Chart, GDP Q1 : recession is worsening and no bottom

The GDP report for Q1 has been published by the NESDB (here).

The main information is : the thai economy shrank 7,1 %, compared to the first quarter 2008. In Q4 2008, the drop was 4,2 %.

Therefore, we are in recession (classic definition is 2 quarters with negative growth).

The official analysis is that the thai economy has bottomed out, AKA it can only get better the following quarters.

This is wrong.

I wrote on my previous report :

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…

I was spot on : deflator on Q1 was 2,2 % (2 % on Q4)… So if we calculate the annualized GDP rate (difference between Q4 and Q1, times 4), we get a striking -13 % !

Now, let’s have a look on 3 components of the GDP (real GDP = inflation removed) :


We are diving. Even the private consumption is now in negative territory (-2,6 % compared to Q1 2008).

The NESDB writes :

the first reduction in 10 years since 1Q 1999 owing to a fall of real sector in line with world economic slowdown. This dampened consumer’s confidence and purchasing power, which resulted in a decrease in expenditure on durable, semi-durable, and non-durable goods, particularly on passenger car, and motorcycle.

As for the Gross Fixed Capital Formation (investments) the fall is even worse : -15,8 %.

Here are the values (in millions THB, nominal GDP = at current prices), for each components so you can juge their relative importance.


Private consumption = almost half of GDP (1 195 billions). The Government spending is a tiny part (270 billions).

Exports and imports… Now this is something that people have often some problem to understand… For the GDP calculation, imports are deducted from exports (because you obviously don’t produce what you import).

So what is important is the difference (exports – imports).

On Q1, imports dropped at a furious rate (-30 % !), much more than exports… Therefore, the trade balance is positive, therefore the contribution for GDP is positive (5,2 %).


And what about the change in inventories ? A big drop (-7,5), that depresses the GDP growth rate.

2 explanations :

-companies have cleared their stock. Normal reaction during a recession.
-and gold. The NESDB writes :

In addition, export of gold increased significantly due to higher price in the world market. This caused the stock of gold declined nearly Baht 100,000 million.

Indeed, my readers already know this anomaly (that showed up in the february exports figures, read here).

Inventories changes accounted for -156 billions… and gold is responsible for two thirds…

So let’s try to recap and to make a reasonable forecast for Q2. It means not a forecast to please people but a forecast that takes the reality into account.

-exports : no change. We are still 25 % down. Confirmed in april (first month of Q2, with a crash of 26 % read here). There is absolutly no reason to believe that exports could increase (a lot) on may and june. Furthermore, don’t forget the base effect… The Peak Exports was july 2008… It means year on year comparisons are going to get uglier and uglier !

Furthermore, we can see that oil prices are going up again… That could increase imports… and therefore, reduce the trade balance… and therefore reduce the positive contribution for GDP growth…

-investments : no change. The situation is even worsening. Very simple to understand : the longer the crisis lasts, with a depressed global demand, the more businesses are going to postpone their investments projects. It’s just insane for a business manager to try to increase (today) his production capacities !
It makes no sense. Furthermore, the psychology is starting to crack, and this is precisely why the authorities are stepping up their idiotic PR campaign about “Green Shoots” and “Recovery”. It shows their desperation.
The longer the crisis lasts, the more the fools who believe that it would be short timed, change their minds… And they join the recession club (cut of investments, cut of spendings, etc.). Not good to fuel a recovery.

-government spendings. Ah ! The best part for the Lalalanders… They believe that gvt can buy its way out from the crisis. Sorry folks, the government is broke, and I really don’t believe Thailand can act like USA (= to borrow like there is no tomorrow).

-Private consumption : worsening. Let’s ask the clowns how they think Mister and Miss Somchai, who started to reduce their expenses on Q1, are going to change totally their behavior and will spend like crazy on Q2 ?

Allo ? What ? I can’t hear the clowns anymore. Oh yes, I’ve just had an idea : let say that the 66 millions of thais are going to win lottery next week. Give them 1 billion THB each, case closed, problem solved. 😉

It’s of course just a fantasy. And why it could even get worse ? Well, again, the longer the crisis lasts, the more companies will close, downsize, the more people will lose their jobs… the more they will be afraid of the future etc. It’s of course a basic negative loop. But the clowns can’t understand this very simple idea.

