GDP and inflation : BOT revises down and up its forecasts

It’s good to be good ! πŸ˜‰

I was right on GDP. And right on inflation.

-The Bank of Thailand (BOT) forecasted headline inflation would reach an 11-year high at 7.5-8.8 per cent, while core inflation would break the policy target to 2.8-3.8 per cent this year marking the first time since inflation targeting was introduced in 2000.

-The Kingdom’s economic growth forecast, however, was revised slightly lower to 4.8-5.8 per cent from 4.8-6 per cent. (Nation)

The last inflation revision was end of april… When the BOT increased its forecast from a surreal 4 % to 5 % for the whole year.

High inflation has apparently eroded consumption and investment while exports could grow higher than expected, thanks to global demand.

No it’s not “apparently” it’s “obvious“… Inflation (at least, the form we currently experience) leads to declining purchasing power.

The BOT estimated total consumption to grow 3-4 per cent this year, compared with a previous forecast of 4.5-5.5.

Total investment is projected to expand 4.3 – 5.3 per cent, lower than 8.5-9.5 per cent in earlier projection.

Still those projections could be lowered again. I mean it’s a sign that the total investment projection has been divided by 2 ! The previous ones were delirious, designed for a rozy world full of confidence, mega-projects, and small kids laughing in Wonderland etc.

The reality for businesses is totally different : uncertainty (on the political front and the economy as well), higher interest rates, running inflation/costs, high competition (difficult sometimes to increase prices, or even forbidden due to gvt prices controls policy), and bad perspectives for exports (obvious slowdown in US and UE, again the BOT is dreaming when talking about a continuous higher global demand !), etc.

4 Responses to “GDP and inflation : BOT revises down and up its forecasts”

  1. 1 MSB 29 July 2008 at 4:56 am

    Much more interesting I think was a comment at the press briefing by a BOT Assistant Governor Duangmanee yesterday who said that GDP grew “about 5.8%” in Q2. Both Surapong and the Fiscal Policy office said recently that H! GDP was close to 6%. So no slowdown see in Q2. This is a huge number and way above street (boiler room!)forecasts at below 5%.

    If it is correct it shows that domestic demand has not fallen as much as expected and that the export sector is holding up well despite a slowing US economy.Thailand is less US-dependent and the Middle East, India and other ASEAN markets are expanding rapidly. For example exports to Cambodia are up 72% in H1 over last

    The BOT’s July report talks about the growing domestic demand, improved corporate profitability (PTTEP had a record Q2 and parent PTT will do the same), improvements in the financial sector and satisfactory levels
    of serviceable household debt.

    Fact or fiction?

  2. 2 ThaiCrisis 29 July 2008 at 6:27 am

    -Exports to Cambodia ? I’m sure that the 198 millions USD recorded for Cambodia in may 2008, AKA 1,25 % of the total of thai exports (15,46 billions)… are going to help us. A lot.
    What about Laos ? At 171 millions, we have a big potential ! Burma too at 114 millions, looks full of promises…

    I’d rather look at US, and… UE and Japan.

    -corporate profitability ? Sure if you talk about PTT amid an astonishing explosion of oil prices… then your vision of the whole picture might be -slightly- distorted. πŸ˜‰
    If we are talking about SMEs (much more important than a few multinationals…) then the story is totally different.

    -Overall, we are arguing (and will probably continue to do so) on quaterly or monthly datas and analysis. My point is (I think) that a negative trend is taking shape, right in front of our eyes. Slowly but surely. To have 6 or 5.8 % growth on Q2 is in a way not really relevant.

    -The trend that’s the key point. How H2 can look ? I still don’t see any reasons for H2 to be better than H1. And 2009 to be better than 2008.

  3. 3 MSB 30 July 2008 at 6:08 am

    ok Cambodia was just an example but i accept your point.
    On the corporate profits, well Q2 all not yet in but major big cap stocks like SCB, BANPU, PTT, PTTEP, TOP, LH have all reported record net or are expected to. Thats 40% of the index.

    Saying H2 will be slower than H1 is nothing new. Most conutries in the world are facing this situation. I just don’t think Thailand will be as bad as some are saying. 08 will show higher growth than 07 and I believe 09 will do better than 08. Thailand is probably the only country that can achieve this. ok coming off a low base in 07 but still this is progress.

  4. 4 ThaiCrisis 30 July 2008 at 6:25 am

    The thai economy is not -only- the “SET index”.
    This illustrates I think our 2 different views.

    At my small level, I see SMEs that struggle with higher costs, asking longer credit terms, increasing their prices (when they can) etc.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

%d bloggers like this: