Thai PM elect seeks to dispel inflation fears

[StrontiumDog]

Thai PM elect seeks to dispel inflation fears - AlertNet

Thai PM elect seeks to dispel inflation fears

08 Jul 2011 05:49
Source: reuters

* Yingluck says policies will only push inflation up a bit

* Says level of baht to be determined by the market

* Says not up to her when ousted brother Thaksin will return

* Says has not yet had contact with powerful army chief (Recasts, adds details and quotes throughout)

By Jason Szep and Martin Petty

BANGKOK, July 8 (Reuters) - Thailand's prime minister elect, Yingluck Shinawatra, sought on Friday to dispel fears of a crippling inflationary backlash from populist promises made in her election campaign, saying she would weigh up the consequences of big spending.

In an interview with Reuters, the sister of fugitive former premier Thaksin Shinawatra held out no promises for the return of her billionaire brother and said her immediate focus was on stimulating the economy, Southeast Asia's second biggest.

The 44-year-old businesswoman, who will be Thailand's first female prime minister, said she wanted an acceleration in telecommunications reforms along with the privatisation of state assets, both of which she said could help quicken long-term growth and make the Thai economy more efficient.

She also clarified that her government would not influence the direction of the Thai baht , saying the currency should be left entirely to market forces.

"We don't aim to control the baht. We prefer to go by the market," she said.

A member of her Puea Thai Party who is seen as a candidate for finance minister said this week he favoured steering the baht's exchange rate to make it more competitive, but Yingluck said that was not party policy.

The baht currently floats freely, with the central bank intervening to avoid excessive volatility. It has firmed slightly since the election as foreign money has flowed back into the stock market and political tension has eased.

INFLATION TO RISE "A BIT"

When asked about the inflationary impact of her campaign promises, including an average 40 percent increase in the minimum wage from January, she said: "We would like to see consumption increase and grow GDP ... Inflation may not increase a lot but may increase a bit in the future."

She said she was focused on finding ways to cut costs, citing a promised reduction in the corporate tax rate to 23 percent from 30 percent in the first year and to 20 percent the year after.

She saw room to privatise state companies to make Thailand more competitive but declined to identify which might be affected. The government has big stakes in Thai Airways International Pcl and second-largest lender Krung Thai Bank among others.

The Bank of Thailand had urged parties campaigning in the election to be cautious in pursuing their populist promises. Private economists warned Thailand could face a wage-price spiral if Puea Thai followed through on all campaign pledges.

She suggested there was no guarantee she would implement every policy. "If when we implement (our policies) and find a problem, we will need to tell the facts and let the country make a decision. So I won't just be stubborn and launch these without thinking about the consequences," she said

THAKSIN'S RETURN

She said her brother's possible return to Thailand depended on the Truth for Reconciliation Commission, set up to investigate political violence in April and May last year.

"I don't know when he can come back. It is up to the committee," she said. The telecommunications tycoon turned prime minister fled into exile in 2008 shortly before being found guilty of abuse of power charges and sentenced to jail.

Thaksin remains revered by the rural masses at the heart of a red-shirted protest movement that helped bring Yingluck to power. To the poor, he is seen as a mould-breaking prime minister, the first to pay attention to their needs.

But to the urban middle class and royalist elite who backed former Prime Minister Abhisit Vejjajiva, Thaksin is a terrorist and a crony capitalist who plundered the economy while in power from 2001 until a 2006 military coup and then led a movement that reduced parts of Bangkok to smouldering ruins last year.

During the election campaign, Thaksin said he would like to return home in December but he has since been more vague about his plans. If he returns without an amnesty, he would be jailed.

"He told me not to be concerned about him, but to be concerned about the whole country. We have to see the country benefit before our family benefits," Yingluck said.

The red shirts want justice for its members killed or maimed when the army moved against them during last year's protests. But analysts say Yingluck must avoid antagonising the army in a country scarred by 18 coups since the 1930s.

"The military has said in interviews several times that they won't intervene in this election," she said. She added she had not yet spoken directly with army chief Prayuth Chan-ocha.

(Additional reporting by Michael Perry; Editing by Alan Raybould)

[Thormaturge]

Thailand's first female prime minister, said she wanted an acceleration in telecommunications reforms along with the privatisation of state assets,

... following which the Shinawatra family will own them instead of the State.

[StrontiumDog]

Bank of Thailand raises inflation forecast

Bank of Thailand raises inflation forecast

วันศุกร์ ที่ 22 ก.ค. 2554




BANGKOK, July 22 – The Bank of Thailand (BoT) conceded today that the accelerating inflation rate is of concern, and revised its core inflation projection to 2.4 per cent from its earlier 2.3 per cent projection this year, and from 2.1 per cent to 2.3 per cent for 2012, according to Paiboon Kittisrikangwan, Assistant Governor heading the Monetary Policy Group.

Meanwhile, the BoT keeps its headline inflation rate at 3.9 per cent this year and at 3.2 per cent in 2012.

The BoT has maintained Thai economic growth or Gross Domestic Product (GDP) so far in 2011 at 4.1 per cent and 4.2 per cent regardless of the implementation of the new government’s fiscal policies which are yet to be put into practice.

The bank conceded that the risk of accelerating inflation is of more concern than the risk regarding economic growth because in the second half of this year, inflation is rising rapidly due to the burden of increasing capital costs being passed on from entrepreneurs to consumers, Mr Paiboon said.

The new government’s economic stimulus measures--particularly the planned increase of daily wage to Bt300 which is not on par with the development of labour skills--as a one-time jump will definitely negatively impact the costs of production, so the bank has its inflation forecast upward, he said.

The economy in the second half of this year is continuing to expand, thanks to exports expected to grow 22.4 per cent in tandem with the global economy and the better-than-expected recovery of the Japanese economy.

The private sector is likely to expand 10 per cent and private consumption to rise 3.8 per cent. Imports are projected to grow 26.9 per cent. However, the European debt problem and the
American financial crisis must be monitored as they have an impact on the foreign capital inflow to Thailand.

It is believed that Europe will be able to tackle the problem with a large cash influx. The baht is likely to strengthen further based on Thai economic fundamentals and currency volatility continues, the BoT executive said. (MCOT online news)

[socal]

- Says level of baht to be determined by the market

along with the privatisation of state assets, both of which she said could help quicken long-term growth and make the Thai economy more efficient.

-She also clarified that her government would not influence the direction of the Thai baht , saying the currency should be left entirely to market forces.

-"We don't aim to control the baht. We prefer to go by the market," she said.

-"We would like to see consumption increase and grow GDP

-She said she was focused on finding ways to cut costs, citing a promised reduction in the corporate tax rate to 23 percent from 30 percent in the first year and to 20 percent the year after.

-She saw room to privatise state companies to make Thailand more competitive but declined to identify which might be affected.

This is basically what Singapore and South Korea did. Capitalism works.

