Economic News in Thailand

[Oytopikos]

Thailand's economy
The high cost of stability

 by The Economist | BANGKOK



SINCE the coup d’état in May economists have been trying to figure what South-East Asia’s second-biggest economy will do next. The data show that this year there will be hardly any growth at all. Spending is weak, investment down, trade and tourism shrinking. A drought is looming in the provinces and in Bangkok easy money has pushed the bourse nearly to an all-time-high. The optimists note that the coup has restored peace and order and things are already looking up. The pessimists see nothing but problems: a collapse in domestic demand, martial law, crippling uncertainty—about the army’s ability to run the economy, among other things—and an imminent royal succession.

How much will Thailand’s indebted households choose to spend against this background of artificial stability and longer-term uncertainty? TMB Bank plc, formerly known as Thai Military Bank, reckons the moment Thais will confidently dip into their spending money is just around the corner and that it will produce a “V-shaped” recovery. Economists at Siam Commercial Bank, the royal family’s bank and bankers, also see a nice pick-up around the corner, with the economy returning to its potential of around 4.5% in 2015. And the Bank of Thailand, the central bank, agrees that things will soon improve. Everybody hopes they are right.

Ask economists at the World Bank (which stopped lending to Thailand long ago because the country had become too rich) and the answer is different. This week, in the bank’s luxe 30th-floor offices overlooking Bangkok, they told reporters that Thailand would remain the slowest-growing economy in South-East Asia till 2016 (see page 153, ff, of their report). They expect the economies of Thailand’s neighbours to keep chugging along nicely: Myanmar at 8%-plus, Cambodia and Laos at 7%, and Indonesia, Malaysia and Vietnam all between 5% and 6%.

It surprises no one that Thailand’s economy has performed poorly over the past year. The country has suffered six months of political agitation; the absence of a proper government capable of handling fiscal policy since the end of 2013, when the prime minister at the time, Yingluck Shinawatra, dissolved parliament; and then a military coup in May.

An empirical analysis of the impact of coups on other national economies shows that growth slows, on average, by 2.1 percentage points in the year of a coup, 1.3 and 0.2 in the first and second year after the coup. But in Thailand the idea that the recent coup might not be good for the economy simply does not arise. It tends to be pushed aside with references to the country’s uniqueness—a kind of all-season pass familiar to authoritarians around the world. It is perhaps worth noting that, though the World Bank did not mention political risk explicitly, its predicted shortfall from Thailand’s potential growth in the years from 2014 to 2016 roughly matches the estimated average annual negative shock on GDP that this analysis would attribute to the average coup. Paul Collier, a professor of economics at Oxford who has noted that coups “are not a cheap way of replacing a government”, calculates that the cumulative effect of a coup, tracked over several years, is to reduce incomes by 7%.

Consider the three main ways in which the Thai economy might get back on its feet—higher household spending, higher exports and a larger government deficit—and it becomes clear why the economy is unlikely to rebound like bouncy ball.

Consumer confidence has recovered somewhat but household spending is still weak. The Bank of Thailand’s private consumption index fell in August. High household debt keeps individuals’ disposable incomes low. Purchases of flats, houses, cars and consumer durables are being deferred. In many parts of the country the price of land has fallen. A long period of large increases in money supply has not led to the rapid increase in consumption and investment for which many had hoped. Instead much of the cash has been invested in financial assets, driving up Thailand’s stockmarkets in the absence of improvements of earnings. No matter, it would seem. Against the evidence, most forecasters based in Thailand predict a solid recovery in household spending in 2015.

The next possible route is higher export growth. So far this year exports have been falling. A strong currency has not helped. Exporters have always struck deals with customs and port authorities to lower their costs—but since the coup and the coupmakers’ anti-corruption drive, these have become uncertain. The main reason however that exports have not grown properly in recent years is a loss in Thailand’s export-competitiveness. Unlike the tigers of East Asia or, more recently, Vietnam, Thailand has failed to invest in education such as it would need to produce higher-value goods for export. In sum, a self-sustaining export-led recovery is beyond the control of the Thai state—it relies on good times in China, Europe and America, Thailand’s main export markets.

So as a third option, could the junta boost growth by increasing government spending dramatically? Thailand does have the fiscal headroom. But experience suggests that the effect of rapid increases in government spending will be slower than the authorities would like. In addition, all indications are that the cabinet will be very conservative when it comes to adjusting government expenditure. The core members of the Thai bureaucracy in charge of fiscal policy live in fear of spending the public’s money. It has ever been the politicians who drive up expenditures, and they have been asked to leave the playing field. Another reason why it is hard to see a gaggle of senior Thai bureaucrats taking up the cause of stimulus spending and a greater deficit.

Like every government before theirs, the generals-turned-civilians face two longstanding economic puzzles: How much to pay farmers for their rice; and how best to manage the exchange rate. They are unlikely to find solutions fundamentally different from those attempted by the elected government they ousted.

