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Thread: Economic Woes

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    Thailand Expat tomcat's Avatar
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    Economic Woes

    Inflation, Rising Debt and Weak Baht Set to Shape Thai Election


    • Thailand’s growth this year set to lag Southeast Asian peers
    • Challenges not easy to solve as nation heads to vote in 2023



    A customer looks at shelves of instant noodles at a supermarket in Bangkok.Photographer: Lillian Suwanrumpha/AFP/Getty Images
    By Suttinee Yuvejwattana and Patpicha Tanakasempipat (Bloomberg)

    October 5, 2022 at 4:00 AM GMT+7

    As Thai politicians jockey for positions ahead of elections that must be called by March, focus is turning to how the next leadership will manage risks including sky-high prices, a bloated budget deficit and the highest level of household debt in the region.
    The tepid pace of recovery in Southeast Asia’s second-largest economy will be front and center for voters as authorities grapple with the fastest inflation in 14 years, the baht’s plunge to a 2006-low and household debt at 88% of gross domestic product.

    “While the recovery in tourism will help support growth over the next two to three years, an aging population and high household debt places Thailand as the laggard in the region,” said Ju Ye Lee, an economist at Maybank Investment Banking Group. “These are challenges that will not be easily resolved even with a new prime minister.” Tourism makes up 12% of GDP.

    Prime Minister Prayuth Chan-Ocha, who last week won a favorable court ruling on a tenure dispute, has seen his popularity slide, reflecting the growing public disappointment with his government’s efforts to rebuild the economy that’s still reeling from the pandemic and lagging peers in the region.

    Paetongtarn Shinawatra, daughter of former Thai premier Thaksin Shinawatra, and Pita Limjaroenrat from the opposition Move Forward Party, are top choices for premier in recent opinion polls.

    Rising Costs

    Thailand’s recovery has been uneven, with those in exporting industries bouncing back faster while low-earners and tourism workers struggling amid inflation above 7%, triggering the first price hike in a decade among noodle makers and the first increase in minimum wage since 2020. Lately, the nation has to worry about the impact of floods too.

    The Bank of Thailand is expected to keep tightening rates although at a gradual pace compared to peers in the region. Lenders have subsequently raised rates also. BOT has said price gains should cool to within its target by mid-2023.
    Net-oil importer Thailand continues to subsidize diesel, electricity and cooking gas. The cabinet extended some of the support until Nov. 20, mindful of the pain on consumers that’s also exacerbating household debt.


    Elevated Debt

    Household debt has jumped by 1.1 trillion baht ($29.3 billion) to almost 90% of GDP from 80% pre-pandemic. Although the ratio eased slightly in the second quarter, it remains the highest in Southeast Asia, making it tougher for the government to stimulate the economy. In the past, frustration with debt has sparked protests among farmers.

    “Slower growth and higher inflation are exacerbating household debt and inequality,” said Pipat Luengnaruemitchai, chief economist at Bangkok-based Kiatnakin Phatra Securities Pcl. These problems, if unresolved, could unleash more political and economic woes, he said.
    Deep In Debt

    Record Deficit

    The government has spent about $5.5 billion to subsidize energy prices, and the latest extension will increase the bill by another 20 billion baht. The budget gap ballooned to a record 700 billion baht in the fiscal year that ended September compared with 450 billion baht in 2019.

    “We have exhausted all the fiscal ammunition during Covid with relief schemes and cash handouts,” said Kiatanantha Lounkaew, a lecturer of economics at Thammasat University. On the brighter side, borrowing for the fiscal year that started Oct. 1 was set at 1.05 trillion baht, substantially lower than the record 1.8 trillion baht in fiscal year 2021.

    Baht Volatility



    The baht has lost 20% since the end of 2020. While this may be good for exports and tourism, the volatility hits investors and consumers.
    There had been calls on the the BOT to reconsider a hands-off stance as the baht depreciates. The Federation of Thai Industries, the nation’s top business group said companies want a stable baht to prevent inflation from squeezing their profit margins.


    Majestically enthroned amid the vulgar herd

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    Thailand Expat
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    Quote Originally Posted by tomcat View Post
    household debt at 88% of gross domestic product
    This is a number that continues to bemuse me and there are other sources putting it higher, at 90%. This is less than Hong Kong and a bit higher than UK although the great difference is that in other economies most of that household debt is secured, property being a big part of that. In Thailand much of the debt is not secured and there is an unofficial loan shark market that probably goes uncounted. It just feels like a house of cards.

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    Thailand Expat OhOh's Avatar
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    Inflation appear to be hitting many countries around the world. One comparison:

    Economic Woes-thai-v-usa-inflation-jpg

    https://d3fy651gv2fhd3.cloudfront.net/charts/thailand-core-inflation-rate@2x.png?s=thacorecpirate&v=202210050330V202203 12&url2=/united-states/core-inflation-rate

    UK, EU similar.
    Attached Thumbnails Attached Thumbnails Economic Woes-china-core-inflation-rate-2x-jpg  

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    SANS SOUCI
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    Im bored AF Backspin's Avatar
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    Quote Originally Posted by OhOh View Post
    Yep. The whole world printed money to cover up covid and now ppl are amazed to see inflation.