[SteveCM]

Korn warns against policy clash with BOT

MANAGING THE ECONOMY
Korn warns against policy clash with BOT


By Wichit Chaitrong
The Nation
Published on July 27, 2011

Outgoing finance minister fears Pheu Thai-led government's spending policies may put it at odds with central bank's goal of containing inflation

Outgoing Finance Minister Korn Chatikavanij has expressed concern over a possible policy clash between the new government and the central bank, while a visiting German economist suggested that the government should not risk policy conflicts with the Bank of Thailand.

Speaking at news conference yesterday, Korn said that while the BOT had been trying to contain inflation, the new government intended to spend more, possibly leading to policy conflicts. The outgoing Democrat-led government had coordinated its economic policies with the BOT and other institutions, making possible a sharp recovery from the global financial crisis in 2008, he said.

To contain rising prices, the Finance Ministry and key economic institutions BOT, the Budget Bureau and the National Economics and Social Development Board had agreed to limit budget deficit at Bt350 billion for the next fiscal year. They also agreed to balance the budget within four years, Korn said.

The outgoing government planned to set expenditures for the 2012 fiscal year (starting in October) at Bt2.25 trillion against estimated revenue of Bt1.9 trillion. The new Pheu Thai-led government may review this spending plan, as revenue may exceed target by Bt100 billion, Korn said.

He quoted the central bank as saying that the government should not run a fiscal deficit of more than Bt350 billion, to support the BOT's efforts to contain inflation.

On the revenue side, Korn said that if the new government cut the rate of corporate income tax to 23 per cent it would result in lower revenue. On the other hand, taxes may rise if the government raises the diesel tax from zero as imposed by the outgoing government.

Meanwhile, a price-subsidy scheme planned by the Pheu Thai-led government would cost about Bt400 billion, according to Korn. "Moreover, the new government will need to repay debts of about Bt100 billion to the Bank for Agriculture and Agricultural Cooperatives, debts owed by the previous Thai Rak Thai government stemming largely from the rice-price pledging scheme."

A debt moratorium and wage increases promised by Pheu Thai would also result in high costs for state banks, the government and commercial banks, Korn said.

"The new government should implement its promises, but the actions must not damage fiscal discipline," he warned.

In a separate news conference, Michael Heise, chief economist of Allianz Group, said it was not good to risk policy conflicts with the central bank.

Heise said the BOT and other central banks in Asia had moved decisively to tackle inflation by increasing interest rates, which would also slow economic growth.

"Inflation driven by commodities and imported inflation have not yet spilled over into domestic inflation," Heise said.

He is optimistic that the central banks in Asia will be able to contain inflation, as prices of commodities, particularly oil and farm products, will not surge further.

Heise said the lesson drawn from the sovereign debt crisis in the euro zone was that governments should not rely too much on borrowing from capital markets.

Greece, Spain, Portugal and Italy have been facing trouble because they did not try to reduce public and private debts during a period of low interest rates.

He said confidence in the euro zone would be renewed next year, and it might take time before the euro currency regains its value against the US dollar.

"But I don't see the dollar regaining its value in the foreseeable future," said Heise, referring to the US public-debt issue and fragile recovery of the US economy.

[SteveCM]

Bangkok Post : Plea for business focus

Plea for business focus

Thirachai warns against interest rises

• Published: 16/08/2011 at 12:00 AM
• Newspaper section: Business

New Finance Minister Thirachai Phuvanat-naranubala is questioning the Bank of Thailand's hawkish focus on inflation by lifting the policy interest rate again, saying it would be a key obstacle for businesses.

Thirachai: Raise core inflation target

On his first day as finance minister, the former deputy governor of the central bank slated the regulator's inflation-targeting framework, saying raising interest rates helps control inflation but hurts domestic purchasing power.
Mr Thirachai said he will discuss with the central bank the possibility of increasing the core inflation target from 3%.

He added the central bank's policy also attracts more foreign capital inflows, especially as US rates are nearly zero and will be for two more years.
Consequently, the baht has appreciated rapidly.

"I want to see fiscal and monetary policies in the future not only focused on economic data from the past, but also concerned with the problems and suggestions from the private sector," said Mr Thirachai.

He demanded a new committee chaired by the finance minister be set up soon to monitor the economy, with participants including the central bank governor, related state agencies, the Federation of Thai Industries, the Thai Chamber of Commerce and other business leaders.

Mr Thirachai is also concerned that the central bank resolve the one trillion baht in liabilities of the Financial Institutions Development Fund (FIDF) dating from the financial bailout during the 1997 economic crisis.

"We should have a serious discussion of the possibilities for the central bank to earn higher revenue, if it could improve its foreign reserves management, and it should earn some profit to help repay the FIDF's debt," said Mr Thirachai.

Even though he admitted the central bank needs to be free from intervention, he pointed out both the Finance Ministry and the Bank of Thailand are moving in the same direction.

"While I don't want to interfere with monetary policy, I would ask the central bank whether it has considered the downside risk of its policies," stressed Mr Thirachai.

M.R. Chatumongol Sonakul, the chairman of the central bank, said the Finance Ministry is responsible for the FIDF debt, because it issues bonds to refinance them.

"There's no way the central bank's balance sheet could turn a profit as long as the baht strengthens from the dollars it collects in the market," said M.R. Chatumongkol.

"The central bank did trade in the market for gains. It does so for the sake of foreign exchange flexibility," he added.

Regarding core inflation, M.R.Chatumongol views a low and predictable inflation environment as more conducive to private-sector investment.

"Inflation targeting is quite new, but there is evidence it works satisfactorily for those countries that have adopted it," said M.R. Chatumongol.

The central bank began using inflation targeting in 2000 for core inflation, which excludes energy and raw food prices.

The Bank of Thailand Act calls for the cabinet to endorse the inflation target based on consultations with the central bank each December. The existing target of 0.5% to 3% has been used since 2009.


Writer: Wichit Chantanusornsiri and Parista Yuthamanop

[SteveCM]

[related]

Bangkok Post : Kittiratt: Govt to boost economy

Breakingnews >

Kittiratt: Govt to boost economy

• Published: 16/08/2011 at 05:22 PM
• Online news:

The government plans to boost the country's economy for next year to ensure growth of one per cent above previous projections through its policies promised during the election campaign, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said on Tuesday.

Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong

The National Economic and Social Development Board projected Thailand's GDP would grow between four and five per cent in 2012.

The Pheu Thai Party's policies, which aimed at boosting domestic purchasing power, would allow the country to reduce its reliance on exports, which have been weakening due to the sluggish global economy, while increasing domestic consumption, Mr Kittiratt said.

[SteveCM]

Bangkok Post : Rice mortgage scheme in November

• Published: 17/08/2011 at 01:22 PM
• Online news:

The government will start its rice mortgage programme in November, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said on Wednesday.
Ms Kittiratt came to work at the Ministry of Commerce for the first day this morning.

