Chart, GDP 2007 : 3 components with % of change per quarter, y-o-y

This chart shows the % of change per quarter, year-on-year, for 3 components of GDP (real) :

-Private consumption
-Government consumption
-Gross Fixed Capital Formation (new investments)

Plus the growth rate of GDP (real).

Reminder :
-Nominal GDP is the sum value of all produced goods and services at current prices.

-Real GDP is the sum value of all produced goods and services at constant prices (1988).
All datas are coming from NESDB.

COMMENTS:
-Private consumption remains weak : at +1,6 % on Q4, compare to Q4 2006.

-Investments : we can see an improvement, but after 2 very bad quarters (Q1 and Q2). Overall, the level on 2007 stayed low compare to previous years. So it’s too early to speak about a sign of recovery.
It could be just a catching-up effect, after a continuous decline since Q2 2005.

-Government expenses : the big winner ! It’s an explosion, nothing less (+16 % on Q4, compare to Q4 2006, and even a sharp increase compare to Q3 2007).

-Growth rate of GDP reached 5,7 % on Q4 2007. We can see clearly the boost effect of government’s consumption and investments (along with a boost of exports).

The BOT removes capital controls

The governor of the Bank of Thailand said Friday the central bank will remove the controversial capital controls on short-term capital inflows effective March 3.

Removal of the controls is justified by several factors, including a strengthening economy and a greater balance in the foreign exchange market, Tarisa Watanagase told a press conference.The central bank implemented a one-year, 30 per cent withholding requirement on many types of capital inflows in December 2006, in part to help maintain the competitiveness of Thai exports by restraining the value of the baht.

But the immediate effect of the measure was to trigger a massive sell-off on the Thai stock market, and critics charged that the measure discouraged foreign investment.

The reversal was announced just one day after ex-prime minister Thaksin Shinawatra returned home Thursday morning, ending nearly one and a half years of self-imposed exile.

Finance Minister Surapong Suebwonglee said Thursday afternoon that he might consult with Thaksin on the capital controls.

Speculation that the controls would be scrapped have already pushed the baht higher this week. The unit closed Friday at 31.96-98 baht to the dollar.

(Nation)

What a roller coaster ! Before the announcement, exchange rate THB/USD was at 31,86. A few minutes later, the THB shot up at 31,20 !

Almost 3 weeks ago, the central bank was reluctant to remove the 30 % withholding requirement… And even had “secret datas” to give to the new finance minister.

“If the ministry receives more information, it may not waive the requirement because of the negative impact which could occur thereafter, said Mrs Pongpen.“, a senior member of the BOT.

Meanwhile, Miss Tarisa, BOT’s boss, stays right in her boots : “I will not quit, because I am a working person. I insisted it would continue to work. I have not been pressured as reported. We considered it was time to remove supporting measures“. (Nation)

Sure. No pressures at all. Today was a good time. And three weeks ago, it wasn’t.

Maybe it’s something related to astrology ?;-)

Export of gold surged 50 % in 2007… People cash in

BANGKOK (Reuters) – Thailand’s sluggish economy and record gold prices have prompted many elderly Thais to cash in family heirlooms as they struggle to make ends meet. Dealers say gold purchases are simply too expensive for most Thais and so dealers are melting down hocked jewellery and selling it abroad for gold value.

The profit they make is from the government-regulated five percent discount to market prices they are allowed to pay customers selling rings, bracelets and necklaces.

According to Commerce Ministry figures, Thailand exported 76 tonnes of gold in 2007 — an increase of almost 50 percent from the previous year — suggesting the trend to cash in jewellery has been going on for at least a year or so.

(the whole article from Reuters).

Thai baht : a return to the “fixed echange rate regime” ?

Bomb shell ? Pathetic propaganda in order to create fears among people who are betting on a continuous depreciation of the USD vis-a-vis THB (AKA almost everyone) ?

Or just a bravado from a lunatic Prime minister ?

We can read this strange quote in an article of Nation, about the new record of THB versus USD.

Deputy Prime Minister and Finance Minister Surapong clarified that Prime Minister Samak Sundaravej, by noting of the possibility of reviving the fixed regime, just wanted Bank of Thailand to conduct the feasibility study.

I’ve never heard Samak talking about “reviving the fixed regime” for exchange rates.

I seriously doubt that Thailand would have the means (financial and political) to do it. We’ll see.