The Bank of Thailand and the finance ministry have tended to be very conservative and determined to hang on to the value of the baht. The last time a big depreciation was undertaken deliberately, in 1984, delivered explosive growth in income and exports. At that time a strong finance minister pushed it through against the advice of the central bank. When export growth slowed down to virtually zero, in 1996, the central bankers refused to depreciate. In the end the currency collapsed and Thailand’s economy collapsed with it. It took years to bring the economy back to its pre-crisis level of activity. The country’s income growth since the collapse has been among the lowest in Asia.

A significant depreciation of the baht surely would trigger another spurt in exports and tourism and raise the inflation rate somewhat. However the central bank thinks this would be the wrong approach. Rather than try for 5% growth they are following policies that are likely to result in 2% to 3% growth while trying to convince everyone that things will be better for other reasons. No one wants to risk questioning the authority of the central bank; instead any failure to grow can always be blamed on political uncertainty.

Finally, what to do with the price of rice? This is a regular issue in Thai politics. The question is whether city people should get cheaper food or the farmers should get higher incomes. The ousted government of Yingluck Shinawatra attempted to raise the market price of rice through government intervention. The only way they could manage this while exporting rice at the global price was by absorbing the loss as a subsidy. In a bid to dodge the blow they tried to corner the global market in the belief that then they could sell the rice at a higher price. When this ploy failed Ms Yingluck ended up with a large stockpile of rice and was found guilty of negligence by a national anti-graft commission for her role in the scheme. The junta has just sanctioned one-off payments of $1.2 billion to small rice farmers. It is yet to announce a policy going forward. Though its method of delivery may differ, the junta will have little option but follow the example of Ms Yingluck and pay off farmers in exchange for their political support.

The members of the triumphant mob that cheered the army to power are still enjoying their victory. Playing politics with the economy is an expensive business. The costs to Thailand’s economy are still piling up. Compared with trend economic growth the cost will be perhaps $20 billion to $30 billion from 2014 to 2016, which makes it roughly equal in value to the wealth of the Thai monarchy. One can only hope the junta’s upcoming performance is good enough to offset such a loss.

[halfway inn]

WEAK CONSUMER PURCHASING POWER

Prices nosedive to hit 66-month low



16 April 2015

The prices of overall consumer goods are expected to remain stable in the second quarter as consumer purchasing power remains feeble.

Retailers and shopping malls are likely to continue their promotional campaigns to stimulate sales.

Santichai Santawanpas, deputy director-general of Internal Trade Department, said authorities have been closely monitoring consumer product prices and found there is relatively high competition among department stores, modern trade and general shopping outlets.

"The likelihood of manufacturers or retailers increasing prices over the next couple of weeks is slim, as consumer purchasing power has been shrinking because of falling farm prices and most consumers are wary. Falling oil prices have also lowered production costs," he said.

Based on 450 products and services, the consumer prices that gauge the country's inflation were reported to fall for the third consecutive month in March to a 66-month low, mainly because of weak global oil prices.

Prices shrank by 0.57% year-on-year last month, slightly more than the 0.52% fall in February, reported the Commerce Ministry.

In the first three months of this year, consumer prices fell by 0.5% year-on-year thanks to a decline in non-food items and beverages, which dropped by 1.7%.

Last month the ministry cut its inflation projection to 0.6-1.3% from 1.8-2.5% previously, based on oil prices of US$50-60 a barrel, an exchange rate of 32-34 baht to the US dollar and GDP growth of 3-4%.

"We expect global oil prices to rise later this year, driven by higher demand during the cool season, propping up inflation accordingly," said Mr Santichai.

Commerce Ministry spokeswoman Duangkamol Jiambutr said the government was committed to continuing the Thong Fa (Blue Flag) low-cost mobile scheme in crowded communities as it could cut living costs for people.

A low-cost department store project initiated by the Commerce Ministry is also about to get off the ground.

The budget department stores would be run and invested in by the private sector, which would set up the outlets at easily accessible locations.

State authorities would coordinate with suppliers and handle public relations.

The first low-cost department store is expected to open in May, with 14 slated for this year and 142 in five years.

"These stores would run the same as discount stores in Germany that sell only average brands with simple packaging," she said.

Somchai Pornrattanacharoen, president of the Thai Retailers and Wholesalers Association, hailed the idea.

"Normally packaging and marketing represent 30-40% of production costs," he said.

"If we focus only on the quality of the products it is possible to cut prices."

However he objected to the Blue Flag scheme, which allows leading manufacturers to sell their products at lower costs.

"If the government really wants to see cheaper products, small manufacturers should be promoted so a wider selection of products is available," Mr Somchai said.



bangkok post

[Oytopikos]

The government has expressed its opitimism that the export target this year would be achieved thanks to the recent depreciation in the Thai baht as well as a slight improvement the euro zone economy.
Government Spokesperson Dr Yongyuth Mayalarp told reporters that the Bank of Thailand’s recent measures are positive to the export sector, as this should boost the competitiveness and ensure that the Commerce Ministry’s 1.2 per cent export target would be achieved.

He also noted that another good news came from the European Commission’s upward revision in the European Union economic growth in 2015 from 1.7 per cent to 1.8 per cent, following monetary easing measures.