He told reporters at the ministry that the government has put in its policy statement that rice mortgage scheme and the mortgage prices will be set at 15,000 baht per tonne for the non-glutinous unmilled rice and 20,000 baht a tonne for the Hom Mali (jasmine) unmilled rice.

The minister said the rice mortgage programme will be continued until the commodity’s market prices are equal to or higher than the pledging prices.

He said his ministry may assign the Public Warehouse Organisation to purchase rice from farmers for a government-to-government exporting. The government has no plan to stock a huge amount of rice before selling it out as it could result in a drop in rice’s market price.

Asked about the policy to minimise the dependence on exports to boost the economic growth, Mr Kittiratt said there would be no reducing exports dependence. The exports will still be promoted but the government will increase its dependence on domestic consumption to drive economic expansion.

“If the government can increase the daily minimum wage of workers and the minimum monthly salary for university graduates and can raise farm incomes as planned, it would help increase next year’s gross domestic product by one percentage point’, he said.

On the concern that the populist policies could lead to high inflation, Mr Kittiratt said the inflation is not scary.

“Why should the low-income earners have to suffer for curbing inflation at low rate? The Pheu Thai-led government will increase income of people. This might result in higher inflation rate, but it is not the damage. We should be glad that people will have higher income,” the minister said.

He went on to say that his ministry would not use measures to reduce prices of goods, but will prevent the setting an exorbitant price practice from occurring. This means that the people will not have to buy goods at unreasonable high prices.

Mr Kittiratt said he will make good understanding with manufacturers that the government does not please people too much, or overlooks the business sector. The government will oversee to ensure suitable production costs and products’ prices.

Prime Minister Yingluck Shinawatra said on Tuesday that strengthening the domestic economy and raising household incomes represent the foundation of the government’s economic policies.

The cabinet meeting yesterday approved a draft policy platform including 10 economic priorities such as the daily minimum wage increase to 300 baht, a new 15,000 baht minimum monthly salary for bachelor degree holders working in state agencies and plans to raise income of farmers.

[SteveCM]

Bangkok Post : Kittiratt: No price cut pressure

• Published: 30/08/2011 at 03:32 PM
• Online news:

The government has no policy to pressure businesses to cut their product prices until they run into difficulties, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said on Tuesday.

"Business is competition. If business operators understand that they have to compete and treat consumers kindly, consumers would in turn become their customers.

"If business operators set their product prices too high, they would not be able to sell," Mr Kittiratt said.

Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong (Photo REUTERS)

He said many business operators had informed him that they could slash some of their product prices to ease people's cost of living.

However, he said, people should not have high expectations for prices of different consumer prices to decrease significantly.

When reporters asked him what products will likely have their prices cut, he said business operators viewed that meat prices can be reduced to an appropriate level but price movement in this product category might not be affected by the government's economic policy.

When asked about the government's fuel price cut measure, he said the measure can alleviate the cost of living of motorists to some extent.

"Countries around the world are pressed with soaring product prices but prices in Thailand have not gone up to that level yet.

"I've just returned from China and the inflation there was as high as six per cent while the inflation in Thailand stood at four per cent. We've done well when compared to other countries," Mr Kittiratt said.

The government will not add more products to its price controlled items but will left the prices to the market mechanism, he added.

[phomsanuk]

Bank of Thailand raises inflation forecast

Bank of Thailand raises inflation forecast

วันศุกร์ ที่ 22 ก.ค. 2554




BANGKOK, July 22 – The Bank of Thailand (BoT) conceded today that the accelerating inflation rate is of concern, and revised its core inflation projection to 2.4 per cent from its earlier 2.3 per cent projection this year, and from 2.1 per cent to 2.3 per cent for 2012, according to Paiboon Kittisrikangwan, Assistant Governor heading the Monetary Policy Group.

Meanwhile, the BoT keeps its headline inflation rate at 3.9 per cent this year and at 3.2 per cent in 2012.

The BoT has maintained Thai economic growth or Gross Domestic Product (GDP) so far in 2011 at 4.1 per cent and 4.2 per cent regardless of the implementation of the new government’s fiscal policies which are yet to be put into practice.

The bank conceded that the risk of accelerating inflation is of more concern than the risk regarding economic growth because in the second half of this year, inflation is rising rapidly due to the burden of increasing capital costs being passed on from entrepreneurs to consumers, Mr Paiboon said.

The new government’s economic stimulus measures--particularly the planned increase of daily wage to Bt300 which is not on par with the development of labour skills--as a one-time jump will definitely negatively impact the costs of production, so the bank has its inflation forecast upward, he said.

The economy in the second half of this year is continuing to expand, thanks to exports expected to grow 22.4 per cent in tandem with the global economy and the better-than-expected recovery of the Japanese economy.

The private sector is likely to expand 10 per cent and private consumption to rise 3.8 per cent. Imports are projected to grow 26.9 per cent. However, the European debt problem and the
American financial crisis must be monitored as they have an impact on the foreign capital inflow to Thailand.

It is believed that Europe will be able to tackle the problem with a large cash influx. The baht is likely to strengthen further based on Thai economic fundamentals and currency volatility continues, the BoT executive said. (MCOT online news)

It's already over 4% and the increase in wages, rice payments etc promised by the TPT have not kicked in yet, I predict close to 8%.

[The Bold Rodney]

It's already over 4% and the increase in wages, rice payments etc promised by the TPT have not kicked in yet, I predict close to 8%.

Surely...you must be related to Warren Buffet, can't understand why a financial guru such as you wastes his time on TD?

[StrontiumDog]

Bangkok Post : August inflation rate highest in 3 years

August inflation rate highest in 3 years

• Published: 2/09/2011 at 12:00 AM
• Newspaper section: Business

Inflation accelerated in August at the fastest pace in 35 months as food and energy prices rose.

The index of consumer prices climbed 4.29% from a year earlier, compared with 4.08% in July, staying above 4% for the fifth month in a row.

Commerce Ministry permanent secretary Yanyong Phuangrach said the increase was driven mainly by rising food prices, which soared 8.43% year-on-year, with the price of glutinous rice increasing 6.90%, fresh fruit and vegetables 14.47% and finished food 17.25%.

Raw food and energy prices rose 7.99% from August of last year. On a monthly basis, consumer prices rose 0.43% from July.

The rate in the first eight months increased to 3.72% year-on-year, which Mr Yanyong described as within the scope of the Commerce Ministry's projected range of between 3.2% and 3.7%.

Core inflation, which strips out volatile food and energy prices, increased 2.85% year-on-year, with the monthly rate rising 0.275% and the eight-month rate up 2.12%.

According to Mr Yanyong, the prices of several food items such as meat, vegetables and rice were likely to decline in the coming months, as new supply is about to enter the market.

