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Effects of the Global Economic Crisis on Thai Economy

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Effects of the Global Economic Crisis on Thai Economy & Development Plan Ampon Kittiampon Secretary-General Office of the National Economic and Social Development Plan – PowerPoint PPT presentation

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Title: Effects of the Global Economic Crisis on Thai Economy


1
Effects of the Global Economic Crisis on Thai
Economy Development Plan
Ampon Kittiampon Secretary-General Office of the
National Economic and Social Development Plan
2
Outline
  • Effects of Economic Crises in 1997 and 2008 on
    the Thai Economy
  • Crisis Measures in the Two Crises
  • Economic Structural Changes in Two Decades
  • Effects of 2008-Crisis on the Development Issues
    Facing the 11th National Economic and Social
    Development Plan (2012-2016)

3
Economic Crisis in 97 and 08
  • Important Events
  • Hamburger Crisis
  • From Food Fuel crisis to collapse of US
    financial system dramatically effect world
    economic and Thailand economy export, tourism
    and agricultural price.
  • Thailand financial stability still strong strong
    financial institutions, high level of national
    reserves and manageable level of public debt.
  • Important Events
  • Tom Yum Kung Crisis
  • Financial Institution Crisis and rapid
    depreciation of Thai Baht lead to collapse of
    investor confidence and capital outflow
  • Economic recovery partially resulted from export
    growth, as world economic still in good shape.

2001 911
2002-2003 Iraq USA war SARs
2004-2005 Avian influenza (Bird Flu) Tsunami
2006-2007 Surge in oil price Domestic political situation
1997
2008
97 Crisis Indicators 2008
-10.4 (98) GDP 2.6
-7.9 (96) Current Account/GDP 0.0
27 (97) National Reserve (Bil. USD) 111
52.4 (95) Short-term debt (Bil. USD) 24.8
57 (00) Public debt/GDP 36.9
45 (98) NPL/Loan 3.19
-2.8 (99) Fiscal account (cash)/GDP -0.3
-7.9 (98) Growth in private sector loan 9.3
58.8 (98) CAPU 67.7
-9.8 (98) Capital Flow (Bil. USD) 12.8
1,423 (99) Unemployment (000) 522
4.4 Unemployment Rate 1.4
15.25 (97) MLR 6.75-7.00
56.06 (12 JAN 98) Exchange Rate (THB/USD) 33.38
355.81 (98) SET Index 449.96
97 98
World growth 4.2 2.8
Priv.consumption -1.4 -11.5
Priv.Investment -30.4 -52.3
Export (GS) 7.2 8.2
Import (GS) -11.3 -21.6
Inflation 5.6 8.1
GDP -1.4 -10.5
Q4/08 2008
World growth -0.2 2.8
Priv.consumption 2.1 2.5
Priv.Investment -1.3 3.2
Export (GS) -8.9 6.0
Import (GS) 1.0 7.5
Inflation 2.1 5.5
GDP -4.2 2.6
  • Rescue Package
  • Receive IMF fund worth 4 billion USD (14 AUG 97)
  • Increase policy rate
  • Financial Institutions established special fund
    to help raise require reserve in both tier 1 and
    2.
  • Pass special bill to borrow extra capital, total
    of 300 bil. Baht, for financial institution
    rescue plan
  • Rescue Package
  • Reduce Policy rate
  • Stimulus Package 1 (short-term measures)
  • Stimulus Package 2 09-11 (medium to long term
    plan)
  • Pass 2 special Bills to borrow extra capital,
    total 800 bil. Baht, for Stimulus Package 2

4
4
Impacts of sub-prime and world economic crisis
on Thailand
Direct impacts on financial institutions
Related impacts on International capital movement
Impacts on Thai exports and tourism
  • Total foreign exposure
  • (which includes loan in
  • foreign currency and
  • investment in foreign debt and equities) as a
  • percentage share to total assets of financial
  • institutions was only
  • approximately 7.5
  • Hence, direct impacts on financial institutions
    were limited.
  • Capital outflows from
  • portfolio investment
  • Thai stock markets
  • volatility and decline in set index and hence
    decline in wealth
  • Depreciation of baht
  • currency
  • Contraction in world
  • demand
  • Decline in trade finance
  • Growing concern over
  • protectionism

2008 2009
Q4 Q1 Q2
Export Value (YoY) -9.4 -19.9 -26.1
No. Foreigner Tourists (million) 3.1 3.5 3.4
(YoY) -17.2 -15.8 -16.5
2008
Q2 Q3 Q4
Net Capital flow (b.US) -3.13 0.69 1.64
Set Index (avg.) 822.4 675.3 422.8
Daily avg. turnover (million baht) 19,959 12,212 12,612
Currency (baht/US) 32.2 33.8 34.8
5
Outline
  • Effects of Economic Crises in 1997 and 2008 on
    the Thai Economy
  • Crisis Measures in the Two Crises
  • Economic Structural Changes in Two Decades
  • Effects of 2008-Crisis on the Development Issues
    Facing the 11th National Economic and Social
    Development Plan (2012-2016)

