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Business, Finance & Economics in Thailand All about money and finances in Thailand and Asia; interest rates, stock market & commodities investing, banking and buying shares.

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Old 07-02-2013, 01:50 PM   #1 (permalink)
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Thailand's credit takes beating over political deadlock

Thailand's credit takes beating over political deadlock - The China Post

Thailand's credit takes beating over political deadlock

By Bruce Gale, The Straits Times/Asia News Network
February 7, 2013, 11:20 am TWN

SINGAPORE -- Ask Thai government officials and they will fume that it is just unfair. How can Thailand be denied an “A” sovereign credit rating when other countries with poorer macroeconomic numbers already have that coveted assessment? Securing a high credit rating helps a country access cheap funding on international bond markets. And for the Thais, the obvious comparison is with Malaysia.

All three major rating agencies — Standard & Poor's, Moody's and Fitch — give Malaysia an “A” grade. Those same agencies put Thailand at the upper end of the “B” category, meaning that while Thai bonds are still rated investment grade, they are not regarded as being of the same quality as Malaysia's.

The macroeconomic numbers, however, suggest otherwise. Thailand's public debt stands at around 44 percent of gross domestic product, significantly lower than Malaysia's 53.7 percent. And while both countries have fiscal deficits, Malaysia's is proportionately higher (4.5 percent of GDP last year) compared to that of Thailand (3 percent). Both countries also hold international reserves equal to more than nine months of retained imports.

The reality, however, is that such numbers are not the only factors rating agencies look at when making their assessments. Also considered is the impact of more subjective political variables. While Malaysia certainly has its problems, the political impasse in Thailand seems far riskier.

Thailand's recent political history, involving military coups, constitutional change and deadly street clashes, cannot be ignored. Malaysia's political difficulties will be dealt with at the ballot box in a couple of months; Thailand's could easily be settled at the point of a gun.

Despite the comfortable parliamentary majority that Thai Prime Minister Yingluck Shinawatra's Pheu Thai Party secured in the 2011 elections, government economic planners are far more easily sidetracked by urgent, short-term political considerations than in most other countries. Frequent changes of government have not helped either.

Education reform, which could help promote the country's long-term economic prospects, is already being neglected.

Thailand remains bitterly divided between yellow- and red-shirt protesters, together with their respective allies. A loose grouping of middle-class professionals and royalists, yellow-shirt protesters supported the 2006 military coup that ousted Yingluck's brother, Thaksin Shinawatra.

The red shirts, on the other hand, hotly oppose what they see as attempts by the urban and military elite to monopolize political power. Sympathetic to Thaksin, they include students, left-wing activists, farmers and businessmen.

Both groups were responsible for violent street protests in recent years. And as Yingluck well knows, a future round of violence could trigger yet another military coup.

In order to maintain strong support among rural voters, her government implemented several populist policies, some of which are contributing to the growing fiscal deficit. According to the World Bank, a controversial rice-buyback scheme alone was responsible for a 115-billion-baht (US$3.86 billion) loss from the 2011-12 bumper harvest.

The government says it is aiming for a balanced budget by 2017. The maximum level of public debt is officially estimated at 49.9 percent of GDP. But critics give much higher debt projections.

“No one in this government is concerned with fiscal discipline,” former finance minister Pridiyathorn Devakula told an economic forum in Bangkok last month.

There is certainly plenty on the political calendar to worry about this year. The International Court of Justice is due to rule later on Bangkok's acrimonious dispute with Cambodia over the ownership of the Preah Vihear temple. Should Thailand's claim be rejected, as seems entirely possible, Yingluck could face serious protests from citizens accusing her of not doing enough to defend Thailand's cultural heritage.

The rising cost of living and lower prices of agricultural produce are also causing concern. Street protests by farmers could, if left unaddressed, seriously undermine the government's support in rural areas. And this, in turn, could give the government's opponents outside Parliament the opportunity they are looking for.

But it is the government's push to amend the present constitution, drafted by a military junta following the 2006 coup, that is potentially far more serious.

The Yingluck government sees it as anti-democratic. Proposed changes include a return to a fully elected Senate, increased provisions for amnesty, and limits on the power of judicial and independent bodies to scrutinize elected politicians.

The yellow shirts are opposed to all of these changes, saying any attempt to amend the Constitution would potentially weaken the monarchy. The government also seems to have little inclination for reconciliation. This can be seen in the crackdown on yellow-shirt protesters in November and the murder charges brought against former Prime Minister Abhisit Vejjajiva in December.

It looks like that rating upgrade will just have to wait.
"Slavery is the daughter of darkness; an ignorant people is the blind instrument of its own destruction; ambition and intrigue take advantage of the credulity and inexperience of men who have no political, economic or civil knowledge. They mistake pure illusion for reality, license for freedom, treason for patriotism, vengeance for justice."-Simón Bolívar
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Old 07-02-2013, 01:52 PM   #2 (permalink)
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Loosely related older article I forgot to post....

Analysis & Opinion | Reuters

Thailand’s unsustainable boom is piling up risks

By Andy Mukherjee
January 16, 2013

By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Thailand is booming again, but the foundations of its growth revival are wobbly. Unless policies and politics become more robust, the Southeast Asian nation’s economy may find its momentum hard to sustain.

While this year’s expected GDP growth rate of about 5 percent is close to the economy’s potential rate of expansion, the quality of growth is suspect. A subsidy for first-time car buyers saw a jump in auto loans last year. A 30 percent increase in unsecured personal lending prompted a recent warning from the Bank of Thailand about the growth of household debt.

Farmers, meanwhile, are getting a state-sponsored income boost. The government is buying their rice crop at above-market prices for a second year at an estimated annual fiscal cost of 1 percent of GDP. The spending priorities are lopsided. The construction of a $12 billion water management system, which could prevent the recurrence of 2011 floods, is unlikely to start this year.

The Bank of Thailand is not a “big supporter” of consumption stimulus, says Prasarn Trairatvorakul, the central bank governor. The monetary authority chief is also mindful of the hard slog ahead in doubling per capita income to $10,000 a year, the minimum required for Thailand to become a rich nation.

Escaping its middle-income trap will be difficult because the country is running out of cheap labour. About 10 percent of the workforce consists of immigrants from Myanmar. More opportunities for them at home could mean higher costs for Thai companies, says Kampon Adireksombat, a TISCO Securities economist in Bangkok.

A 23 percent minimum-wage increase and a drought in the agricultural belt in the north and northeast could lift inflation this year above the central bank’s estimate of 2.8 percent.

The biggest risk for investors, though, is politics. In the 17 months that she has been in power, Prime Minister Yingluck Shinawatra has not pushed too hard for an amnesty for her brother and former prime minister, Thaksin Shinawatra, who was ousted in a 2006 military coup and is currently living in Dubai. But there is always a risk of a tactical mistake that will put pro-Thaksin “red shirts” and anti-Thaksin “yellow shirts” on a collision course. Unless Thai politics becomes more stable, the government will have little interest in boosting competitiveness and every incentive to carry on giving people a good time.
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Old 07-02-2013, 02:37 PM   #3 (permalink)
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No mention of "Southern Unrest?"
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