Recent fuel price adjustments would also result in transport cost reductions and rein in inflation in the fourth quarter and for the full year."The inflation rate in August has probably peaked," said Mr Yanyong. "The rate from now on is expected to ease, with the figures in September expected to stand at not more than 4% and the entire fourth quarter at 3.6%. Inflation for the whole year as a consequence will stand at an average of 3.7%."

Barclays Capital, the investment banking division of Barclays Bank Plc, agreed, saying inflation had more than likely peaked, coming in at 4.3% year-on-year for August, compared with market expectations for 4.0%.

The recent decision to slash excise duties on petroleum products should push headline inflation significantly lower in September by as much as 50 basis points, Barclays estimates.

"We believe this uptick will be temporary, and should come down in the next one or two months," the bank said. "Transport costs were weaker, with the contribution of transport falling to 90 basis points from 120 in July, given lower energy prices on administrative controls designed to ease the burden.

"But this impact on lowering inflation expectations remains to be seen. We believe the central bank's reaction function will attach greater importance to inflation expectations, which remain high. Amid decent domestic demand, overall inflation expectations could remain sticky, especially given the rise in rice prices and a tight labour market."

Nonetheless, it said the central bank would not hike rates again this year.

[StrontiumDog]

Bangkok Post : BoT: Inflation risk still exists

BoT: Inflation risk still exists

• Published: 2/09/2011 at 02:19 PM
• Online news: Economics

The country is still at risk of high inflation due to pressure from rising production costs and global oil prices, Methee Supapongse, senior director at the Domestic Economy Department of the Bank of Thailand, said on Friday.

The announcement by the Ministry of Commerce that the core inflation rate stood at 1.85 per cent and the general inflation rate was 4.29 per cent in August reflected the fact that inflation risk still exists, he said.

“The announced inflation figures were close to the projection by the central bank.

"We have to admit that the government’s policy to raise the daily minimum wage to 300 baht and the 15,000 baht minimum monthly salary for university graduates had a psychological effect on the parties who project that the inflation rate would be higher in the future,” said Mr Suthee.

Due to strong possibility of high inflation, the monetary policy committee of the central bank had to adjust key policy rate to ensure a balance between enhancing economic growth and controlling inflation risk factors, he added.

[Mid]

No Doubt Korn sleeps a tad easier these days .........................

[StrontiumDog]

Thailand Should Avoid Using Higher Rates to Curb Inflation, Kittiratt Says - Bloomberg

Thailand Shouldn’t Use Rates for Climbing Commodity Costs, Kittiratt Says

By Daniel Ten Kate and Supunnabul Suwannakij
Sep 12, 2011 2:14 PM GMT+0700

Thailand should avoid raising interest rates to fight rising oil and food costs, Deputy Prime Minister Kittiratt Na-Ranong said, signaling the economy may have room to tolerate faster inflation.

“When I look at Thai inflation, it’s perhaps the lowest in Asia,” Kittiratt said in an interview in Bangkok today. Raising interest rates to curb increases in input costs “causes more problems,” he said.

Prime Minister Yingluck Shinawatra aims to insulate the country of 66 million people from a global slowdown by lifting incomes of poorer Thais who propelled her party to victory in a July election. The policies may add inflation pressure, Bank of Thailand Deputy Governor Atchana Waiquamdee said last week, signaling there is room for interest rates to rise further.

Consumer-price growth accelerated to 4.29 percent in August, the fastest pace since 2008, as higher food prices countered a drop in oil costs. The government on Aug. 27 ended contributions by companies to the national oil fund to reduce retail fuel prices.

“I did not agree with high interest rates to handle inflation if it’s not demand-pull inflation,” said Kittiratt, who is also the commerce minister. “To have higher interest rates during the cost-push inflation, it’s even more cost-push, it causes more problems to inflation.”

Growth in Southeast Asia’s second-biggest economy slowed to 2.6 percent last quarter from a year earlier. The state planning agency in August cut its 2011 growth forecast to 3.5 percent to 4 percent, from as much as 4.5 percent earlier.

Yingluck, the sister of ousted leader Thaksin Shinawatra, has pledged to almost double the minimum wage in parts of the country, buy rice from farmers at above-market rates and boost civil servant salaries. Parties linked to Thaksin have won the past five elections on support from the northeast, the most populous region where incomes are a third of those in Bangkok.

[SteveCM]

Govt moves to cut dependence on exports

By PETCHANET PRATRUANGKRAI
THE NATION
Published on September 23, 2011

The Commerce Ministry aims to boost annual domestic consumption by an average of 15 per cent annually in a bid to grow the national economy on its own strength instead of relying on exports as at present.

Commerce Minister Kittiratt Na-Ranong said yesterday that domestic consumption accounts for 30 per cent of the country's economy and exports for 70 per cent.

He said the government's new strategy would cushion the country against impacts from a global economic slump. He added that the government's policies - the hike in minimum wage and starting salary for graduates and the rice-pledging scheme - would encourage domestic consumption in the near future.

The Commerce Ministry has officially revised up its export growth target for this year to 20 per cent from 15 per cent, worth US$234 billion (Bt7 trillion), thanks to significant export gains in the first eight months.

The value of Thai shipments in the first eight months was strongly up by 26.4 per cent to $158.06 billion.

Permanent secretary at the Commerce Ministry Yanyong Phuangrach said that although there was a slowdown in growth to some markets, including the US and the Eastern Europe countries, Thai exports would not be impacted much as the country has shifted its export focus to emerging markets.

"Thai shipments are expected to exceed the previous target of 15 per cent to at least 20 per cent growth this year," Yanyong stressed.

The ministry also reported that Thailand had posted a trade deficit of $1.2 billion (Bt44.37 billion) for the first time in four months after imports in August outpaced exports due to an increase in imports of fuel and gold.

The value of exports last month continue to jump, surging 31.1 per cent to $21.56 billion, setting a Thai record for monthly export value. However, Thailand's imports also surged by 44 per cent to $22.77 billion, mainly from higher import of gold.

Last month, gold import was up by 59.7 per cent in terms of volume - 27 tonnes - and 143 per cent in value - $1.54 billion. Import of fuel soared 77.5 per cent to Bt4.89 billion.

However, the ministry is confident that Thailand will end up having a trade surplus of at least $1 billion to $2 billion by the end of the year. Import is expected to expand strongly due to an increased demand for raw materials and machinery, while exports will also continue to grow this year.

Imports in the first eight months were up by 28.5 per cent to $153.02 billion. The country still enjoyed a trade surplus of $5.04 billion in the first eight months of the year.

Last month, exports from the farming and industrial sectors grew by 64.3 per cent and 16.5 per cent respectively. Exports of some industrial goods, mainly automobiles, dropped by 9.5 per cent due to some plants not increasing their production capacity following the tsunami impact in Japan. Exports of toys dropped by 17.6 per cent amid lower orders from the US and EU markets.

