GDP report Q4 : analysis, charts, and a very bad omen

(Source NESDB, report and data).

As promised, here is my review of the report published monday by the NESDB.

I remind you the main information : real GDP (it means at constant prices) shrinks 4,3 % on Q4 2008 compared to Q4 2007.

Furthermore, growth in Q3 was revised down (from 4 to 3,9 %).

First, here is the chart, per quarter, year on year.


As you can see, if we put on the side the 97 crisis, such a drop is unprecedented.

Now, a little game. As you know, there are seasonal effects. Always.

Q4 it’s the end of year, it’s the high season for tourism, businesses close their fiscal year etc. So, we should compare the evolution of all Q4 compared to Q3 for all the years since 1997.

Precision : here we work on nominal GDP (at current prices) because it’s more precise and because the time of comparison is shorter than year-on-year.


It’s obvious : it’s unprecedented. Even during the 1997 crisis, the GDP grew on Q4 (by 3,79 %), compared to the previous quarter.

Now, let’s go deeper with a comparison between Q3 and Q4 of 2008, to see some trends.

After all the first fallouts of the global crisis started to be visible lately (it started in august-september for exports for instance).

The evolution between Q3 and Q4 is much more relevant (to see the pace of the decline) than an analysis year on year.

First the values :

Real GDP (at constant prices), in millions THB
Q3 : 1 080 679 (= 1 080 billions THB)
Q4 : 1 084 901

Nominal GDP (at current prices), in millions THB
Q3 : 2 321 431
Q4 : 2 201 143

I can see that you are surprised too. 😉

The nominal GDP decreased between Q3 and Q4 (-5,18 %)… but the real GDP has… increased (+0,39 %).

How can we explain such alchemy ?

It’s because of the calculation of the deflator. In other words the way of removing inflation, AKA the calculation at constant prices (read my article here).

The rule is : the lower the deflator is, the greater the real GDP will be. Therefore it makes a year on year comparison more… attractive.

If we want to calculate the annualized growth rate of GDP (it means difference between Q3 and Q4, real GDP, times 4) we get 1,56 %. It means, if the current pace continues throughout the year, the total growth of GDP for 2009 would be 1,56 %.

In any case, that would be a serious slowdown (compared to growth rates Thailand enjoyed before). But nothing compared to other countries (read my article here), who already suffer negative annualized GDP growth rate.

Deflator was high on Q3 (6,7 %), and low on Q4 (1,9 %)… cisor effect… therefore the annualized GDP looks better. But this is a one bullet weapon

On Q1 2009, deflator will be the same than on Q4 (more or less)… While the contraction of the economy is worsening… therefore the comparison quarter-on-quarter between Q1 2009 and Q4 2008 is going to be really bad (like in so many other countries).

Therefore, the annualized GDP growth rate is going to be really bad on Q1…

Now let’s have a look at 3 of the components of the GDP, with their evolution in percent, year on year.


It’s not a surprise : government expenses increased 10 %… The private consumption remains positive… But the very worrying sign is of course the Gross Fixed Capital Formation (AKA investments)… with a drop of 3,3 %.

No matter what the government is doing or spending… businesses do not invest. Period. The government, like everywhere else in the world, is just throwing money into the air… hopping that it will be enough to hide for a while the holes. The black holes.

It won’t work. Because the fundamental point of this crisis, excepted its scale, is of course its duration.

That’s the faultline.. The policies the governments around the world are using… are designed to be sustainable on the short term… They can’t cope with a very long crisis.

Countries in Europe are proud of their social model, with several (a lot !) of “safety nets”… For instance, you loose your job, the state (sorry : the tax payers) will continue to pay your salary (although not at 100 %) for 23 months (France). Yes 23 months. I know what you think : that’s great. Or he’s lying. 😉

Such policy can deal with intense and short crisis… They act like shock absorbers. But what could happen if the crisis stays ? For years ?

Then the model would just collapse.

The model for the retirement of many babyboomers in USA was : I sale my house at high price with huge profit, and my pension is indexed on a ever increasing Dow Jones index. Great. Life is sweet.

But what would happen if the prices of house drop (it did) and then stay low for long time ? And the stock market ? They are manipulating the Dow Jones trying to gain a few weeks, a few months, to avoid the panic… But what if the stock market drop (it did, and will continue) and then stay low for long time ?

Then the model would just collapse.

What is true for social safety nets, is true for banks balance sheets, stock markets, pension funds, and many parts of the economy.