And here, another article from TNA :

Deputy Prime Minister and Finance Minister Surapong Suebwonglee today refuted press reports quoted Prime Minister Samak Sundaravej as saying that Thailand may change its current floating currency exchange system as has been implemented following the financial crisis that hit the country in 1997.

He said Mr. Samak only said Monday that monetary officials should study the currency exchange systems adopted in Thailand’s neighbouring countries.

It did not mean that Thailand would switch to using fixed exchange rate system in which the Thai currency, the baht, was pegged to US dollar, he said.

Interest rate : BOT on hold at 3,25

The Thai central bank on Wednesday kept the policy rate unchanged at 3,25 per cent saying inflation will rise further, while global economic slowdown is still a risk.

I think that short term and burning popular issues (inflation) outweigh the economic slowdown.

As I wrote here, it would have been strange to cut interest rates with such ugly inflation figures.

Elections : red card for the House speaker… risk of dissolution for PPP

The comedy continues !

Two months after the general elections… the Electoral Commission has disqualified Yongyuth, House speaker, and member of the PPP, for fraud (votebuying in Chiang Rai).

What does it mean ?

The EC will forward the case to the Supreme Court within two weeks.

If convincted, he would lose his seat and face a five-year ban from the electoral process.

But furthermore, because he’s an executive of the PPP, “the EC is obliged to form an investigative panel to determine whether his alleged violations were linked to the party. Should the linkage be suspected, the EC must petition the Constitution Court to rule whether the dismantle the party“. (Nation)

That’s a lot of “if”, I would agree. However, it’s still a risk for the new government ! A huge liability.

How can we expect them to work, with such an uncertainty ahead ?

And what about the so called “investors confidence” ? What about the JBIC, the japanese bank that allegedly gave its green light to finance part of the new train lines (mega projects) ? Are they going to proceed if the… government and the house could collapse ?

Political crisis ? More than ever.

The big contradiction : GDP will increase ? And interest rates will go down ?

The National Economic and Social Development Board (NESBD) yesterday revised upward its growth forecast for 2008 on expectations of a surge in exports and private investment.The economy is expected to grow between 4.5% and 5.5% this year, higher than the agency’s last estimate in December of 4-5%, said Ampon Kittiampon, the NESDB secretary general.

Meanwhile… the same day…

The Bank of Thailand is prepared to further cut interest rates to help spur growth, according to deputy governor Atchana Waiquamdee.

The central bank’s Monetary Policy Committee is widely expected to cut interest rates by a quarter-point when it meets tomorrow. The MPC’s one-day repurchase rate currently stands at 3.25%, or a quarter-point higher than US official short-term interest rates. (Bangkok Post)

One of them… is wrong. 😉 Or one of them is hidding something…

I think I know the answer : growth of GDP in 2007 declined compare to 2006 (read here). And the worst is to come with a… global slowdown…

And what about inflation ? And the problem of the appreciation of THB ? What a conundrum !

The trap door is closing.

GDP 2007 and GDP Q4 2007 : +4,8 % and +5,7 %

Growth of GDP in Q4 reached 5,7 % (year-on-year).

Growth of GDP in Q3 was revised down (4,8 from 4,9 %).

So to summarize :
Q1 4,2 % (y-o-y)
Q2 4,3 %
Q3 4,8 %
Q4 5,7 %

Therefore, the growth of GDP for 2007 was 4,8 % (compare to 5,1 % in 2006).

Quick comment :
Private consumption and investments remain very weak. Government’s expenses increase a lot (particularly wages), and exports are red hot.

So the overall situation of thai economy remains the same. The pace of growth is decreasing.

Due to a base effect, I do not think that the growth in 2008 can be higher. It’s going to be difficult to have again a +16 % growth for exports…

And this is precisely why the new government is obsessed with “mega projects” (to inject a few hundred billions THB into the economy).

It could be the only life jacket to save GDP growth this year.

More details and charts … later.

Last point : the deflator (ratio of nominal GDP to real GDP) explodes at 5,8 %, against 2,1 in the previous quarter. It means : prices increase.

My point : the BOT has its next meeting for monetary policy on february 27… I don’t see how they can cut interest rates with such numbers. 😉

(complete report of NESDB, here , and statistical tables there).

Tax : VAT will stay at 7 %

Good news, and first real decision from the new government as far as economy is concerned : the rate of the VAT will stay at 7 %, for 2 more years.

