval, which in turn increase consumer purchasing power, iv) increasing numbers of low and medium income dwellings which were newly granted by Board of Investment (BOI), v) new trend of consumer behavior which tend to have a second accommodation, and iv) mass transit plan became more certain.
However, there are some risks remaining, particularly, i) discontinuity of real estate stimulus packages which might reduce motivation in real estate activities, ii) high level of housing stocks in 2009 (97,442 units remaining at the end of last year). This might causes excess supply in housing market, and iii) inflation and interest rate which tend to be increase at the second half of this year might impact buyer’s decision. A housing trend for developers in 2010 is small-to-medium size. Condominiums and townhouses with price level between 1 - 3 million baht.
(5) Tourism sector: In 2010, the number of tourists is expected to be approximately 16 million persons, increase by 13.5 percent from the 2009 figure (which recorded at 14.1 million persons). This improvement is largely due to economic recovery in Thailand major tourism market, such as Malaysia, China, Japan, and UK, coupled with implementation of new marketing strategies by Tourism Authority of Thailand (TAT), which aim to attract more tourists. Moreover, the TAT new marketing strategies will cover i) East Asia, ASEAN, and Oceania regions: boosting tourist confidence and expanding market opportunities, ii) European market: increase awareness and expand new niche market, iii) US market: expanding market opportunities and increase tourist confidence, and iv) South Asian, and Middle East markets: expanding existing market and expand new niche market.
Thai economy tends to improve significantly given a strong momentum from global economic recovery. However, economic revival will be centered upon particular sectors during the first phase of economic recovery. In addition, the continuation of recovery remains subject to global expansion that possesses the risks of significant deceleration in the latter half of the year and the fluctuation of global financial and economic system tends to escalate. With respect to domestic condition, the pressures on Thai baht appreciation and inflation are heightened, while interest rate trends upward. In this respect, economic management in 2010 should focus primarily on policy implementation to assure continue economic recovery in parallel with maintaining economic stability, to foster a broad base economic recovery, and to mitigate the negative impacts from global economic and financial fluctuation. The key issues of economic management in 2010 are as follows:
3.1 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.
3.2 Speed up key investment project 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.
3.3 Resolve investment problems and reestablish investors’ confidence to prevent the bottleneck that obstructs the investment recovery in spite of picking up capacity utilization and Thai baht appreciation that lowers the import costs of imported capital.
3.4 Minimize downside risks and maintain farmers’ income by extending the income guarantee scheme and mitigating the impacts of drought.
Economic Projection of 2009 and 2010
Actual Data Projection 2010
2007 2008 2009 Nov 23,2009 Feb 22, 2010
GDP (at current prices: Bil. Bht) 8,529.8 9,075.5 9,047.6 9,278.8 9,726.2
GDP per capita (Bht per year) 129,240 135,455 134,638 137,463 144,092
GDP (at current prices: Bil USD) 245.8 273.4 263.5 285.5 299.3
GDP per capita (USD per year) 3,724.2 4,080.6 3,921.3 4,229.6 4,433.6
GDP Growth (at constant prices, %) 4.9 2.5 -2.3 3.0-4.0 3.5-4.5
Investment (at constant prices, %) 1.5 1.2 -9.0 3.8 4.6
Private (at constant prices, %) 0.6 3.2 -12.8 3.0 5.0
Public (at constant prices, %) 4.2 -4.6 2.7 6.0 3.5
Consumption (at constant prices, %) 2.8 3.0 -0.1 2.5 2.8
Private (at constant prices, %) 1.7 2.7 -1.1 2.7 3.0
Public (at constant prices, %) 9.7 4.6 5.8 1.6 1.6
Export volume of goods & services (%) 7.8 5.1 -12.7 6.7 8.8
Export value of goods (Bil. USD) 151.3 175.2 150.9 166.3 174.3
Growth rate (%) 18.2 15.9 -13.9 10.0 15.5
Growth rate (Volume, %) 11.9 4.9 -14.2 6.5 9.0
Import volume of goods & services (%) 4.4 8.5 -21.8 12.4 16.4
Import value of goods (Bil. USD) 138.5 175.1 131.5 153.4 163.0
Growth rate (%) 9.1 26.5 -24.9 18.5 24.0
Growth rate (Volume, %) 3.5 12.3 -23.0 14.0 18.0
Trade Balance (Bil. USD) 12.8 0.1 19.4 13.0 11.3
Current account balance (Bil. USD)(1/) 15.7 1.6 20.3 14.6 12.2
Current account to GDP (%) 6.3 0.5 7.7 5.3 4.1
Inflation (%)
CPI 2.3 5.5 -0.9 2.5-3.5 3.0-4.0
GDP Deflator 3.2 4.5 2.0 2.5-3.5 3.0-4.0
Source: Office of National Economic and Social Development Board, 22 February 2010
Note: (1/) Reinvested earning has been recorded as part of FDI in Financial account, and its contra entry recorded as Income on equity in current account
--National Economic and Social Development Board--