Thread: Teflon Thailand Starts to Flake

With consumer confidence low and forecasts grim, economists fear the short-term struggles are signs of long-term financial weakness

Bangkok Post
April 12, 2015
Writer: Nanchanok Wongsamuth

It’s almost noon and the Toyota saleswoman still hasn’t seen her first customer. Thaiyont, a Toyota dealership in Chon Buri’s Muang district, used to serve at least eight customers a day. But these days, they are lucky to have two.

“In the past, we couldn’t keep up with the customers. Nowadays, we need to seek them out,” said Kulcha Jariyawiwat, who sells mid-range models mostly to factory workers who already have a hard time making ends meet. “They tell me that in the past, they would work overtime every day. But nowadays they are being paid only for the days they work, which on average is now three days a week,” Ms Kulcha said. “So not only do they have to make tougher decisions when buying a car, but it’s also hard to get financing.”

While she is lucky to be in the office today with the comfort of air-conditioning, most days she is out hawking for customers standing next to a new pickup at a local flea market. It’s the worst period in her 12 years working at the company, with first quarter sales dropping by 10% year-on-year for the dealership. Although some customers are waiting for the new Hilux Vigo pickup that will be available in May, Ms Kulcha attributes 70% of the sales decrease to the economic slump. “Even if the customer says that he or she is interested in the new vehicle, I’m still not sure that they will have enough purchasing power,” she said.

Short Honeymoon

When a veteran TV journalist confronted Prime Minister Prayut Chan-o-cha last month and asked him about the general public’s struggle to make ends meet, he cut the question short. “I am doing the best I can — even more than the government that you adored in the past,” he responded in his usual terse military manner.

In the first few months after the May 2014 military putsch instigated by Gen Prayut, analysts and financial brokers welcomed the coup for restoring political stability and breaking the decade-long political deadlock. But 10 months on, it appears all that has changed. Consumer confidence hit a nine-month low last month, while several banks have painted negative prospects for the Thai economy.

The central bank recently cut its economic growth forecast from 4% to 3.8%, while Kasikorn Research Centre trimmed its prediction from 4% to 2.8%, on an assumption of flat export growth. “It seems that the economic shock absorbers that have cushioned Thailand’s Teflon economy in previous coups have not worked their magic this time around,” said Pavida Pananond, an associate professor of international business at Thammasat University.

The short-term symptoms of a weak economy are evident in lower exports, domestic consumption and slower-than-expected government spending. But Ms Pavida believes there are long-term weaknesses in the Thai economy that cannot be solved while the Prayut government is setting out its roadmap for political reform. Central to this is Thai production engaging in higher value-added economic activities — such as bioplastics, hybrid or electric cars, and medical equipment — both as an exporter and an investment destination.

“The ongoing political instability disturbs any substantive long-term investment and management of these issues, weakening Thailand’s competitiveness in an era when we are not short of upcoming competitors in the region,” Ms Pavida said.

But even completing a new constitution and returning to some form of elected government is no certainty of political stability conducive to investor confidence.

CIMB Securities (Thailand) said in a recent report to its clients that it believes political uncertainties will gradually rise, even though the situation is calm at the moment. “We believe that there is a high chance that Gen Prayut Chan-o-cha will come back to power after the next election. Political risks are then likely to be high as red shirts may run out of patience,” the report says. “With growing political uncertainties, we believe that people will be reluctant to spend and corporates will adopt a wait-and-see attitude for their new investments, which would bode ill for the economy.”

A recent Credit Suisse report sees politics leaving the period of certainty of the past six to nine months around mid-year, and entering a period of multiple uncertainties. “If the constitution is approved, a six-month interim (one) will follow before elections in which the prime minister is a lame duck and investors will not know who next governs the country. Even if elections proceed successfully, Thailand might see a drop in governmental effectiveness,” the report said.

