Economy NEWS/Discussions

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Northeast farmers and business tell Thai govt to 'make economy the focus' 
The Nation: 30 Oct 2008
'Make economy the focus'

The government is being urged by the Northeast Chamber of Commerce to pay more attention to economic stability than political stability, as the public is in need of advice and assistance to adjust to the global economic crisis.

"Little has been said about the economy. The government should stop taking care of only its own business," said secretary-general Taweesan Lonanurak, who urged the government to dispatch teams to different areas to gauge the extent of the worsening situation.

His main concern is over spiralling unemployment, which could reach 2 million nationwide next year, and the decline in commodity prices.

While farmers in the North suffer from lower corn prices, those in the Northeast have witnessed a drop in tapioca prices and those in the South suffer from cheaper para-rubber prices.

More than 20,000 workers are without jobs in Nakhon Ratchasima, prompting the province's officials to work hard to find them alternative employment.

However, Preecha Inthornchathorn, a job-placement official in the province, insists the number of unemployed is not at a critical level, as it represents only a tiny portion of the province's population of 2.7 million.

Most of the unemployed have a bachelor's-degree education, he said.

Recently, a Nakhon Ratchasima jewellery factory was shut down and 120 workers laid off. An electronic-parts manufacturer also launched a voluntary programme to shed 115 workers.

Preecha said the office was monitoring whether these employers were complying with the labour law in expelling workers. Meanwhile, a list of vacant jobs is being offered to the laid-off employees, he added.

The office will also approach companies and factories to survey their employment needs.
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EARLIER REPORT:
BAAC worries over wild swings in farm product prices

The sharp twists and turns in the fortunes of farmers due to the global financial crisis has made executives of the Bank for Agriculture and Agricultural Cooperatives (BAAC) jittery.

While farmers' incomes jumped when prices of farm products rose sharply early this year, the situation has now reversed, with farm prices plunging along with that of crude oil.

Crude oil prices have plummeted because fears of a global recession fear have affected demand for oil.

"We're concerned about debt repayment that will be due in December and March," acting president Ennoo Suesuwan said yesterday.

Farmers may buy goods on credit when prices of rice, rubber and other farm products are rising and run into financial trouble when prices drop, said Ennoo.

The prospect is also bleak, due to the threat of a sharp global economic slowdown next year.

"We cannot rely on the export market, as our competitors, such as Vietnam, recently cut their rice price sharply," said Ennoo.

The BAAC has sent its staff to meet farmers and advise them on how to cope with the fast changing environment. If they cannot repay their debt, the bank will undertake debt restructuring for them, he said.

In the past six months of its fiscal year (April to September), the bank lent farmers Bt183.8 billion, exceeding its target by 80 per cent.

The surge in lending has largely been driven by the government policy to boost the economy at the grass roots level, Ennoo said. With the government continuing to direct state owned banks to lend more, the BAAC plans to lend more than Bt100 billion in the present fiscal year.

The bank has also provided financial support for the government's price intervention scheme, in order to shore up farm product prices. At the latest rice pledging, the government is guaranteeing a price of Bt12,000 a tonne for paddy rice.

In the past six months, the BAAC has mobilised deposits worth Bt10.38 billion. It plans to raise more by launching lottery savings products. Next month, the bank will issue lottery deposits, with each unit worth Bt100 at interest of 1.5 per cent for a three year deposit. Each unit could also win a lottery, with a first prize of Bt1 million and total prizes worth Bt13.25 million.

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Govt urges Bank of Thailand to cut interest rate 
The Nation: 7 Nov 2008
SUCHART URGES BOT TO CUT RATE

Finance Minister Suchart Thadathamrongvech has urged the Bank of Thailand (BOT) to slash its policy interest rate of 3.75 per cent to below the deposit interest rate. He said the central bank should also reduce bond issues to financial institutions and buy back bonds from primary dealers in the repurchase marke

His recommendations follow concerns over liquidity in the economy as the government's additional budget deficit of Bt100 billion could suck out liquidity, discouraging borrowing by the real sector.

Suchart said in the economic slowdown the deposit interest rate should be higher than the repurchase interest rate.

The BOT's breakdown of bond issues along with the bond repurchase would improve liquidity in the real economy, which would help boost economic growth. About Bt1.5 trillion of BOT bonds have been in the banks' portfolio, he said.

"The government needs to issue the bonds to finance the budget deficit and the rice pledge worth a total of Bt110 billion. If the central bank does not reduce the bond issues, the liquidity will not be enough," he said.

The minister said he had already given his suggestions to the central bank, but the final decision depended on the BOT.

The minister earlier called for collaboration of fiscal and monetary policies to boost the economy amid the global economic slowdown. The minister said he was worried that shortage of liquidity would dent private investment.

Bank of Thailand Governor Tarisa Watanagase said separately that the banking system's lending has incessantly risen, with a 13.5percent growth in September.

The expansion has been reflected both in loans for consumers and the business sector's working capital and investment.

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Bank of Thailand likely to cut rates 
Bangkok Post: 18 Nov 2008
BoT will likely cut policy interest rate: Tarisa

The Bank of Thailand (BoT) will likely adjust its economic forecast and key economic indicators and cut the policy interest rate because of the grave global economic crisis, BoT governor Tarisa Watanagase said on Tuesday.