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    Days Work Done! Norton's Avatar
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    Quote Originally Posted by tomcat View Post
    “These are challenges that will not be easily resolved even with a new prime minister.”
    Indeed as demonstrated by Liz Truss.

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    Governments love inflation.
    If they’ve been inventing wealth (ie borrowing / stealing from the future by money printing) then inflation makes the debt less debty.

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    I think this comes under the same heading as this thread. No one commented on it when it was news a couple of weeks back. My questions follow the article:

    Thai Govt Plans $21.6 Billion in New Borrowing in 2023 Fiscal Year

    BANGKOK (Reuters) - Thailand's government plans new borrowing of about 820 billion baht ($21.64 billion) in the 2023 fiscal year starting Oct. 1, mainly to finance a budget deficit, the finance ministry said on Tuesday, as it tries to bolster economic recovery.

    The borrowing is part of a wider debt management plan in the fiscal year, which also includes existing debt of 1.74 trillion baht ($45.92 billion) and 360 billion baht debt repayment, the ministry said in a statement.

    The overall debt plan, approved by the cabinet on Tuesday, also includes new borrowing of 233 billion baht by state enterprises and other government agencies, it said.

    The 2023 debt plan focuses on stimulating the economy through infrastructure investment and mitigating the impact of global oil price volatility and unrest between Russian and Ukraine, it said.

    The government has introduced various measures to help ease the impact of high oil prices and living costs as inflation hit a 14-year high.

    Last week, Finance Minister Arkhom Termpittayapaisith said he expected the economy to grow 3% to 3.5% this year.

    The government projects a budget deficit of 695 billion baht ($18.34 billion) for the fiscal year, the ministry said.

    Thailand's public debt is expected to be at 60.43% of gross domestic product at the end of the fiscal year, still within an approved limit of 70% of GDP, it said.

    As of July, the debt-to-GDP ratio was at 60.75%.


    My bold for emphasis.
    Questions:

    Are they really going to increase foreign debt by nearly 50% this year?

    I assume foreign debt is held mainly in USD. So as the Baht slipped 15% against the USD, would the true measure of foreign debt not have gone up 15%?

    This matters because the official limit is 70% of GDP and GDP has not gone up much. I am still looking for accurate historic numbers, my memory is that debt was already over 60% of GDP last year, so by now it should be about 69%. Am I missing something?

    As of July, the debt-to-GDP ratio was at 60.75%. Thailand's existing debt is 1.74 trillion baht ($45.92 billion) and the government plans new borrowing of about 820 billion baht ($21.64 billion) in the 2023 fiscal year. Thailand's public debt is expected to be 60.43% of gross domestic product at the end of the new fiscal year. Read that again and tell me how they can increase total debt by 47% and reduce the debt to GDP ratio from 60.75% to 60.43%. Does this make sense to anyone?

    I am a simple person. I'd be happy for someone who understands finance to explain what is happening here.

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    Quote Originally Posted by Shutree View Post
    As of July, the debt-to-GDP ratio was at 60.75%. Thailand's existing debt is 1.74 trillion baht ($45.92 billion) and the government plans new borrowing of about 820 billion baht ($21.64 billion) in the 2023 fiscal year. Thailand's public debt is expected to be 60.43% of gross domestic product at the end of the new fiscal year. Read that again and tell me how they can increase total debt by 47% and reduce the debt to GDP ratio from 60.75% to 60.43%. Does this make sense to anyone?
    Okay, so after some keyboard tapping I see that I misunderstood "existing debt of 1.74 trillion baht ($45.92 billion)", what that actually means is that this year's plan includes borrowing to restructure a portion, $45.92 billion, of the existing national debt. In fact Thailand's total National government debt stood at $248.7 Bn in Jul 2022. So the new borrowing ($21.64 billion) adds only about 8% to the total.
    Which doesn't answer all my questions.

  10. #10
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    Hey it’s all good.
    Money and wealth can be created by the stroke of a keyboard key.
    There’s no need for any taxes as gold just grows on trees and falls into laps like rain.
    Nothing to see here.
    As long as the financial jugglers can keep the balls in the air of course. And that’s assuming that there’s no significant funny business anywhere in the world that could cause the house of cards to blow away.
    Economists will say ‘pffft - it’s fine, always has been fine and always will be fine. We know what we’re doing’.
    Yeah right. Real wealth comes from production in my world.

  11. #11
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    Quote Originally Posted by Shutree View Post
    my memory is that debt was already over 60% of GDP last year
    Not far off:

    Thailand Government Debt to GDP - 2022 Data - 2023 Forecast - 1996-2021 Historical

    Thailand recorded a Government Debt to GDP of 59.61 percent of the country's Gross Domestic Product in 2021. source: Ministry of Finance, Thailand

    So: The Baht is down about 15%, meaning the Baht value of foreign debt has gone up by 15%. GDP has not grown much, say 3%. Yet the Debt to GDP ratio has barely changed at 60.75%. I'd like to meet the person who does their maths, maybe he can speak to my bank.

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