Most export markets showed considerable growth last month, with the exception of Eastern Europe which dropped by 5.5 per cent mainly due to the situation in Greece and the Czech Republic. Shipments to the US continued to show slower growth, of only 3.6 per cent last month.

Nuntawan Sakuntanaga, director-general at the Department of Export Promotion, said exports to the US are expected to see slower growth amid lower demand for some goods, mainly furniture, toys and electric appliances.

Exports to the US are expected to grow only 10-12 per cent by the end of this year from 15.4-per-cent expansion in the first eight months of the year.

Paiboon Ponsuwanna, chairman of the Thai National Shippers' Council said that shipments could see slower growth in the fourth quarter of this year mainly due to the global economic slowdown and the obstruction to transportation from the flooding.

However, the country should achieve at least 20 per cent export growth this year due to high gains in the first eight months, he noted.

[SteveCM]

Floods to cast shadow over economic growth: UTCC study

By PETCHANET PRATRUANGKRAI
THE NATION
Published on September 23, 2011

Thailand's economic growth will fall to 3.5-4 per cent from the previous forecast of 4-4.5 per cent, hit mainly by the serious flooding this year, according to a study by the University of the Thai Chamber of Commerce (UTCC).

The study by the private sector's think-tank showed that the floods in the South since April and the current flooding in the Central region and the North of the country will dent the country's gross domestic product by 0.5-0.7 percentage point, worth Bt58.49 billion.

The setback was attributed to the impact on the agriculture sector, worth an estimated Bt31.5 billion; Bt11.73 billion to the trading sector; Bt8.73 billion loss of public property; Bt2.21 billion to housing; Bt1.89 billion to tourism; and Bt1.48 billion to the industrial sector.

Of the estimated losses, Bt32.41 billion was due to the flooding impact from July to September, while Bt26.07 billion was from flooding in the southern part in April-May this year. "Despite the government's economic stimulus package, the Thai economy is at high risk of a slowdown in growth due to severe floods.

"The economic stimulus measures of the government will have only a small impact on the Thai economy this year as most of the measures, including salary hikes, higher labour costs, and tax reductions in the first-car and first-house schemes, will become fully effective only next year," said Thanavath Phonvichai, director at the UTCC's Economic and Business Forecasting Centre.

He said losses from the flooding could rise to Bt100 billion if the flooding lasts till the end of the year and the government is slow in reacting.

Moreover, the global economic slowdown, in particular in the United States and the European Union, would also shrink the growth of the Thai economy.
The ratings and credit cuts of several banks in the US, and the |financial crunch in Italy's economy, which is the third largest in the |EU, would continue to severely impact the global economy.

The budget cuts, which will continue to be adopted in many countries in the EU, would also slow growth in the global economy this year and next, Thanavath noted.

To ensure growth, he suggested that the government develop 25 watersheds to absorb water during the rainy season. The government should not cut the budget to tackle the flooding problem.

Based on the survey of 1,200 respondents, the UTCC poll showed that 27 per cent of them were affected by the flooding, about 18 per cent were seriously affected, 18 per cent were slightly hit, while 27 per cent were not affected at all.

Saowanee Thairungroj, vice president of the UTCC research division, pointed out that almost 80 per cent of respondents were not satisfied with the government's measures to tackle the flooding, while only about 20 per cent said the government has worked promptly to resolve the problem.

Meanwhile, the UTCC poll showed that spending during the 10-day Vegetarian Festival would grow slightly by 4.8 per cent, worth Bt35.1 billion this year, at a lower rate than last year due to concerns about the flooding, which would lead to lower spending.

Saowanee said the higher spending this year was due to higher food prices, as many vegetables were destroyed in the floods, pushing up prices.

[SteveCM]

Capital Flows Into Thailand May Have

Capital Flows Into Thailand May Have ‘Vigorous’ Returns, Thirachai Says

By Shamim Adam and Suttinee Yuvejwattana - Sep 24, 2011


Capital inflows into Thailand may have a “vigorous” return after a selloff in the nation’s stocks, and the government is prepared to help control such investments if needed, Finance Minister Thirachai Phuvanatnaranubala said.

The Bank of Thailand should “keep a close watch” on the return of capital flows and can approach the government to impose specific measures if inflows are too strong, Thirachai said in a Bloomberg interview in Washington yesterday. It would be “jumping the gun” to say such steps would be necessary and unveil policies the government can undertake, he said.

“Once investors get over this short-term pessimism, the long-term fundamentals would come in and this could translate into a more vigorous capital inflow than of late,” he said. “If the central bank finds the inflows too strong and if they think it would adversely affect our competitive ability, then the central bank is welcome to come to talk to us and ask for whatever help they may need.”

The worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from global equities since May. Thailand’s benchmark SET Index slid 7.3 percent last week, its biggest weekly decline since November 2008. Overseas investors have sold a net $520.8 million of Thai stocks so far this month, according to data compiled by Bloomberg.

Recession Threat

The threat of a global recession is rising and European nations need to gather political will to resolve the crisis, Thirachai said. Europe’s crisis is likely to have a greater impact on Thailand’s financial markets compared to its economy, he said. Thirachai is attending the annual meetings of the International Monetary Fund and World Bank.

“The concern is less about export demand but more about financial market disruption” for Thailand, Thirachai said. Without a resolution to Europe’s debt woes, “whenever the bonds come due and they need to be refinanced, the markets will react again and again like a bullet that ricochets, hitting and bouncing around and it will hurt the emerging markets.”

The Bank of Thailand, which last month raised its key interest rate for the seventh straight meeting, needs to find “the right balance” between inflation risks and threats to growth amid the worsening global environment, Governor Prasarn Trairatvorakul said Sept. 15.

The central bank lifted the benchmark interest rate to 3.5 percent on Aug. 24, the ninth increase since the start of July 2010, and said current rates are close to “normal levels.” The next meeting is on Oct. 19.

‘More Adverse’

“It seems like they are now looking at the external environment as being more adverse than it appeared originally so they will take that into account,” Thirachai said.

Thai Prime Minister Yingluck Shinawatra has pledged to increase the daily minimum wage to 300 baht ($10), almost double the current level in some parts of the country, and buy rice from farmers at as much as 42 percent above market rates, spurring concern inflation will quicken.

The Thai government’s measures to boost domestic demand will have “one-time” effects, Thirachai said.

“There might still be price pressures but with the outlook of the major economies being weak, this might be a good insurance,” he said. The government’s measures “should not put too much worry on the shoulders of the central bank.”

Thai inflation accelerated 4.29 percent in August, the fastest pace since 2008, as rising food prices countered a decline in oil costs. Core inflation, which excludes fresh food and fuel, accelerated 2.85 percent. The central bank uses core inflation to guide monetary policy and aims to keep it at less than 3 percent.