According to Mrs Tarisa, the central bank on October 8th projected that Thailand’s economy in 2008 and 2009 would expand by 4.3 to five per cent and 3.8 to five per cent respectively. The assessment was based on the information from the second quarter, but the figures could lessen because many factors had changed in the third quarter, she noted.

The central bank previously forecast that the country’s economic growth rate in the third quarter of 2008 was between five and 5.3 per cent, but it was slashed to only four to 4.5 per cent mainly due to the consequences from the economic downtrend worldwide.

The International Monetary Fund (IMF) foresaw that the global economic growth in 2009 would be only 2.2 per cent, down by 0.8 percent from its previous forecast in October. Economic figures in many countries in Europe as well as Japan were also adjusted downward, and Thailand’s export sector would be hit more severely than expected.

The gross domestic product (GDP) growth rate and the policy interest rate will be revised at the Monetary Policy Committee meeting on December 3, Mrs Tarisa said.
 

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Bank of Thailand to cut rates today 
Bangkok Post: 3 Dec 2008
Interest rate cut expected today
The financial market expects the Bank of Thailand to reduce its benchmark one-day repurchase interest rate by between 25 and 50 basis points today, even though the economy has deteriorated quickly in the past few months.

According to the central bank, the manufacturing sector and capacity utilisation declined sharply in October as exports fell faster than expected. Business sentiment indicators and imports also pointed to a trend of moderating private investment.

Meanwhile, headline inflation in November fell to the lowest level in 14 months at 2.2% year-on-year in light of weakening domestic demand due to increasing unemployment and eroding economic confidence.

Kobsith Silapachai, a Kasikornbank executive for economic research and capital markets, said the central bank's Monetary Policy Committee (MPC) might not cut its rate as aggressively as many had expected because it could weaken the baht in light of the unfolding global financial crisis. It is likely to cut the interest rate by a quarter percentage point from 3.75% to 3.50%, he believes.

"The central bank might want to be more careful about foreign reserves which decreased by $2 billion between Nov 14 and 21 because of risk aversion in the world market," he said.

"We have a slimmer current account surplus, and there is risk in terms of income opportunity."

The MPC, he added, was unlikely to view monetary policy, instead of fiscal policy, as the priority for stimulating domestic demand.

In any case, Mr Kobsith said, the economy might not be as bad as some fear due to global and political factors.

"Real GDP [gross domestic product] might still expand although nominal GDP may not grow at all. Low inflation could help stimulate domestic consumption," he said, based on a scenario that inflation could turn negative in 2009.

Credit-rating agencies' revisions of Thailand's sovereign credit ratings are likely to pose a higher risk of outflows of short-term external debt, now totalling $20 billion, in the future, he added.

Ariya Tiranaprakij, an executive vice-president for the Thai Bond Market Association, said bond investors had anticipated the MPC would cut rates by a quarter to half a percentage point today, resulting in a significant decline in yields during the past few days.

In addition, local institutional investors have shifted from equities to bonds in that period.

"Yields differ very little between five-year government bonds, which are at the lowest since the beginning of the year at 3.3%, and 10-year ones at 3.5%. This shows that the market expects demand to be weak and the interest rate to remain low in the long term," she said.

However, yields of corporate bonds increased in line with risk perceptions in the private sector, she added.

The baht staged a modest rebound yesterday to 35.64/68 to the dollar from 35.70/74 the day before.

The baht strengthened early yesterday in line with an unusual appreciation of the Chinese yuan. It then weakened because of the central bank's intervention. But news of the disbanding of three coalition parties helped prop the baht up later.

"We expect the baht to continue to weaken and the dollar to appreciate. The fact that the European Central Bank tends to reduce interest rates aggressively in the future could lift the dollar further," the dealer said.

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Thailand 'Open for business' message key to investors 
Bangkok Post: 15 Dec 2008
'Open for business' message key

The new government needs to tell investors outside Thailand that the country is open for business again after Bangkok's airports reopened, the Australian-Thai Chamber of Commerce says. Even though expatriates living in Thailand know Thailand is safe and remains a good place to invest, the perception of the country by those living abroad remains unchanged, said Andrew Durieux, the chamber's director.

Suvarnabhumi and Don Mueang airports were shut down from Nov 25 to Dec 2 by protesters from the People's Alliance for Democracy (PAD).

"The major concerns of business communities are the political situation, the rule of law and whether the airports will be closed again," Mr Durieux said. "And for business communities outside Thailand, there is still the perception that Thailand is closed for business."

Consequently, explaining this to the outside world is among the top priorities he recommends for the new government to win back foreign investors.

"The first priority is to restore stability and then impose regulatory changes and eliminate those unnecessary for investment," Mr Durieux said. In his view, the government has not performed as the business sector would hope ever since the coup that ousted Thaksin Shinawatra in September 2006.

"The view of Australian foreign investors is that there will be an extended period of instability in Thailand. Combined with the impacts of the global economic crisis, some companies hesitate to invest further here and some have already decided to delay their investments," said Mr Durieux.

With competition from neighbouring countries, especially Malaysia and Vietnam, Thailand needs attractive investment strategies such as liberalising the service sector, he added.

Nonetheless, while overall foreign direct investment was down 38% year-on-year from January to November, Australia bucked the trend.

Net applications of Australian companies to the Board of Investment totalled 3.72 billion baht, compared with 3.18 billion a year earlier.