The report added that outlines of the new constitution indicate that the next parliament could be fragmented with a weak coalition government, while a change of national leadership could disrupt the current government’s infrastructure agenda. “Rich valuations, the weak economy and the likelihood of earnings downgrades make us cautious on the market, and politics looks like it will lose its force as a supporting factor.”

much more here: Teflon Thailand starts to flake | Bangkok Post: business

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Yet the Baht still hangs in there.

A baht devaluation could go some way towards helping things, otherwise a long overdue and much deserved period of pride denting hardship is coming thailands way, sadly though it will mostly affect those who can least afford it and those who least deserve it.

Rather reflective of things worldwide, ain't it?

Bu..but Prayut has a 74% approval rating, according to the junta's very own opinion polls, how could there possibly be further political uncertainty?

Wait to 17th April approval rating will be near 90%

Originally Posted by stroller

Bu..but Prayut has a 74% approval rating, according to the junta's very own opinion polls, how could there possibly be further political uncertainty?

We're waiting for that event.

The changes will come as strategies and positions are being played as we speak.

Originally Posted by thaimeme

Originally Posted by stroller

Bu..but Prayut has a 74% approval rating, according to the junta's very own opinion polls, how could there possibly be further political uncertainty?

We're waiting for that event.

The changes will come as strategies and positions are being played as we speak.

How long have you been saying that?

Until he gets it right.

Originally Posted by Sumocakewalk

With consumer confidence low and forecasts grim, economists fear the short-term struggles are signs of long-term financial weakness

Could be a statement about the US or most western countries at present.

For sure - Thailand has slowed down to a snails pace like the rest of the planet, but the Thai's are able to weather it easily as on the whole they don't give a monkeys about being "rich". Couple that with an all year round temparature where mofos can sleep on the streets without freezing to death and a farming capability way beyond it's needs - yes - they're sitting pretty.

Dapper Thais don't want to be rich, sure you never wanted to post something else there.?

“We believe that there is a high chance that Gen Prayut Chan-o-cha will come back to power after the next election.

That could well turn out to be the understatement of the decade.

Originally Posted by terry57

^

Yet the Baht still hangs in there.

And it will continue to do so because rich Thais who run the show will never allow a devaluation because they like it strong so they can enjoy cheap foreign holidays and pay less to have their kids study overseas.

The long planned hike in VAT , from 7 to 10%, is due this November or thereabouts. The ASEAN integration will lead to more competition. At present the currencies here and in Malaysia are historically founded on cheap dollars supplied by QE from the U.S. but that has ended and with the heralded increase in interest rate for the $ the supply of cheap money will not only have ceased it will go into reverse making future borrowings more expensive. Thailand is teetering as indeed is Malayasia and Indonesia.

The baht simply cannot be maintained at the current level nor should it be.

If they are to avoid a recession they will have to devalue and quickly or accept the alternative which means stagnation, increased unemployment, reduced public expenditure and an awful lot of grumpy Isaan folk who ain't going to get their free ride anymore.

Public acquiescence in accepting the junta is founded upon the assumption that things are getting better but when economic reality intrudes this will no longer be assured.

Interesting ride coming and I doubt the current cabinet leaders have a clue as to how deal with it but since this is not unusual in Thai governance I suspect it won't matter too much.

If it wasn't for the yen flowing here they'd certainly be in deep dodo already.

Originally Posted by Horatio Hornblower

Dapper Thais don't want to be rich, sure you never wanted to post something else there.?

The selfish fvcks want to be that - for sure - same world over.

But most Thais choose quality of life over money - it's in their blood.

Originally Posted by terry57

Yet the Baht still hangs in there.

And do you know why?

Originally Posted by Phoenix

And it will continue to do so because rich Thais who run the show will never allow a devaluation because they like it strong so they can enjoy cheap foreign holidays and pay less to have their kids study overseas.

Is part of the answer, mate.

Originally Posted by Phoenix

Originally Posted by terry57

^

Yet the Baht still hangs in there.

And it will continue to do so because rich Thais who run the show will never allow a devaluation because they like it strong so they can enjoy cheap foreign holidays and pay less to have their kids study overseas.

Sadly true. And also buy up overseas property and real estate.