A small company for instance can cope with a few months of decline of production… and/or with a few customers defaults payments… but not more… The state can give some oxygen to those companies, on a small or even on a big scale (bailouts)… but it will work only on a short term.

In Thailand, the morons are very proud of the plan “2000 THB for 8 millions or 9 millions people”… They think it’s going to “start up” the economy… Like Bush with his “stimulus check” last spring…

It’s just derisory. It will make a fart, a blip on the GDP of the second quarter.

It’s not sure yet of course. But more and more, the picture appears clearly : we have an unprecedented crisis, because of its scale, its globality (all the countries), its simultaneity and… its duration.

The politicians can’t imagine a long crisis.

For them, it’s the real nightmare scenario.

18 Responses to “GDP report Q4 : analysis, charts, and a very bad omen”

  1. 1 World Citizen 25 February 2009 at 4:22 am


    This collapse is not a recession. It is not a depression. It is a global breakdown crisis and, nothing has been done, absolutely nothing, to fix it. Instead, the worst swindles in modern financial history of any civilized nation have dominated that period. And some people in Washington and around the world are fooling around, saying, “Well, let’s try this, and then let’s try that.” They’re idiots! They’re totally irresponsible!

    The behavior of the leadership—not out there in society, the people out there—the ordinary people out there in the country, are ready for action; they’re ready to support the right actions. They despise what governments are doing! They hate it!

    We need a series of measures, NOW, to deal with an onrushing collapse of the world monetary-financial system and to do the necessary things needed to re-create the world economy such as:

    1) Putting the international monetary system into reorganization. The entire international monetary-financial system is hopelessly bankrupt and in collapse phase. Reforms of the international monetary system will not work but will only accelerate the collapse.

    2) Protecting the chartered banks—the banks that take deposits, that take government money to supplement those deposits, and which loan that money for useful projects for the country from bankruptcy. Not the Wall Street banks!

    3) Putting the Federal Reserve System into reorganization, because it’s actually bankrupt, and then, reorganize it, according to the principles of national banking. That is, you need an institution between the Treasury Department and the chartered banks as a quasi-government-supported private organization, chartered organization, to replace the function of the bankrupt Federal Reserve System.

    4) Planning what we need to do to build this planet back into shape. The United States (because they must lead this) needs to open up agreements with other countries such as, Russia, China, and India, to build a new, fixed-exchange-rate world credit system, replacing the bankrupt monetary system, internationally, by a credit system.

    Then, enter into cooperation with those countries and other nations to develop a program of long-term credit, under which we revive the production capabilities of China, which are now collapsed, we revive the projects, which are necessary in Russia, etc.

  2. 2 World Citizen 25 February 2009 at 4:42 am


    There is a solution to the American housing crash it is called The Homeowners and Bank Protection Act (HABA) of 2007. This resolution has already passed in the senate; Joni Jenkins introduced it into the house last year but it did not get voted on. The US Congress need to enact the HBPA into law immediately:

    Here are the essential features of the Homeowners and Bank Protection Act of 2007:

    1) Congress must establish a Federal agency to place the Federal and state chartered banks under protection, freezing all existing home mortgages for a period of how ever many months or years are required to adjust the values to fair prices, restructure existing mortgages at appropriate interest rates, and write off all of the cancerous speculative debt obligations of mortgage-backed securities, derivatives and other forms of Ponzi Schemes that have brought the banking system to the point of bankruptcy.

    2) During this transitional period, all foreclosures shall be frozen, allowing American families to retain their homes. Monthly payments, the effective equivalent of rental payments, shall be made to designated banks, which can then use the funds as collateral for normal lending practices, thus recapitalizing the banking system. Ultimately, these affordable monthly payments will be factored into new mortgages, reflecting the deflating of the housing bubble, and the establishment of appropriate property valuations, and reduced fixed mortgage interest rates. It is to be expected that this process of shakeout of the housing market will take several years to achieve. In this interim period, no homeowner shall be evicted from his or her property, and the Federal and state chartered banks shall be protected, so they can resume the traditional functions, serving local communities, and facilitating credit for investment in productive industries, agriculture, infrastructure, etc.

    3) State governors shall assume the administrative responsibilities for implementing the program, including the “rental” assessments to designated banks, with the Federal government providing the necessary credits and guarantees to assure the successful transition.

  3. 3 25 February 2009 at 12:42 pm

    Thai Crisis you’re a real doomsayer!
    I don’t deny we’re in the shit… But by focusing on gloom you don’t mention some positive effects of a populist plan like the 2000-bahts gimmick.

    Do you advise to ignore people hit by the recession? Even if insurrection could follow?