Salary Increases

Thailand’s Cabinet this month approved wage and salary increases for government officials as well as tax incentives for first-time buyers of homes and cars to help spur consumption.

The government is targeting a budget deficit of 350 billion baht in the fiscal year starting Oct. 1, and estimates expenses of 2.33 trillion baht. The government earlier this month approved a plan to spend 15.2 trillion baht over the next four years, including 11.3 trillion baht to fund state policies aimed at boosting the economy.

While the previous Thai government had aimed to balance the budget by 2016, Thirachai said that is less of a concern for him.

“With the adverse environment in the international arena, the issue of when the budget would come back into balance is less important than how the spending and the budget are geared toward improving competitiveness of the country,” he said.


To contact the reporters on this story: Shamim Adam in Singapore at sadam2[at]bloomberg.net; Suttinee Yuvejwattana in Bangkok at Suttinee1[at]bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang[at]bloomberg.net

[SteveCM]

^
Then again, there's The Notion's take on much the same material from Thirachai. They decided to splash the headline across the front page of today's print edition (IIRC "drought" was in red).....


Fears of investment drought

By Wichit Chaitrong
The Nation
Published on September 26, 2011



Finance minister worries global market turmoil could scare away foreign capital

The turmoil in global financial markets and fears of recession in Europe and the United States may scare investors away from Thailand and other developing countries, which need capital to boost their economies, Finance Minister Thirachai Phuvanatnaranubala said yesterday.

"I'm more worried about abrupt capital inflows and outflows than the impact of an export slowdown," he told reporters in a teleconference from Washington.

Thirachai attended the annual meeting of the International Monetary Fund (IMF) and World Bank from Thursday to Saturday. Participants discussed measures to tackle the threats to the global economy posed by the sovereign debt crisis in Europe and the weakening of the US economy.

The IMF, World Bank and policy makers worldwide are concerned about the state of the European and US economies, which are struggling with huge public, bank and household debts, Thirachai said.

"We are worried that the repercussions will create a crisis of confidence, and spook international bankers away from lending to developing countries, as rumours of bank insolvencies continue to dampen market confidence," he said.

"I'm more concerned about high volatility in financial markets than the impacts on Thailand's exports. [Lack of investment] is analogous to running of out oxygen; it kills instantly, whereas a slowdown in exports is like running out of food," the finance minister said.

Thirachai was referring to fears of sudden capital outflows and a sharp decline of the baht and other Asian currencies against the US dollar as investors sell off shares worldwide. The Stock Exchange of Thailand's composite index plunged 3.27 per cent on Friday, with foreign investors turning net sellers to the tune of Bt15.8 billion. The baht recently moved close to Bt31 to the dollar, down from the Bt30 level.

But Thirachai also expressed hope that the turbulence would be short-term, and that Thailand would not be badly affected if world leaders can come up with effective measures.

"The Bank of Thailand is the first line of defence against financial market turbulence, and international bankers still have confidence in Southeast Asia's potential," he said.

He said developing economies - particularly those dependent on exports - had been advised to boost domestic consumption and investment in order to lessen the impact of an expected slowdown in exports. "We will look at our tax revenue before we consider boosting spending on investment," Thirachai replied when asked whether the government would launch a supplementary mid-year budget.

The government is currently drafting a Budget Bill for fiscal 2012. It plans to spend Bt2.33 trillion, against projected revenue of Bt1.98 trillion, resulting in a deficit of Bt350 billion.

Thirachai said he had been asked to explain to the World Bank its rice-pledging policy, which is designed to boost the price of the commodity.

He told the bank that the government needs to increase farmers' income, which is an important factor in food production. He said the bank expressed concern over expected higher food prices, and the possibility that extreme weather conditions are affecting food production. The bank will next year issue guidelines on food security for members to implement, he said.

Meanwhile, finance ministers of Asean countries have approved the launch of an infrastructure fund worth about $500 million (Bt15 billion), Thirachai said. "All members except Thailand have inked the agreement, but we need to seek parliamentary approval of our contribution of $15 million," he said.

[SteveCM]

Bangkok Post : A marriage built on give and take

A marriage built on give and take

Outgoing BoT deputy reflects on up-and-down relationship with Finance Ministry.

• Published: 26/09/2011 at 12:00 AM
• Newspaper section: Business

On the surface, the Finance Ministry and the Bank of Thailand appear to have been in conflict over the past month or two, but closer scrutiny reveals the bittersweet relationship that is typical between the two.

Atchana: Wealth fund is not a concern but the government’s investment strategy is.

Soon after the new government took office early last month, Finance Minister Thirachai Phuvanatnaranubala assigned the central bank to revise the inflation target, restructure the government's liabilities deriving from the huge 1997 bailout fund, establish a sovereign wealth fund and oversee banks' deposit mobilisation through debt instruments.

However, all of these were met with a cautious response by Prasarn Trairatvorakul, the Bank of Thailand's governor.

Atchana Waiquamdee, the central bank's deputy governor for monetary stability, in an interview with the Bangkok Post is resigned to the media playing up the perceived feud.

"But I agree with Dr Puey [Ungphakorn], who said: 'The relationship between the central bank and the Finance Ministry is one of husband and wife _ if they want to argue, they do so behind closed doors'," she said.

Dr Atchana said Mr Thirachai had been a deputy central bank governor and head of the capital market watchdog before assuming his current post, so he understands the issues well enough.

The Bank of Thailand Act calls for the cabinet to endorse the inflation target based on consultations with the central bank each December.

The existing target of 0.5% to 3% has been used since 2009, but the central bank believes it should be narrower to make the public more aware of current inflation trends.

There has been an ongoing debate about whether inflation targeting can sufficiently accommodate growth in a developing country like Thailand.

Dr Atchana, who will retire at the end of this week, said the notion that this framework is as strict on price pressures as, for example, the Bank of England or the Bank of New Zealand, is a misconception.

"We call our framework 'flexible inflation targeting'. That means we place a lot of weight on economic growth," she said.

"We have no other choice," she said. "We've tried exchange-rate targeting, and the time for monetary-based targeting has passed."

While the global economic downturn will prompt the government to use more stimulus spending, she says caution should be exercised, as revenue collection has remained modest.

"The country's tax collection is only 17% of GDP compared with 25-30% in other economies. It's a tradeoff. If the government gives tax rebates for buying a car, then it stands to lose money that could have been used to improve mass transit or logistics," said Dr Atchana.

"Above all, they'll have to consider how best to end such a policy."

She said the Monetary Policy Committee will have a tougher time balancing the risks for economic growth and inflation due to the general perception including by the IMF that the global economy is increasingly likely to slip into recession again.

Dr Atchana also said the central bank did not oppose a sovereign wealth fund aimed at maximising returns on foreign reserves.

"After stress-testing our balance of payments, we found there's actually an excess of those foreign reserves used to back banknotes," she said.