6
1997-Economic Stabilization
High priority on stabilizing the currency and
financial system to restore confidence
Great emphasis on replenishing international
reserves to restore confidence in currency
Restructuring financial sector
7
1997-Rebuilding the reserves, stabilizing
currency, and lowering prices
  • IMF bailout package
  • Short period of strict monetary policies to
  • - rebuild international reserves,
  • - restore confidence in the exchange rate,
  • - control inflation.

8
1997-Financial Sector Restructuring
  • Segregating unviable
  • fin. Institutions
  • addressing FIDF
  • problem

Addressing the NPL problem
Strengthening supervision of the remaining
institutions
Strengthening and recapitalizing viable
financial institutions
9
2008-Policy mix/Policy coordination to stabilize
and stimulate the economy
Monetary Policy
Fiscal Policy
Public investment Projects
Support for consumer spending through
Low Interest Rate policy From 2.5 to 1.25
Closely monitoring of financial liquidity
Stimulus Package II
Stimulus Package I
3-Years Public Investment Projects e.g.
Infrastructure projects, education
development-related projects, water system
development projects, health care
upgrading-related projects etc.
Personal tax cuts Transfer payment e.g. more
generous unemployment insurance benefit,
subsidy to senior citizen, cash handout for low
income-earners, free education, etc.
Macro prudential policy to prevent financial
imbalances and to ensure stability of financial
institutions
10
2008-Stimulus Package I
  • - Strong boost to domestic demand is key and
    imperative for the road to recovery in 2009 while
    Thai exports will contract throughout 2009. The
    measures under SP I are aimed to mitigate impacts
    of economic slowdown.
  • In January 2009, Abhisit's government announced
    a Bt116.7 billion (US3.35 billion) stimulus
    package aimed at boosting domestic demand shore
    up an economy which has been battered by the
    global downturn and political turmoil and last
    year's airport blockade. Excluding an amount
    paid back to treasury balance, this is a one-year
    2,700 mil. USD (or 93,000 million baht) program.
  • The stimulus package was based on 4 principles
    as guidelines for implementation, namely timely,
    transparent, temporary, and targeted.
  • The plan comprised a mix of cash handouts for low
    earners, tax cuts, tax deductible for mortgage
    payment up to 300,000 baht, expanded free
    education, monthly payments to the elderly and
    volunteer health-care workers, and subsidies for
    transport and utilities.
  • - If implemented by Q2/2009, potential boost of
    GDP is expected to be around 0.5-0.7 percent of
    GDP.

11
Thai Economic Situation in H1/2009
The Thai economy contracted 6.0 in H1/2009
  • The contraction was attributed to the sharp fall
    in exports and tourism driven by a collapse in
    global demand during the worst recession, and the
    impacts of domestic political turmoil and the
    spread of influenza A(H1N1) that jeopardized
    consumer confidence and leading to a decline in
    tourism and consumer spending.
  • Production fall in many sectors such as
    manufacturing (-11.4), construction (-2.7) and
    Hotel restaurants (-5.8)

