Back to business : “taxes nosedive so we need to borrow more”

We are back in business ! The revolution is over (even though we still have emergency decree, more on that later)… the birds are singing, the sky is blue… and the thai government can return, sabai, to its routine : the lunacy routine.

Particularily on the economic front.

It started this morning with the poor Korn, alleged Finances Minister, who opened the umbrella : with the riots, GDP will be worse, he said. Sure Korn… The Freaking Global Economy was waiting for the Reds before to hit Thaiwonderland.

But this afternoon, we had another winner : deputy Prime Minister Korbsak ! Who is this guy ? He was the treasurer of the Democrat Party… Now that demands some serious and special skills ! 😉 And he has even his own website : www.korbsak.com

Anyway back to the topic. Ready ? Go.

Thailand will need to borrow more than expected to stimulate the economy following the recent civil unrest, which will lead to lower government revenue as well as a continued drop in private investment, Deputy Prime Minister Korbsak Sabhavasu said yesterday.

He said it was now necessary for the government to spend more and to revise economic policies so that they are more in line with prevailing conditions. Top of the agenda is how to offset falling government revenue.

What I can say now is we need to borrow more, to compensate for the disappearing revenue. There will be no change to the amount of the second package, worth Bt1.56 trillion, but we will need to borrow more as tax revenue is tending to nosedive. The Cabinet will discuss borrowing options, which should be finalised next week,” he said.

The stimulus package is one issue to be discussed at a special Cabinet meeting tomorrow, aside from the political turbulence.

Korbsak added that the government would still raise some taxes, particularly on alcohol products. (Nation)

First : government’s revenues are going down. Indeed. Crashing. We could even say that it’s a disaster.

My dear readers know this fact since several months.

And they also know that the negative trend continues and will continue. But the clowns were adamant : not possible. Temporary. Mai pen rai. But It happened. Ouch. Caramba. Mi casa no es tu casa.

We are still waiting for the figures of tax collections for march (the Finance Ministry is late…)… But you can have a look at the charts for february (here).

Second : just the sentence “we need to borrow more, to compensate for the disappearing revenue” is enough to disqualify Korbsak and to send him directly to remedial education, with Geithner or Bernanke. 😉

Yes I know. I can hear you… don’t worry… Yes I know… USA, Europe are all doing exactly the same : they borrow like there is no tomorrow, while their economy is crashing ! The first is seen as the miraculous medecine for the second.

It’s the Dildo Economy, on credit ! It’s the Bailout Stimulus Whatever, on credit !

But we should remember : it’s not because the pool of clowns seems endless on this earth… that Thailand has to follow.

Anyway. I apologize for quoting myself :

The economic crisis will be the Nemesis of the Abhisit’s government.

More than ever, I stick to it. And with people Korbsak, such call is really too easy. 😉

[Korbsak has one quality though : he’s not afraid to call a pile of shit a… pile of shit. The word “nosedive” he’s using is extremely appropriate. Respect 😉 ]

9 Responses to “Back to business : “taxes nosedive so we need to borrow more””


  1. 1 George P Tuckeer 16 April 2009 at 2:51 am

    I don’t have the facts yet, but with the unrest, various insurance premiums and borrowing costs would have gone up for doing business in Thailand and that would reduce foreign exchange inflows.

    The big drop in exports would reduce foreign exchange inflows (although resulting reduced imports would cut the other way, but not by the same degree)

    Thailand’s credit rating is about to be lowered.

    At the same time, Thailand now announces they need to borrow more, presumably it will be at higher borrowing costs.

    My question is this: why is the Baht holding up fairly well against most currencies?

  2. 2 ThaiCrisis 16 April 2009 at 3:26 am

    My question is this: why is the Baht holding up fairly well against most currencies?

    Because “stability” is the keyword of the BOT. This policy costs them, they keep large foreign currency reserves.

    But I still believe that the “asian bias” (let the local currency going down versus USD to boost exports) will be stronger. For political reasons.

    Right now they still have the foolish hope that the crisis will end quickly… So no need to change anything. They don’t plan nothing, they have no plan B if the crisis continues for a long time.

    Exports are crashing, taxes collections are crashing ? Mai pen rai : give 2000 THB to the people (copyright Abhisit), “borrow” (copyright Korn), “stabilize the THB” (copyright BOT) and everything will be fine.

    With such prehistoric mindset, they are going to be really surprised… And the landing is likely to be painful.