"The key concern is the government's investment strategy. We would like the government to use funds to buy these reserves out rather than just taking them out. This would be similar to South Korea, whose government raised funds from the public and swapped them out with their central bank reserves to set up a sovereign wealth fund."

Dr Atchana said the central bank's failure to fulfil its commitment to set aside profits from foreign reserves to offset the principal on Financial Institutions Development Fund liabilities has taken away resources that could have been used for other purposes.

However, she said the central bank could set aside funds to reduce that debt if the requirement were amended to allow profits to be used before foreign assets are revaluated in baht terms.


Writer: Parista Yuthamanop
Position: Writer

[StrontiumDog]

Thailand

Thailand’s Inflation Eases to Six-Month Low as Falling Fuel Counters Flood

By Suttinee Yuvejwattana - Oct 3, 2011 3:20 PM GMT+0700

Thailand’s inflation eased to a 6- month low in September as fuel prices slid, countering an increase in food costs after the worst floods in at least 50 years damaged crops.

An index of consumer prices climbed 4.03 percent from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today, compared with a 4.29 percent pace in August. The median of 14 estimates in a Bloomberg News survey was for a 3.95 percent gain.

Slower inflation gives the Bank of Thailand more room to pause after six interest-rate increases this year and join neighbors from Indonesia to Malaysia in shielding growth from a faltering global recovery. The central bank may cut projections for economic expansion and inflation expectations aren’t likely to rise, Governor Prasarn Trairatvorakul said Sept. 24.

“Rising vegetable prices from the floods were countered by falling oil prices, which have more weight in the inflation basket,” Pornthep Jubandhu, an economist at Siam Commercial Bank Pcl in Bangkok, said before the release. “The governor has also signaled a higher possibility of a rate pause this month.”

The benchmark SET Index of stocks slumped 4.9 percent as of 3:04 p.m. local time amid a tumble in Asian stocks, while the baht weakened 0.5 percent to 31.3 per dollar, according to data compiled by Bloomberg.

Flood Toll

“I expect the central bank to keep its key interest rate unchanged at the next policy meeting,” Yanyong Phuangrach, the permanent secretary for commerce, said at a briefing today. Flooding won’t have a significant impact on inflation through crop damage since vegetables account for just 1.4 percent of the consumer-price index’s goods basket, he said.

Core inflation, which excludes fresh food and fuel prices, accelerated to 2.92 percent. The central bank uses core inflation to guide monetary policy and aims to keep it at less than 3 percent. The median of 12 estimates in another Bloomberg News survey was for a core reading of 2.9 percent.

The death toll from flooding in Thailand over the past two months rose to 212, and 25 provinces remain submerged, the Department of Disaster Prevention & Mitigation said on its website today. Heavy rain since July 25 has caused inundations in 58 of the country’s 77 provinces, it said.

“This flooding is the worst in at least 50-60 years,” Commerce Minister Kittiratt Na-Ranong said last month.

Impact on Prices

Price pressures from flooding are expected to be short term and the Bank of Thailand won’t take temporary factors into account for monetary policy, Mathee Supapongse, a director of the central bank, said Sept. 30.

Thai retail fuel prices dropped as much as 16 percent in September from late August on government measures and a fall in crude oil costs, Energy Policy and Planning Office data show.

Prime Minister Yingluck Shinawatra’s administration on Aug. 27 reduced diesel and gasoline tariffs by ending contributions to the national oil fund, which were funded by levies on fuels.

Yingluck, whose Pheu Thai party won the July 3 general election, has also pledged to boost the daily minimum wage to 300 baht ($9.6), almost double the current level in some parts of the country, and buy rice from farmers above market rates.

The Bank of Thailand raised its key rate in nine steps to 3.5 percent by Aug. 24 from 1.25 percent at the start of July 2010. It next meets to decide borrowing costs on Oct. 19.

[SteveCM]

Bangkok Post : UTCC: 2011 GDP growth 3.6%

• Published: 6/10/2011 at 03:09 PM
• Online news: Local News

Gross domestic product growth for the third quarter of the year is expected at four per cent, and around 3.6 per cent overall for 2011, an economist at the University of the Thai chamber of Commerce said on Thursday.

“The economic expansion will be mobilised by the increase in exports due to strong overseas demand for Thai products and the recovering domestic economy that has boosted local demand," Thanawat Polwichai, director of the Economic and Business Forecasting Centre at the university, said.

Mr Thanawat projected 2012 GDP growth at 4.3 per cent but warned that risk factors still exist, including the global economic crisis and the increasing production costs of domestic manufacturers.

The revision of the economic growth projection to 3.6 per cent from the previously expectation at 4.4 per cent was based on the impact of the floods in various provinces, which could trim GDP growth by between one per cent and 1.3 per cent, he said.

The flood damage cost is estimated at 130 billion baht and about 20 billion baht additional damage could be experienced if areas in Bangkok are also flooded, the academic said.

The unresolved economic crises in the US and Europe were other risk factors that had been taken into account in the growth forecast’s revision, he added.

The centre’s director predicted GDP growth for 2012 at 4.3 per cent, based on the hypothesis that the global economy would grow by three to four per cent.

Exports are expected to expand by 10.7 per cent, with a total value of 262.88 billion baht next year, and imports to rise by 13.7 per cent with a total value of 256.77 billion baht, for a projected 6.1 billion baht trade surplus, he said.

Next year inflation is projected in a range of 3.5 per cent to four per cent, he added.

Mr Thanawat said the economy would grow above the four per cent level next year because about 400 billion baht more seed money from the implementation of government policies would circulate in the system, including the rice mortgage scheme and investment in infrastructure development megaprojects.

He believed the central bank’s monetary policy committee, scheduled to meet on Oct 19, would keep the repurchase rate unchanged at 3.50 per cent. This is because most central banks of other major countries had halted their plans to raise key policy rates.

If the impact of the continuing global economic crises reached critical level, it is possible that the monetary policy panel would cut the policy rate to 3.25 per cent. But the committee is likely to increase the RP rate by 0.50 percentage points early next year to lift the real interest rate into plus figures, he said.

[SteveCM]

Bangkok Post : More impact to come next year

• Published: 7/10/2011 at 12:00 AM
• Newspaper section: Business

Floods are expected to have only a modest impact on economic growth this year, but damage to farmland and properties could weigh heavily on the Thai economy in 2012, say local economists.

The worst flooding in five decades has claimed hundreds of lives and displaced tens of thousands from their homes. While much of the damage has been limited to cropland, flooding this week in Ayutthaya has led to factory closures and worries that manufacturing and exports will be hit in the months ahead.

Estimates of the extent of the damage vary considerably, with the Bank of Thailand putting the losses at 20 billion baht compared to over 130 billion by the University of the Thai Chamber of Commerce (UTCC).

Prasarn Trairatvorakul, the governor of the Bank of Thailand, noted 20 billion baht was slightly less than last year.