    2000 bahts per person is for sure a populist scheme, but doing nothing could be much worse: think social unrest! Not the kind of unrest we had with those PAD yellow clowns or with the pro-democracy red people, but real social unrest that turns nasty and breaks the very basis of a society.

    Singing in the shit brings nowhere (denying the crisis), but it’s still better than drawing one’s head into it (feeling paralyzed by the crisis).

    I do appreciate your blog, but for once, I’d like to read what you think would help to get out of the rut instead of being complacent with the unfortunate downward spiral.

    One thing I remember from an old school teacher: he once advised that the day the USA would be deep into the shit dragging the world with them, it would make sense to write off the American debt, just to kick start the machine again, while trying to avoid to fall by the same sin again (to do so by creating real new markets to counterbalance the US influence). I doubt my teacher’s recipe would be applied, but wondering what you’d think about his idea.

  4. 4 ray 25 February 2009 at 1:29 pm

    i think yr teacher was right. but first the US has to write off the debt of the insolvent banks first. the foreclosures must happen and these forclosed homes have to be sold 15-25 cents to a dollar to peope who can afford them( ppl with good credit).citi, and other banks will have to sell their toxic assets in the same manner. i firmly believe that there is alot of privatre capital waiting on the sidelines for this oppurtunity but the govt is getting in the way trying to prop up these banks.
    imagine burger king has 50 branches. 10 are losing money month in month out. after some time , if they are smart thay will close down these 10 branches ands will not take funds from the profitable 40 shops to pay to the 10 losing shops. i think htis is what the govt. needs to do. only then we will see recovery.
    in 1997 thailand did the same thing by letting 52 finance companies and 1 commercial go bankrupt while gurantees were palced on all the fixed deposits.

  5. 5 ThaiCrisis 25 February 2009 at 1:35 pm

    I understand your frustration.

    But, by a simple matter of scale, the 2000 THB per employee is nothing. It’s half a mobile phone, or a night at the karakoe.

    2000 THB are not going to save a family, an individual who lost his job.

    2000 THB are not going to prevent a criminal from doing a robbery.

    2000 THB are not going to save someone who has no medical cover and who fall sick.

    2000 THB in april. And then… in may ?

    So we see that this “policy” is a fart. A blink. Something totally irrelevant. I insist. Do you agree ?

    Now, on a more macro level, what should we do ? What would I do ?

    I gave some ideas already, here and there.

    _but your teacher’s idea is actually and basically the core one. It’s the only solution. The amount of debt worldwide (and not only in the US…. look at Europe… it’s a disaster too)…. the total amount is so vertiginous that it can’t be repaid. Period. Never. NEVER.
    Unless you choose the Weimar style inflation : I own you TRILLIONS of dollars ? Here is a truck of bills for payment. Goodbye. 😉 That would not be practical… And lead to even more problems.

    -the scale is so insane, that the idea to create “bad banks”, like a pocket of shit to put inside all the toxics debts and stuff…. is crazy. Because those toxics would remain “assets” for something or somebody else.
    That’s the problem of our accounting system, double entry : the money you own is the… asset of somebody else !

    -so the only rational solution is to just ERASE the debt, indeed.

    -but of course, big problem, if you do that, you ERASE the assets of somebody else (eventhough and that’s the core of the problem, the real value can be close to zero). All those debts or “assets” have no value. It’s vaporware. It’s just a black hole. A dream.

    -policies designed to maintain the status quo… by “waiting” (putting the toxic stuff on the side for years; but keeping some book value for them) won’t work. Because of the scale of the problem. This alchemy can work, but on a small scale. bailout ? Sure. for one bank, or a few. Not for the freaking WHOLE world financial system.

    -so ERASE the debt. Yes, the only solution,. But it won’t happen, because it would “upset” (ah ah ah) many powerful men (who would lose… a lot).

    how do we “erase” the debts ? By allowing the market to do his dirty (but normal) job : bankruptcy.

    -and this is exactly what all the clowns want to avoid… They are ready to suck all the money from tax payers… in order to “save the system” like they say… they just want and need to perpetuate the fiction of their “assets”.

  6. 6 History buff 25 February 2009 at 4:18 pm

    On 5 August 1997, the Thai government, through the FIDF, guaranteed the principal and interest of depositors and creditors of the non-suspended finance and finance and securities companies and also extended the guarantee to commercial banks, credit foncier companies and any suspended finance or finance and securities company which was subsequently permitted to resume operations.

    On 8 December 1997, the Thai government closed 56 of the 58 suspended finance and finance and securities companies.

