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The Outlook for the Thai Economy

29th November 2011

I was delighted to attend “The Outlook for the Economy and Thai Business after the flood crisis” seminar at Centara Grand Hotel hosted by Bangkok Bank.  The guest speaker was Dr. Prasarn Trairatvorakul Govenor of the Bank of Thailand.  There must have been close to 400 people attending , it was so packed they had to put more chairs in.  As the seminar was conducted in Thai and my Thai language skills were not up to scratch I decided to bring my executive assistant who translated perfectly for me.  During the break out session I had the privilege in meeting Khun Chartsiri Sophonpanich, President of Bangkok Bank Public Company Limited.  So in summary:

Bangkok Bank was the host of this annual seminar 2011, which was held at Bangkok Convention Center, Centara Grand Hotel on 23rd November titled “The Outlook for the Economy and Thai Business after the flood crisis”.

The President of Bangkok Bank, Chartsiri Sophonpanich said in the seminar that the severe flooding has had a significant impact to the opportunity to cash in on new investments by foreign investors. The Bank had expected to welcome foreign investors as they are looking for new places to expand their business and Thailand is one of them but the flooding broke down the global supply chain, and many foreign investors  were traumatized. Last month, overall export volume expanded by 13 percent but automobile parts exports dropped by 15 percent and electronic parts dropped by 22 percent. To restore confidence, the Government had to hurry to recover the country’s appeal through water management and new measures from agencies, such as tax incentives from the Board of Investment.

The Bank of Thailand, Governor Prasarn Trairatvorakul said in the seminar that flooding has affected 1.2-1.5 million households, mostly in the capital and surrounding provinces. Recovery may be sooner than expected as some industrial estates have already started to drain water out and the flood impact on the Thai economy may last till the end of 2011.

The bank’s previous 2011 GDP growth forecast on 19 October was 2.6 percent. After that, it is expected to rebound in the first and second quarter in 2012 and that GDP is projected to grow 4.1 percent. Moreover the uncertainty and fragile European and America has an impact in Thai economy as well as local flooding, If the world economy slows down, the demand for oil and consumer product will drop then affect to the global economic problems may worsen in the second quarter 2012.

Regarding government assistance, one of the challenges is water management and SMEs nationwide should realize that how business they can handle with the flood recovery and competition.

Payungsak Chatsuttipol, President of the Federation of Thai Industries (FTI), Pronsin Patcharintanakul, VP of Thai Chamber of Commerce, Tongma Vichitpongpan, President of Pruksa Real Estates Public Company Limited and Kong Krit Hiranyakij, President of Policy of Tourism Council of Thailand have joined discussing regarding the flood impact on various businesses and SMEs nationwide and how to adjust their business after the flood crisis.

In the Industrial sector, 7 industrial estates, 9,895 plants in eight provinces have been flooded, affecting 660,000 workers. The flood crisis will cause Thailand’s direct and indirect damages of about 400,000 million Baht, moreover damage on industrial production is likely to impact exports in the fourth quarter dropping by 10 percent. Government should restore confidence as soon as possible. For assurance, the entrepreneurs haven’t received any commutation cause it is still in process of damage assessment.

For tourism, foreign tourist arrival this year are likely to drop about 700,000 to 1million which means Thailand will lose about 30,000 – 40,000 million baht.

Last, Executive Chairman of Bangkok Bank, Kosit Panpiemras said that GDP next year could expand by 4-5 percent, recovering from 1.3 percent expected this year.

The economy would still be affected from the flooding until the first quarter of 2012. However, the resumption of operations by business could be seen in the second quarter and could offset the temporary suspension of operations in the fourth quarter this year and the first quarter of next year. The bank’s loans next year could rise by 6-8 percent, the same as this year.

The central bank will cut its policy rate by 25 basis points in the upcoming meeting and gradually reduce it further next year. However, the central bank should not hack the policy rate too deeply because the country needs to have enough reserves to prepare for unexpected risk especially the global economy volatility. All sectors must include the flooding impact and unexpected risk in their business plans. The government should make it a priority to increase the efficiency of solving flood-related problem.

In the photo below from left: Dr Anatchai Rattakul (Chairman of the Board, Broadgate Financial and Honorary Counsel to the Ministry of Finance), Chartsiri Sophonpanich (President, Bangkok Bank Public Company Limited), John Mills (President & CEO, Broadgate Financial) @ Economic Forum Centara Grand.

John Mills

President & CEO