So, with such depressed conditions, GDP on Q2 will be as bad as Q1. Simple as crystal clear.

Now, what are the positive items that could curb and change this reality, a little bit and on temporary basis ? There are some.

-government spendings : a little boost (like the 20 billions national bribe given by Abhisit in april) could soften the negative trend. But it would be a blip on the radar. Absolutly not a sign of recovery. Abhisit is just unable to launch and manage really the mega projects. Even though he would sign all the contracts and would get all the financing tomorrow, the money would not be injected into the system before several months.

-inventories : I think some companies have cut their production… too fast and too deep… They will have to produce again, even at lower levels. And the gold mania is probably over (unless prices explode, that would convince many thais to sell their gold).

Voila. And all my comments at the end of my report about GDP Q4 remain valid.

The longer this crisis lasts, the more the negative effects will increase : compound effect, negative loop, you name it.

The system (with many shock absorbers) can’t sustain a long crisis.

20 Responses to “Chart, GDP Q1 : recession is worsening and no bottom”

  1. 1 Marvo 26 May 2009 at 7:40 pm

    Hey TC, can we get your opinion on something…?

    When the world’s economies started going belly-up there was a flight of “money/cash” into the dollar which had a dollar strengthening effect. Money (under the delusion/pretense of these new delicious “green shoots”) is now heading back into stocks etc – also visible in the SET.

    When the “clowns” all over the world don’t see these “shoots” maturing into sturdy growth and eventually realise that the system is well and truly broke (and been made worse by most government’s actions), what do think the people with the money will decide to do with (what’s left of) their assets in order to protect them?

    Will there be any credibility left in the dollar by then?

    Talk is of a bias towards investment in “emerging economies” over the fcuk’d West, but from your figures, Thailand must be slipping down the rankings in the “emerging” stakes.

    I’d still like to know what everyone will do with their invested assets though, when the REAL slide to the bottom happens eventually. Sorry, not being too negative am I?

  2. 2 Tarrin 27 May 2009 at 6:38 am


    Maybe they want to put their money in gold?

  3. 3 Pricilla 27 May 2009 at 6:07 pm

    In all honesty TC Thailand isn’t even in the same league as the clowns in the US and what they are doing.

    What are you suggesting that the Thai govt should be doing?

    To Marvo, I think you are right that the real recession hasn’t even hit yet, all the indicators are just to dreadful for the current suckers rallies to continue much more. Many predict to bottom out around 2014-2016, a frightening thought. Strategies will depend on how bad it really does get.

    Bonds generally give a good return in recessions, but what bonds would you buy with any actual security these days? Gold holds intrinsic wealth but the juries still out on which way it will go. Goldbugs have good arguments for increase but apparently traditionally in depressions it also drops. Interesting times.

  4. 4 ThaiCrisis 27 May 2009 at 7:40 pm

    I never said the contrary ! US, UK, France… you name them… All in the Big Clowns League, happy and proud.

    Now… once you’ve said that… it doesn’t mean that Thailand has to follow. Even on a smaller scale.

    The unanimity in idiocy we currently see in the world…. is really obscene.

    And absurd : because, if you think about it, NOT ALL THE COUNTRIES IN THE WORLD WILL BE ABLE TO BORROW AT THE SAME TIME, THE CRAZY AMOUNTS THEY ALL PLAN TO BORROW. 😉 (and we should add : not gvt only… many businesses have to/ want to borrow too).

    It makes no sense. The crisis is so deep, so global that the clowns don’t even see those very simple facts.

    Now, what they should do ? Discipline for the fiscal policy and the budget, use the crisis as an opportunity to clean the mess, to let the bad and too protected businesses go down, don’t try to “stimulate” the consumption, it’s counter cyclical, it’s like throwing matter into a black hole, it’s utterly stupid… accept that the stock market (for insiders and the elite) will go down, accept that the real estate bubble would burst in Bangkok (who gives a fuck anyway ? A few thousands people, members of the gang, the elite) give real opportunities and freedom to foreign investors, reduce corruption to bring them en masse, launch a REAL (not a fantasy, not a source of corruption) policy of “mega projects”… not for the sake of it (“I want my mega project, my mega toy”) but because the country needs them (more mass transports in Bangkok, less roads, a real railway system up country) etc.