    And the tragedy is : it’s not only Thailand. 😉 It’s the whole freaking world is thinking within this tiny and idiotic frame.

    PS : you’ll notice that exchange market reopen this morning…
    http://www.scb.co.th/exchange/bk-pvsexchange.htm
    the THB is not moving at all… ! What a joke… After all the political circus, the Asean summit, the riots… So the BOT is probably busy buying THB this morning. Another face saving exercise. For “Stability” sakes.
    Go ! Go ! Go Tarisa. 😉

  3. 3 E. Spitzer 16 April 2009 at 4:07 am

    Credit Rating cut to BBB , the baht STRENGTHENED

  4. 4 ThaiCrisis 16 April 2009 at 4:20 am

    Credit Rating cut to BBB , the baht STRENGTHENED

    That’s my point.

    The downgrading of the baht’s credentials from “A” to “A-” by Standard&Poor’s was understandable in the wake of the Songkran holiday riots and the country will just have to live with it, Thai Chamber of Commerce adviser Arch Taolanont said on Wednesday.

    Foreigners now saw increased investment risks, he said. The S&P downgrade would increase the cost of the government’s planned bond issues anf and foreign loans it enters into. This also applied to the business sector, Mr Arch said.
    http://www.bangkokpost.com/business/economics/140633/thailand-has-to-live-with-baht-downgrade

    April 13 (Bloomberg) — Thailand’s baht fell the most in 10 months and ratings companies said the nation’s debt rating may be cut after anti-government protesters fought police and Prime Minister Abhisit Vejjajiva declared a state of emergency.

    The currency extended its loss this year to 2.8 percent as soldiers battled to restore order to Bangkok’s streets. Protesters are calling for the resignation of Abhisit, 44, who was forced to cancel a summit of Asian leaders over the weekend after 1,000 protesters stormed the seaside venue of Pattaya.
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arAsovi7LIQc

    That was during the “revolution”… But now the birds are singing again, the sky is blue and the women are gorgeous… The BOT is shining. It’s indeed ridiculous.

    They overdo it. 😉

  5. 5 George P Tuckeer 16 April 2009 at 5:12 am

    No doubt BOT is buying baht, but, as TC says, this can’t go on.

    However, BOT buying does not fully explain the relative strength of the baht in the face of so much adverse events, even when you consider that Thailand is less vulnerable than other SE Asian countries.

    Any other theories?

  6. 6 Mythbuster 16 April 2009 at 5:17 am

    Isn’t BBB the last investment grade before junk bond status ?

  7. 7 ThaiCrisis 16 April 2009 at 5:18 am

    I believe It explains… everything.

    Read my previous articles :
    https://thaicrisis.wordpress.com/2008/11/26/the-mystery-of-the-thb-value-and-the-bots-foreign-currency-reserves/

    https://thaicrisis.wordpress.com/2008/10/30/chart-currencies-thb-is-tied-to-the-usd/

    https://thaicrisis.wordpress.com/2009/01/08/chart-81-of-thai-exports-are-invoiced-in-usd/

    -foreign money went away… ALREADY.

    -the capital controls (from dec 06 to mar 08) have protected Thailand during the “peak insanity” (2007-mid 2008) of inflows of hot money. Investors were sabai : “why risking money in a strange country with a junta, some lunatics capital controls when it’s possible to make tons of money (free of risk) on AUD, NZD etc ?”.

    -all this… made the THB a non-market. No volume, no demand, no liquidity. A non-market.

    -therefore with little means, the BOT has leverage and can do whatever they want (in line with some global trends though) on the local market (the one that counts).

    Voila. This is my theory.

    However, I advise to wait next week… Thursday and friday are not relevant. The banks open slowly, it’s songkran, the BOT is playing, it’s the hang-over from the “revolucion“… Next week we migth have a better picture of the situation.

  8. 8 George P Tuckeer 16 April 2009 at 9:43 am

    Thanks, TC, I missed the fact about the thinness of the market. This indeed allows BOT great leverage with little resource at hand.

    If so, it’s also a very dangerous situation as it’s a double-edged sword. The thin market may also make the baht more vulnerable to downward manipulation, say by Mr T or just your run of the mill speculator.

  9. 9 Marvo 21 April 2009 at 11:02 am

    OK, Songkran is well and truly over, volumes should be up a little now.
    On 16th Apr, THB = 35.25 cents (T/T)
    Today, 21st Apr, THB = 35.48 cents (T/T)

    Just a little movement but the USD has strengthened all round since last week.


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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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