Friday, September 7, 2012

Current Economic Situation in Thailand 2012

Thailand Economy has an important potential especially with the upcoming launch of the AEC (Asean Economic Community) which will create synergy within the countries of Burma, Laos, Cambodia  VietNam, Singapore, Thailand and Indonesia).
Thailand is one of the biggest rubber producer in the world and the number 1  in producing hard drives. Despite the sever floods that paralysed the country last year and stopped manufacturing for few months, the economy is now regaining strength, here are some informations relative to the GDP components of Consumption, Investment, Government and Net exports in Thailand for the year 2012.


Consumption (C)
PCI (Private Consumption Index) rose in the first two quarter of this year rose up from 137.3 to 144.5 due to an increase in the number of individuals fixing houses and rebuilding plants. It is  very likely  that the PCI will continue to increase during this year as manufacturers have resumed fully productivity from last year floods.
The consumption this year is on an increasing trend since the last quarter of 2011 as  the  economy has recovered from flood situation. People are now spending more on durable goods and have also spent to rebuild houses.

 Investment (I)
The Business Sentiment Index (BSI) for Thailand has decreased this year, the reason for the fall of the index is the increase of the cost of production, and the economic uncertainty of the country. The high cost of production can mainly be associated with the increase in minimum wage and the upward price trend of raw materials, moreover  investments on construction has expanded over the year. On the other band, total investment in factories have decreased over the year, this indicator may signal the fear for new investment due to possible future floods.
  The FDI of Thailand has been “increasing continuously.” There was a 30% increase in the application of foreign investment during January and February indicating a positive growth for Thailand’s FDI. Areas including electronics, paper and plastic industries, electrical applicators and chemical are preferred investment areas. Moreover Thailand has strengthen bonds with neighboring countries such as China, or closer neighbors such as Laos, Myanmar and Viet Nam in order to prepare for the upcoming implementation of AEC in 2015 and promote investment confidence in the region.
Private investment is expected to grow by 14.7% according to the latest reports from Bank of Thailand.


 Government Spending (G)
Thailand’s government has  spent large amount of money in facing up the previous flood crisis”, Moreover, the new minimum wage to 300 baht per day , new car policy, and the increase in farmers loans has made the government spending rising over this year 2012.  Recently, Thailand has borrowed about 350 billion baht to invest in water management projects.
Thailand has also changed its basic legal and tax environment to boost the economy. There is a reduction of Corporate Income Tax rate to 23% from 30 %, by reducing Corporate Income tax the government has to increase its spending to stimulate the growth.

Net Export (X-M)
Thailand’s exports have shrinked this year due to the debt-crisis in the Europe Union and higher uncertainties from the US. economy, moreover European governments don’t seem to find any solution to the problem and the crisis is likely to expand to larger european economies such as Spain and Italy, as Thai exports count for approximately two third of the country’s GDP, the debt-crisis is causing Thailand an important decrease in growth
Overall  the current economic situation is quite stable, unemployment has declined and inflation remains in the target range set by the Bank of Thailand.. The Thai economy  has sustained growth in all sectors during the beginning of the year 2012 and recovered faster than expected from past floods, Exports are expected to grow by 6.8% this year which is below previous expectations and import are expected to grow by 10.4%
Economic Outlook
Thai economy is expected to grow 5.7 % this year 2012 which is more than the previous expectations range (4.5% to 5.5%) , the Government has taken the right measures being an important supporting factor to sustain the growth. The government’s policy to raise the minimum wage and starting salary for fresh graduates has helped stimulating public spending and private consumption over the year.
Investment Confidence (domestic & international), Thailand’s Creditability

The 21stWorld Economic Forum on East Asia was attended by prime minister of ASEAN counties and representative of private sectors such as the WTO, Asian Development Bank and the IMF. The forum will help bring cooperation amongst the East Asian countries and also be a good place to exchange economic information along with making good public relations. This will greatly boost the international confidence of Thailand. Moreover, Thailand has strengthened the bond with China which promotes investment confidence with one of the world largest economic power. But current political unrest, government policies, unclear investment laws and unpredictable natural disasters can all be part of the reason that will decrease the investment confidence for international investors and move domestic investors internationally.

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