    The recipes and good policies are not missing… To be able to implement them, Thailand would just need courage and smart, clean people… Both ressources, unfortunately, not plentiful nowadays….

  5. 5 InPhuket 28 May 2009 at 4:25 pm

    Do not fear my friends, Mr. Abhisit says everything is sabai sabai.

    “Prime Minister Abhisit Vejjajiva said he believes the domestic economy will improve in the second quarter of this year and gross production (GDP) will contract lesser than the first quarter”

    -Bangkok Post

  6. 6 Pricilla 28 May 2009 at 6:58 pm

    Hi TC, wholeheartedly agree with you, it is a worldwide madness called “cover your political arse” so they all want to show they are doing something. Bear in mind the intelligence of the average voter, they believe what they are told on the TV, critical individual analysis is just too much hard work. That the government solutions are completely wrong doesn’t matter, they are only thinking of the next election and scraping in again. Later others will have to sort out the mess.

    Could Thailand do better, it really doesn’t have a reputation for innovation and clear thinking now does it? Like most politicians just in it for the glory and getting that snout in the trough long enough to make some real money.

  7. 7 sammy 28 May 2009 at 9:55 pm

    Marvo, you ask a great question. Fantastic question. I wonder about this myself. There are only two place I can see people putting cash when things finally start to slide and the pyschology changes to fear – gold or offshore foreign currency deposits. I think we see this already. Many central banks are selling down their gold reserves. Somebody has to be a buyer, somewhere. Money is flowing into Swiss Franc like crazy, even the government cannot stop it. Aussie and Kiwi dollar are up and yen refuses to die. I think offshore foreign currency is where the money will flee. Maybe that is smart to do, maybe not. I dont know. I always wondered this, too: during the great depression in the U.S. when the banks all suppposedly went bust along with the stock market, where did all the rich people keep their money? In Currency, but where? Either most banks remained open or the money was under the pillows. But what if there was hyperflation in stead of deflation? Then money would be worthless. The problem with gold is you cant use it to buy things even though its money. you have to sell it to use it to buy something. That leaves currencies. And not in Thailand if you are a foreigner.

  8. 8 antipadshist 29 May 2009 at 12:31 pm

    TC, check it out !

    Govt may have to cancel contracts

    Rice subsidy is one of a pile of problems for Abhisit

    “Some merchants from the total of 17 have threatened to sue the government now that they can’t take delivery of the rice they have bid for …

    The merchants are shadow boxing. Many of them have dubious backgrounds, with links to politicians…

    They claim that ships are anchored at the docks ready to take delivery of the rice for export. If the government fails to deliver the rice to them, they stand to face losses or will default on their obligations. Rumours in the rice industry have it that these exporters have paid under-the-table money amounting to more than Bt2 billion to politicians

    This rice scheme appears not to have been transparent from the outset, and Abhisit should have cancelled the bidding. However, doing so now would certainly create complications because the exporters have already paid out the tea money. More importantly, Abhisit’s relationship with the coalition partners would sour further. Already, the stability of his government is very shaky. On top of this, there are problems in all the crop schemes, not to mention the public bus project and other mega-projects.

    The smell of corruption is thick in the air.

    But Abhisit can’t raise a finger against any one of them directly because the coalition partners could go after him at any time. Also, his government is going broke. It now needs to borrow Bt800 billion – half of which is being introduced through an executive decree and the other half through a normal legislative act – to shore up investment needs. The borrowing is also needed to fill a big hole in the budget deficit, which might exceed Bt300 billion in fiscal year 2010…

    It will be a rough ride for Abhisit from now on. He will have to fight for every project or every policy to get things done. The point is whether he will be doing so to safeguard his premiership or to defend the integrity of his government.

    also adds to that Suthep’s own problems:

    EC to file charges against Suthep

    so, looks like ultimately and inevitablty sh1t hits the fan for Dems once again ? ;D
    (same it was before – during the 2 Chuan’s govs.)

  9. 9 Pricilla 29 May 2009 at 6:14 pm

    Sammy: My brother is into solid junior Oz gold companies that he bought very cheap after the last crash. The logic of holding gold makes sense, plenty of people are saying it will sky rocket, and are hoping for currencies to be linked to the gold standard again if the US dollar fiat currency tanks it and loses reserve status.