  7. 7 History buff 25 February 2009 at 4:22 pm

    No commercial bank went bankrupt. Instead the Ministry of Finance converted its debt into equity to take control of a number of the banks, thus avoiding triggering the 5 August guarantee.

  8. 8 thaichris 26 February 2009 at 2:58 am


    You gave us an idea what you would do regarding the global issues, especially the financial crisis in the USA. But what would you tell the Thai government to do?

  9. 9 ray 26 February 2009 at 4:10 am

    history buff

    didnt bangkok bank of commerce go bust? i was 22 years old then so if u could elaborate i will be grateful. as i remember there was a run to withdraw the deposits at bbc.

    also thaicrisis, why is the set( stock market) holding up so well in the past few weeks.? from the info i could gather the foreigners and institutions are net sellers and the locals are net buyers. the only translation i could get is that thai people have savings and are investing in set for the long term, because thai stocks are cheap if in terms of price/earning and price/ book value. i would liek to hear yr thoughts.

  10. 10 BBC memories 26 February 2009 at 12:34 pm

    The Government took control of Bangkok Bank of Commerce. It was closed on 1 November 1998. Its banking license was revoked and its ‘good’ assets were merged with Krung Thai Bank. Its ‘bad’ assets were transferred to Bangkok Commercial Asset Management (BAM). The Government also took control of First Bangkok City Bank, Siam City Bank, Bangkok Metropolitan Bank, Union Bank of Bangkok and Laem Thong Bank.

  11. 11 BBC memories 26 February 2009 at 3:59 pm

    P.S. Bangkok Bank of Commerce fell over in 1996 but wasn’t formally closed until 1998.

  12. 12 Dido 27 February 2009 at 10:58 am

    Civil wars after the economic crisis ?

    Beginning of Phase 5 of the global systemic crisis: phase of global geopolitical dislocation

    – Public announcement GEAB N°32 (February 16, 2009) –

    GEAB N°32 is available! 4th quarter 2009 – Beginning of Phase 5 of the global systemic crisis: phase of global geopolitical dislocation
    Back in February 2006, LEAP/E2020 estimated that the global systemic crisis would unfold in 4 main structural phases: trigger, acceleration, impact and decanting phases. This process enabled us to properly anticipate events until now. However our team has now come to the conclusion that, due to the global leaders’ incapacity to fully realise the scope of the ongoing crisis (made obvious by their determination to cure the consequences rather than the causes of this crisis), the global systemic crisis will enter a fifth phase in the fourth quarter of 2009, a phase of global geopolitical dislocation.

    According to LEAP/E2020, this new stage of the crisis will be shaped by two major processes happening in two parallel sequences:

    A. Two major processes:
    1. Disappearance of the financial base (Dollar & Debt) all over the world
    2. Fragmentation of the interests of the global system’s big players and blocks

    B. Two parallel sequences:
    1. Quick disintegration of the current international system altogether
    2. Strategic dislocation of big global players.

    We had hoped that the decanting phase would give the world’s leaders the opportunity to draw the proper conclusions from the collapse of the global system prevailing since WWII. Alas, at this stage, it is no longer possible to be optimistic in this regard (1). In the United States, as in Europe, China and Japan, leaders persist in reacting as if the global system has only fallen victim to some temporary breakdown, merely requiring loads of fuel (liquidities) and other ingredients (rate drops, repurchase of toxic assets, bailouts of semi-bankrupt industries,…) to reboot it. In fact (and this is what LEAP/E2020 means ever since February 2006 using the expression « global systemic crisis”), the global system is simply out of order; a new one needs to be built instead of striving to save what can no longer be saved.

    History is not known to be patient, therefore the fifth phase of the crisis will ignite this required process of reconstruction, but in a harsh manner: by means of a complete dislocation of the present system, with particularly tragic consequences in the case of several big global players, as described in this 32nd issue of the GEAB (see the two parallel sequences).

    According to LEAP/E2020, there is only one very small launch window left to prevent this scenario from shaping up: the next four months, before summer 2009. Practically speaking, the April 2009 G20 Summit is probably the last chance to put on the right tracks the forces at play, i.e. before the sequence of UK and then US defaults begin (2). Failing which, they will lose their capacity to control events (3), including those in their own countries for many of them; and the world will enter this phase of geopolitical dislocation like a “drunken boat”. At the end of this phase of geopolitical dislocation, the world will look more like Europe in 1913 rather than our world in 2007.