Damage has been focused primarily on the Central region, with the Northeast mostly spared, he said.

Yesterday the central bank asked commercial banks to assist customers affected by the floods, including relaxing debt payment schedules, cutting minimum credit card payments and offering debt restructuring as needed.

Somchai Jitsuchon, an economist at the Thailand Development Research Institute, said crop production may not fall significantly this year due to the floods.

But the impact may be seen in terms of household assets in 2012 and beyond, he added. Household debt may also increase once reconstruction begins.

"Most people think the floods will have a limited impact on the economy. The contribution of agriculture to the GDP is small. But it will weigh on household consumption in the near future," he said.

JPMorgan earlier this week estimated the impact of flood damage on growth this year at just 0.2 to 0.3 percentage points, or equal to 20-40 billion baht.

But Thanavath Phonvichai, an economist at the UTCC, estimated flood damage at up to 130 billion baht this year, eroding growth by one to 1.3 percentage points.

The UTCC revised its 2011 growth forecast to 3.6% from an earlier estimate of 4% to 4.5%. Flood damage since July is estimated to have cost the economy 104 billion baht, or 0.8% to 1% of GDP, while flooding in the south in April and May cost another 26 billion or 0.2% or 0.3% of GDP, it noted.

The university said the agricultural sector had been hit hardest by the current floods, with damage estimated at 54.9 billion baht, followed by losses to the industrial, tourism and trade sectors of 36.3 billion. Residential property, public facilities and infrastructure have also suffered.

The Agriculture Ministry estimates the flooding has affected 6 million rai of farmland, affecting paddy production by 3.5 to 4 million tonnes. Overall, the rice industry has suffered damage of 43 billion baht, including losses from the need to speed up the harvest.

The UTCC projects growth in 2012 at 4.3%, assuming global growth ranges from 3-4%. The Thai economy is expected to benefit from the rice mortgage programme and policies to increase village funds and infrastructure spending, it noted.


Writer: Parista Yuthamanop & Phusadee Arunmas

[SteveCM]

Inside Thailand -- Thai Food Exports Expected to Reach 950 Billion Baht This Year

(12/10/2011)

Thai food exports this year are expected to reach 950 billion baht, an increase from 850 billion baht last year.

President of the National Food Institute Petch Chinabutr said that Thai food exports were unlikely to reach one trillion baht, as forecast earlier, because of flooding in many provinces this year. Even so, they would still enjoy higher growth.

Mr. Petch stated that, as a consequence of flooding, entrepreneurs would find it difficult to locate raw materials, especially agricultural products, such as rice and tapioca. This impact would be felt until next year, when prices are expected to increase, as more time is required to plant these crops in order to make up this year’s losses. Because of flooding, another problem faced by traders is that they may not be able to transport raw materials to factories, or send products to customers, in time.

Today, Thai food exports to ASEAN account for 60 percent of Thailand’s total food exports, to the United States and Europe 20 percent, and Japan 15 percent. Seafood exports are likely to face a slight impact and are expected to recover early next year.

The National Food Institute has sought a budget 600 million baht from the Ministry of Industry to launch a project to promote Thai food safety for the world. The three-year project, to be carried out from 2012 to 2014, seeks to develop the potential of over 8,000 food factories nationwide in order to prepare for the realization of the ASEAN Economic Community by 2015. More food-producing factories will be developed to an export standard in order to enhance the competitiveness of Thai entrepreneurs.

Industry Minister Wannarat Channukul earlier announced a policy to seriously develop the food industry under the “Kitchen of the World” project. Emphasis will be placed on promoting creative food, developing market channels at various levels, and improving food safety standards.

The Kitchen of the World project was launched a number of years ago. With its high nutrition and unique flavors, Thai food has become one of the most popular dishes in the world. Spices and fresh herbs play a vital role in Thai cuisine, and not only do they add a wonderful taste to the food, but there is therapeutic value in many of the ingredients.

The Ministry of Industry is giving a major boost to promoting the food industry on a full-cycle basis, in order to create confidence in the quality and safety of Thai food at the international level. The Master Plan for the Food Industry, 2010 to 2014, focuses on enhancing the competitiveness of food exports and creating confidence in the quality and safety of Thai food among both local and international consumers. A target has been set to increase the export value of Thai food by at least 10 percent a year.

The Government is also striving to promote Thailand into a health and creative food center in order to add value to food products.

[SteveCM]

Brokerage view floods TO have impact on GDP and earnings of corporates effects to be felt for two quarters

Siriporn Chanjindamanee

The Nation October 17, 2011 10:55 am



Brokerage houses estimate that damage from the floods could drag down the Thai economy for two quarters while revising growth rates of the economy and publicly traded companies’ earnings.

Over the past two months, the Thai stock market has been on a downward trend, with the Stock Exchange of Thailand Index sliding more than 15 per cent. The situation is similar to that in 1998.

Besides, fears are mounting at the possibility of an emergency decree to tackle the severe floods, which could lead to outflow of foreign capital as some countries are constrained with investment conditions.

The flooding in several areas of the country could have the same impact as a couple of years ago when gross domestic product growth slowed for two consecutive quarters - in the fourth quarter of 2008 and the first quarter of 2009 - according to research by Asia Plus Securities.

In 1998, the SET Index dropped more than 15 per cent as Thailand had been facing fundamental problems, especially trade and current account deficits, pressuring the baht to weaken and, eventually being floated in July 1997 during the Tom Yum Kung crisis, the research said.

This flood would likely have an adverse affect on the economy and the stock market, the research said. The GDP in the fourth quarter could slow down, compared to the previous quarter when the Thai economy had started to recover after Japanese manufacturers resumed normal production following Japan's tsunami disaster in early March.

The hardest-hit sectors are industrial estates in Ayutthaya and nearby areas, auto-makers and auto-parts firms, insurance companies and commercial banks. Asia Plus analysts are revising down their figures, including earnings growth estimates, on expectation of only this year's impacts.

Next year, the impact could be less, the research said. The previous conservative estimate does not take into account positive effects from the government's economic policies. In the worst flooding situation, some benefit or receive less impact.

Kim Eng Securities said that both local and foreign brokerage houses are starting to downgrade Thailand's GDP growth estimates for 2011 and 2012 due to risks to the economic recovery from the flood crisis. Publicly traded companies' estimated earnings performances are also lower in these years.

The Thai stock market will face higher risks. If the government declares a state of emergency, that could drive foreign capital out of the country as some foreign funds are prohibited from investing in the stock market when an emergency decree is in place.

DBS Vickers Securities (Thailand) said that flood risks would likely heighten in the next one to two weeks when water is expected to flow down from the North coupled with a likely high tide. Listed companies' earnings prospects are expected to be downgraded, particularly the electronics parts, automotive and electrical appliances sectors, as some of their plants have been directly or indirectly affected by the floods.