    Another mob claim that gold always drops in recessions and historically booms in bull markets. They say it won’t run up and have the charts to prove it. They also foresee deflation as the next big problem. Swiss currency seems tipped as OK.

    Another group anticipate a complete US economy collapse and hold physical gold, food, mountain retreats and guns.

    Many pundits say the full crash is yet to come so hold cash to buy at the real bottom of the market to make a killing later, this also makes sense.

    Seems need to prepare for numerous outcomes and be ready to act accordingly, seems lots of cash and some gold not a bad combination. I also own a few condos in Thailand that I know I wont be able to sell, so will adjust rents to market conditions, better some rent than none.

    Antipadshit: some good info, seems Abhisit is in a real bind, the usual problem with coalition govts with numerous snouts looking for troughs.

  10. 10 Lothar 29 May 2009 at 6:39 pm

    “defend the integrity of his government”

    Integrity? ROTFL. Hey man this is Thailand.

  11. 11 George P Tuckeer 29 May 2009 at 9:45 pm

    Crisis? What crisis??

    For the last week, the teevee is showing videos of baby panda born in Chiang Mai zoo, every day, for hours on end. on every channel.

    Go ahead, ask me something about baby pandas, anything at all, I dare you.

  12. 12 ThaiCrisis 29 May 2009 at 9:51 pm

    And before the pandas we’ve had : “the little thai boy who is looking for his japanese dad”. A pure saga and drama…
    The propaganda manoeuvre is gross.
    But it works. Every time. The thai media love those stupid stories. The thai public too.

    So mai pen rai : we shall continue to cry in front of our TVs.

  13. 13 whoopla 30 May 2009 at 12:29 am

    What about all those uncensured penises and breasts belonging to savages that Thai television love to program for their flocks, they must think they are watching science fiction, and one presenter was saying how important it was for Thais to watch such programs to get away from their internal issues…
    No one questions the fact that its OK to show genitals of humans from different cultures, black skinned people are somehow a sub-species… must make Thais feel better about themselves?

  14. 14 antipadshist 30 May 2009 at 4:05 am

    oh, wait, that’s what is all about (re baby-panda) :

    Panda cub expected to boost tourism

    Thanks to the cub, the number of tourists should rise at least 10 per cent this year,” said Chalermsak Suranant, director of the Tourism Authority of Thailand’s Chiang Mai office.

    “This is good news, and we’re delighted,” said Chalermsak…

    “The cub is cute. Aside from China and Japan, Chiang Mai will be the only place in Asia where tourists can see a baby panda,” he pointed out…

    “We’re preparing a corner where tourists can express their congratulations on the cub’s birth,” he said. “We’re also making pandacub souvenirs.”

    The Chiang Mai Zoo receives 3,000 visitors on a typical weekend.

    “But from now on, we expect the jump in the number,” Thanapat said….

    oh, sh1t ! this is so un-fcuking-belivable. they seriously think that tourism is gonna improve because of freaking baby-panda ? ROFLMAO

    Thai public must be seriously brain-impaired to buy this crap and swallow it whole.

  15. 15 chang dek 30 May 2009 at 3:31 pm

    America sets out to change Chinese “saving” culture!!! What planet are they on?

  16. 16 Tarrin 30 May 2009 at 6:02 pm

    please dont talk about the baby panda or the missing boy story, its degrading me as a thai

  17. 17 Bedwyr 31 May 2009 at 8:32 am

    Thai public must be seriously brain-impaired to buy this crap and swallow it whole.

    Yep. Welcome to the reality that is Thailand.


  18. 18 George P Tuckeer 31 May 2009 at 8:51 am

    “please dont talk about the baby panda or the missing boy story”

    OK, then, let’s talk about the Thai ladyboy who won fourth place in an obscure beauty contest.

    Or we could talk about Abhisit’s daughter at Chula.

  19. 19 maverick263 3 June 2009 at 12:08 am

    i’m so glad… meeting a bunch of ppl… sharing opinion & … clapping each others shoulders… for superior intelligence…

    watch my words: let’s talk again in 2 years na 🙂

  20. 20 ThaiCrisis 3 June 2009 at 2:29 am

    Oh no need to wait for 2 years… You’ll clap even more in 2 quarters when you’ll see how right my forecasts are … 😉
    Mark my words and read my lips.

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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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