This rate was already a “reduced” one. It was supposed to end in september.

Let’s try to recap :

-on one hand, the gvt needs more ressources (budget deficit). Overall, the temptation to increase the VAT is just too intense for thai politicians… 😉

-on the other hand, a hike was strictly impossible due to the current situation (inflation, consumption still depressed, political instability, etc.)

So I would say : we won a “reprieve”.

Reminder : the VAT produces 40 % of the total taxes levied by the Revenue Department (personal income tax, corporate taxe etc.) = 424 billions THB on a total of 1 071 billions in 2006.

The government’s total revenue for 2006 was 1 430 billions THB in net, and 1 628 billions THB gross.

War against inflation : Commerce Minister… deflates… himself

What a noise ! What a flatulence !

Mister Commerce Minister has deflated. Not prices.

But himself. 😉
Summary : the Department of Internal Trade announced a meeting with 350 entrepreneurs, to crush the inflation, stop the increases of prices, teach the companies how to manage their businesses.

The tone was martial, like always. The resolve and the spirit very high.

-“many entrepreneurs are raising their product prices without the government’s permission during this period”

-“the department will take a legal action against the guilty entrepreneurs.”

We were all very afraid, almost shaking.

The meeting happened friday. And… well… I’m sure I don’t need to tell you… You’ve probably guessed… Ready ?

Commerce Minister Mingkwan Saengsuwan yesterday managed to convince the manufacturers of only four product groups to agree to freeze their prices.

Mr Mingkwan had a three-hour meeting with 300 manufacturers from 10 product and service groups in a desperate attempt by the government to bring down household expenses. (Bangkok Post)

Oooh… now this must be painfull. Really. How do you say “loss of face” in Thai ? Me, I’ve lost my dictionnary.

Manufacturers of the four product groups which agreed not to raise prices in the near future included electrical appliances, Mama instant noodles, cleansing products such as toothpaste, soap, dish-washing liquids and detergents, and Phan Tai Norasing instant seasoning products.

The pain is definitely getting stronger…

-electrical appliances ? Sure, they have already tremendous deflationary pressures on their shoulders (because very high competition).

-Mama Soup ? Sure, they have just increased in january their price by 20 %. So I guess they can commit themselves to stop for a while… 😉

-soap, toothpaste ? Well dear readers, I do not have specific details. 😉 But those products are certainly not a great % of the average budget of the average thai citizen.

So to summarize : on 10 groups of products and services, we have 4… but not really.

It’s a failure. A pathetic attempt to look not totally ridiculous.

And this guy really believe that people are going to eat this crap ? It’s amazing.

Mr Mingkwan said his ministry would continue to urge manufacturers of other product groups not to raise prices.

Sure. Mister Minister The Great Deflator should go back to his studies, read more books, peruse ThaiCrisis (he would learn things), and leave politics and economy to serious people.

Religious days : total ban on alcohol ?

Thailand or Saudi Arabia ? Buddhist or Talibans ?

With the new government, new lunacies are coming, new bigotery hysteria.

It’s a tradition (do not miss my selection, the archives, there).

All sales of alcohol should be banned on religious holidays, according to Deputy Prime Minister Surapong Suebwonglee. Mr Surapong, also finance minister, came up with the proposal during merit-making to mark Makha Bucha Day at Wat Suan Kaew in Nonthaburi.

Backing the campaign, Mr Surapong said he would seek an amendment to the Alcohol Control Act to prohibit sales of alcohol on Buddhist holidays. (Bangkok Post)

Who is Mister Surapong ? The new Finance minister… Was he under medications this day ? Was he touched by “la grace divine” ?

It was said that the man had some education and some common sense. Obviously, we can doubt it.

Citing research, Mr Surapong said alcohol consumption cost the country about 196 billion baht in health and other spendings a year _ three times more than the excise taxes which the government collects.

Those costs include damage to people’s health, crime and accidents associated with alcohol consumption, he said

Sure, by saying that, Surapong looks smart. The old ladies love him. He wants to fight evil, and vices. He’s the white knight.

But will the ban of alcohol during a few days per year… change anything at the situation he describes ? Only the old ladies could believe it…

Instead of thinking like a Taliban, would it be smarter to tackle really the problem, at its roots, starting with… education ?

Non… it’s certainly too much asked. Thai politicians prefer to take the pose, rather than to act.