2008 2008 2009
YOY ?????? Q4 Q1 Q2 H1
Private consumption 2.5 2.1 -2.5 -2.3 -2.4
Government consumption 0.5 11.0 3.6 5.9 4.8
Total Investment 1.1 -3.3 -15.8 -10.1 -12.9
- Private 3.2 -1.3 -17.7 -16.1 -16.9
- Public -4.8 -10.2 -9.1 9.6 0.5
Export (GS) 6.0 -8.9 -17.9 -22.8 -20.4
Import (GS) 7.5 1.0 -31.6 -25.3 -28.4
GDP 2.6 -4.2 -7.1 -4.9 -6.0
2008 2008 2009
YOY ?????? Q4 Q1 Q2 H1
Agriculture 5.0 1.6 3.4 -2.7 0.5
Non-Agriculture 2.4 -4.9 -8.1 -5.0 -6.6
Manufacturing 3.9 -6.7 -14.4 -8.4 -11.4
Construction -4.7 -12.8 -7.9 2.5 -2.7
Wholesale and retail trade 1.9 -3.2 -4.0 -3.3 -3.6
Hotel restaurants 1.6 -7.7 -6.0 -5.6 -5.8
Financial Intermediation 8.1 5.5 4.0 5.6 4.8
GDP 2.6 -4.2 -7.1 -4.9 -6.0
11
12
Economic Projection of 2009 (August 24, 2009)
Actual data Actual data Actual data Projection_2009f Projection_2009f
2006 2007 2008 25 May 09 24 Aug. 09
GDP (at current prices Bil.Bht) 7,841.3 8,493.3 9,105.0 8,831.8 8,786.3
GDP growth (at 1988 prices, ) 5.2 4.9 2.6 (-3.5) (-2.5) (-3.5)- (-3.0)
Total Investment (at 1988 prices, ) 3.9 1.3 1.1 -6.2 -10.0
- Private 4.1 0.6 3.2 -9.7 -14.8
- Public 3.3 3.4 -4.8 5.0 5.0
Total Consumption (at 1988 prices, ) 2.9 2.7 2.2 2.0 0.7
- Private 3.0 1.6 2.5 0.4 -0.8
- Public 2.4 9.2 0.5 11.3 9.4
Export value of goods () 17.0 17.3 16.8 -15.0 -16.3
Import value of goods ( ) 7.9 9.1 26.4 -19.6 -24.2
Trade balance (Bill. USD) 1.0 11.6 0.2 8.3 14.0
Current account (Bill. USD) 2.3 14.0 -0.2 9.3 14.5
Current account to GDP () 1.0 6.1 -0.1 3.7 5.6
Inflation () 4.7 2.3 5.5 (-0.5) (0.5) (-1.0)- (-0.5)
13
Economic Management in 2009
  • Preparation of disease control plan to prevent
    the outbreak of 2009 new strain influenza
  • Acceleration of budget disbursement in the
    remaining months of FY 2009, and preparation of
    budget execution details so that disbursement of
    FY 2010 budget could be timely started in
    October.
  • Disbursement of public funds and implementation
    of public projects under the second stimulus
    package (SP2) must be promptly executed in the
    first quarter of FY2010 (October December
    2009).
  • Facilitation of credit extension by special
    financial institutions to entrepreneurs and SMEs
    who encounter liquidity shortage.
  • Implementation of agricultural prices guarantee
    scheme during period of falling prices.
  • Managing exchange prudently to prevent either
    sharp depreciation during the period of rising
    oil prices, or rapid appreciation that could harm
    exporters and tourism industry. However, exchange
    rate management should not fuel asset prices to
    rise faster than the pace of economic recovery.

13
14
2008-Stimulus Package II
  • On January 13, 2009, the Cabinet approved the
    First Stimulus Package (SP I) worth 116,700
    Mil-Baht (3,334 Mil-US) in order to cushion the
    immediate impact from global financial crisis
    during Q2-Q3/ 2009
  • IMF forecasted that the world economy would
    contracted by 0.5-1.0 and recovery would be
    prolonged. Consequently, Thai economy, specially
    unemployment, would be severely affected
  • Thus, Thai government have initiated the Second
    Stimulus Package (SP II) (2010-2012) in order to
    create jobs and generate incomes through public
    projects investment, aiming to enhance Thailands
    competitiveness and to induce private investments
    in the future

Rationales
  • 1. To enhance food and energy security,
    including increase productivity of agricultural
    and industrial sectors
  • 2. To upgrade public infrastructures for both
    economic and social services to improve economic
    competitiveness and quality of life
  • 3. To improve income-generating capacity of
    tourism sector
  • 4. To create new income-generating sectors in the
    Creative Economy.
  • 5. To upgrade quality of education and
    holistically modernize learning system
  • To raise quality of public health care system for
    all Thais
  • 7. To create jobs and increase incomes for
    people at community levels in order to improve
    their quality of life

Objectives
15
2008-Stimulus Package II
Public Infrastructure 837,642 Mil-Baht
Community 91,708 Mil-Baht
Water System/ Agricultures 238,515 Mil-Baht
Creative Economy 17,585 Mil-Baht
Public Health 10,441 Mil-Baht
Tourism 8,506 Mil-Baht
Education 53,969 Mil-Baht
Program 1.43 Tri-Baht
Learning Community Building
Water Management
Production and Strengthening Capacity of Medical
and Health Care Staff

Development Programs for 5 Provinces in Southern
Thailand
Sub- Program
Transport Logistics
Image Revival
Cultural Heritage Conservation and Restoration

Quality and Standard Improvement on Education and
Learning System
Alternative Energy
Tourism Marketing
Technology Standard Improvement for
Agricultural Sector