    Because they persisted in bearing the ever-increasing weight of the ongoing crisis, most states, including the most powerful ones, failed to realise that they were planning their own trampling under the weight of History, forgetting that they were merely man-made organisations, only surviving because they matched the interest of a large majority. In this 32nd edition of the GEAB, LEAP/E2020 has chosen to anticipate the fallout of this phase of geopolitical dislocation so far as it affects the United-States, EU, China and Russia.

    It is high time for the general population and socio-political players to get ready to face very hard times during which whole segments of our societies will be modified (4), temporarily disappear or even permanently vanish. For instance, the breakdown of the global monetary system we anticipated for summer 2009 will indeed entail the collapse of the US dollar (and all USD-denominated assets), but it will also induce, out of psychological contagion, a general loss of confidence in paper money altogether (these consequences give rise to a number of recommendations in this issue of the GEAB).

    Last but not least, our team now estimates that the most monolithic, the most « imperialistic » political entities (5) will suffer the most from this fifth phase of the crisis. Some states will indeed experience a strategic dislocation undermining their territorial integrity and their influence worldwide. As a consequence, other states will suddenly lose their protected situations and be thrust into regional chaos.


    (1) Barack Obama, like Nicolas Sarkozy or Gordon Brown, spend their time chanting about the historic dimension of the crisis, but they are just hiding the fact that they fully misunderstand its nature in an attempt to clear their names from the future failure of their policies. As to the others, they prefer to persuade themselves that the problem will be solved like any normal technical problem, albeit a little more serious than usual. Meanwhile everyone continues to play by decades old rules, unaware of the fact that the game is vanishing from under their noses.

    (2) See previous GEABs.

    (3) In fact it is probable that the G20 will find it more and more difficult to simply meet, as the growing trend is one of « every man for himself ».

    (4) Source : New York Times, 102/14/2009

    (5) Idem companies.

    Lundi 16 Février 2009!-4th-quarter-2009-Beginning-of-Phase-5-of-the-global-systemic-crisis-phase-of-global-geopolitical_a2805.html

    Have a good week-end…

  13. 13 World Citizen 27 February 2009 at 3:16 pm

    Adding to Dido’s comments:

    Europe’s Crisis: Much Bigger Than Subprime, Worse Than U.S.

    Europe’s financial system is sunk and the sums needed are beyond the limits of the IMF.,cs,db,hbc

    And reference Dido’s comment: ‘Practically speaking, the April 2009 G20 Summit is probably the last chance to put on the right tracks the forces at play.’ FORGET IT, THE G20 HAS FAILED US EVER TIME.

    In addition, the U.S. economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century.

  14. 14 Gustinfs 4 March 2009 at 9:37 pm

    You need to look in the dictionary for a definition of the term “unprecedented”. Just because it does not show up on your incredibly short term (10 year) charts does not make it unprecedented. The last major recessions in the US were in 1982 and before that 1973-74. Your very short term view is causing your opinions to be horribly off. This is not unprecedented in any way. We saw GDP shrinkage much greater than this then with unemployment rates above 11% in 1982. Do a little more research and maybe look at time scales that are meaningful.

  15. 15 ThaiCrisis 4 March 2009 at 10:02 pm

    Hey Gustinfs… THAIcrisis… A blog about THAILAND… GDP report for THAILAND not USA… Okay ? Or do you need a drawing ? Because obviously a chart, and some basic common sense and knowledge, are not enough for you…

    Furthermore, I wrote : “if we put on the side the 97 crisis, such a drop is unprecedented.”

    Unprecedented in Thailand, not in the whole freaking world. I mean it’s so obvious.

    And a little bit of research would help you :

    Data since 1960 for THAILAND… The drop in 1985 was smaller than 1997. Enough for you ?

  16. 16 memphis 10 March 2009 at 4:25 am

    I think this graph give a glimpse of the magnitude of the correction that will take place…

    how many people used their home as an ATM, taking out equity loans to buy to fuel the GDP? buying high priced cars and living beyond their means?

    The deflating of the housing bubble has really just begun… unless inflation is used to “maintain” values…

  17. 17 streaming 6 July 2010 at 12:53 pm

    You need to look in the dictionary for a definition of the term “unprecedented”. Just because it does not show up on your incredibly short term (10 year) charts does not make it unprecedented. The last major recessions in the US were in 1982 and before that 1973-74. Your very short term view is causing your opinions to be horribly off.

  18. 18 ThaiCrisis 3 September 2010 at 3:15 am

    … unprecedented…. for Thailand, little prick !


    Why people are unable to read and understand 2 words, one after the other ? It’s unbelievable.

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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.

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