Investment Programs for Job Creation and Income
Generation in Communities
Creative Tourism Products
Arts and Cultural Town
Research and development of medical technology
Telecommu-nication
Tourism Site Recovery
Thai Handcraft Promotion
Intellectual Infrastructures Improvement plan
and Center of Education in sub-region and region
Tourism
Creative Product Promotion
Standard Improvement
Education
Thai Software Industry Promotion
Public Health
Quality Improvement on Teachers and Education
Reform
Social Security
Design Industry and RD Promotion
Science Technology
Natural Resources
16
Outline
  • Effects of Economic Crises in 1997 and 2008 on
    the Thai Economy
  • Crisis Measures in the Two Crises
  • Economic Structural Changes in Two Decades
  • Effects of 2008-Crisis on the Development Issues
    Facing the 11th National Economic and Social
    Development Plan (2012-2016)

17
Economic structure sensitive to external shock
Production more depend on manufacturing sector than others sector
Employment remains concentrate in agriculture sector though its gradually declined
Demand side more depend on external trade

Economic structural changes Supply side ( of
GDP)
Economic structural changes Demand side ( of
GDP)
18
Economic structure sensitive to external shock
Energy depend on import energy
Energy Consumption and GDP (at current prices)
Import energy to GDP (at current prices)
Energy Consumption
GDP
19
Outline
  • Effects of Economic Crises in 1997 and 2008 on
    the Thai Economy
  • Crisis Measures in the Two Crises
  • Economic Structural Changes in Two Decades
  • Effects of 2008-Crisis on the Development Issues
    Facing the 11th National Economic and Social
    Development Plan (2012-2016)

20
New world architecture and evolution of Thailand
New Global Trends in the next 20 years
1. Regional economic cooperation 2. Asia economic
power increase 3. New Financial Architechture 4.
Aging Society 5. New technology-Innovation and
Human life style 6. Fuel Crisis 7. Global Warming
10th National Plan
  • Human Development
  • Strengthening grass root community
  • Economic restructuring
  • Bio-diversity
  • Good governance
  • World economic growth in the medium term expected
    to be slow.
  • Financial market shift toward Multiple financial
    nodes and tighter financial rules and
    regulations.
  • Shortage of water supply and agriculture area.
  • Unemployment and aging population.
  • Global warming
  • Fast pace of technology development
  • Sustainable capitalism and CSR
  • Regional trade and cooperation increase
  • Asian increase role in global politic

New born Risks after world economic crisis
World Economic Crisis
2007 2009 2011
2013 2015 2017
2019 2021 2023
2025 2027
21
New Global Economic Landscape
Multi Polar World
Contribution to Global GDP Growth
  • Shift toward Multi-polar world
  • BRICs gain greater power
  • China become world 2nd beigest economy
  • Recovery of each country will be differs from 1.
    affect from economic crisis and 2. Stimulus
    package by each government.

22
New Global Economic Landscape
New Financial Architecture
Multiple Financial Nodes
Tighter financial rules, regulation and
administer
US Dollar losing power
23
New Global Economic Landscape
Food and Fuel Security
Short-term
z
Current economic crisis soften down the effect
Food
Fuel
Primary Products
Economic recovery will boost the effect
Long-term
24
New Global Economic Landscape
Shift in Social Sector
Increase in Unemployment and Poverty
Might not achieve MDGs 2015
Aging Society
Increasing risk of new born epidemic
25
New Global Economic Landscape
Shift in Environmental Sector
z
Global Warming!!
Change in environmental/ physical/ biodiversity
Effect towards agriculture sector and food
production
Conflict over national resources
26
New Global Economic Landscape
Technology and Innovation
Information Technology
Biotechnology
Nanotechnology
Cognitive Technology
27
New Global Economic Landscape
Global Trade and Cooperation
Trade and Cooperation
Trade barrier
Tighter rules and regulations on trade
Harder for international organization and
institution
Regionalism
Increase regional cooperation in Asia
???
28
New Global Economic Landscape
New Economic and Business Model
State Capitalism
Sustainable Capitalism
29
New Global Economic Landscape
New Global Politic Landscape
US declining in power
BRICs increasing power
Terrorists still remain major threat
30
Opportunities and challenges of Thai Economy
Short-term
Keep growth steady while minimize risk from
volatile global economy
Long-term
Adapt to changes
  • Expand market and increase regional cooperation
  • Restructuring production sector

Economic and Financial
  • Create advantage to become Agriculture Products
    Hub
  • Create value creation in agriculture and food
    products
  • Innovation and development in alternative energy

Food, Fuel and Environment
Global warming and Good governance
  • Green Job / Green Growth / Green Economy
  • Expand home-care service for elder, medical
    sector,
  • health-care service and Long stay tourisms

Aging Society
  • Cooperation in production, trade and investment
  • Social and Environment sectors
  • Financial cooperation to reduce external risks

Regional cooperation
31
Thank you
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