The higher economic growth rate should boost demand for Thai exports, he said, adding that 9 per cent of Thai exports is destined to the bloc.

The baht lost more than 1 per cent to 33.43 per dollar on Thursday, its weakest since January 2010.

Last week, the central bank made a surprise cut to the policy rate. It also eased capital account restrictions to facilitate cross-border capital flows.

Bank of Thailand Governor Prasarn Trairatvorakul on Thursday attributed the weakening to several factors, including the rate cut, the easing of the capital account restrictions as well as the improvement in some US economic indicators.

He is convinced that the weakening baht would support Thailand’s economic recovery, citing that the first-quarter growth was slower than expected due mainly to export contraction.

Yet, he insisted that no more measures are planned to further weaken the Thai baht against US dollar.

the nation

[halfway inn]

A REPORT BY MOODY'S

Friday, May 15, 2015 (SGT)



Domestic recovery remains fragile.

A report by Moody's Analytics stated that Thailand's growth prospects are the "dimmest" among all ASEAN nations, on back of fragile domestic recovery and weak regional demand.

Moody's stated that a pickup in consumption and investment remains elusive, while the country's export competitiveness is stuck in secular decline.

"Thailand's woes are also cyclical, stemming from falling commodity prices, which have suppressed farm incomes and agriculture production," the report stated.

"Consumer spending continues to fall on a year-ago basis," the report stated.

"Weak regional demand has compounded the issue, weighing on other export-oriented industries," the report stated.

"Electronic and hard-disk drive production continues to fall, while the auto sector is facing stiff regional competition as a result of the relatively strong Thai baht,” the report stated.

[Oytopikos]

 (CNN)The situation regarding human trafficking and slave labor in Thailand's fishing industry "is now severe" and the country is taking action to tackle it, Thai Prime Minister Prayuth Chan-ocha has told CNN.

In an interview with CNN's Andrew Stevens, Chan-ocha said his government was updating legislation to tackle the issue, which was this month highlighted by CNN's Freedom Project.

"This has been happening for a long time," said Chan-ocha. "Previous governments have tried to solve the problem, but not effectively.

"So I've had to overhaul the laws, so we can deal with the issues. The laws relating to fisheries are very outdated and must be amended so the agencies can operate effectively."
Back from the dead -- Thai fishermen living as slaves



CNN's Freedom Project spoke to Thai men who had been promised decent wages on fishing boats only to find themselves among thousands of migrant workers, working as virtual slaves.

One man told CNN he spent six years on board one boat, and was made to work 20-hour days in life-threatening conditions.

His horrific journey only came to an end last month, thousands of miles from Thailand, when the boat he was on was impounded by Indonesian authorities for suspected illegal fishing.

Chan-ocha told CNN: "The situation is now severe -- we need to move more quickly."

The Thai leader said trafficking victims needed to be rehabilitated.

"The most important thing is to identify who the victims are -- and where they come from. If they come from another country we will repatriate them. But we first have to rehabilitate them until they are strong," he said.

"If they are Thais, we will provide them with training to help them get jobs. We have a ministry which has set up a program to help these victims."

Trafficking in Persons report

The issue of slavery and rights abuses in the Thai fishing industry has become acute in recent years. As the global demand for seafood has increased, the Thai economy improved, making it more difficult to attract workers to dangerous jobs on fishing boats.

Last year, the U.S. State Department downgraded Thailand to the worst possible ranking -- Tier 3 -- in its Trafficking in Persons report. It said Thailand was a source, a transit point and a destination for trafficking.

The report also said that ethnic minorities and citizens of neighboring countries were especially at risk of exploitation in Thailand through forced labor or the sex trade.

Asked about a labor rights group's claims that some Thai officials could be deliberately avoiding registering some trafficking victims, so as not to affect the country's rating on the U.S. report, Chan-ocha said that identifying victims was "very complicated."

"We have to set up a committee to specifically look into this problem. The deputy prime minister is driving this -- it is complicated because it involves several agencies. But, no, it's not happening -- we're not disregarding the victims just because we want lower numbers."

The European Union last month called Thailand a "non-cooperating" country because of poor monitoring and control of its fishing vessels and the trade of fish and seafood from other countries into Thailand.

Unless it cracks down on the situation, Thailand faces a financially damaging embargo on its fish exports to the EU from October.

Exports by Thai seafood companies to the United States and Europe are worth around $2.5 billion annually, with Thai Union Frozen Products one of the largest -- and owner of the John West and Chicken of the Sea brands.

[Oytopikos]

Thai junta under pressure to spend faster as economy sputters

BANGKOK, May 19 (Reuters) - A year after toppling a big-spending government, the Thai junta's war on corruption has made civil servants fearful of spending the amounts needed to jolt Southeast Asia's second largest economy out of a rut.

The export-dependent economy is suffering as its top trade partner China grows at its slowest pace in 25 years. Domestic consumption is also hobbled as Thai households are saddled with record-high debt.

That has put the onus on government spending to drive growth. But the needed investment spending remains slow due to bureaucrats fear of taking decisions, because of the campaign against graft.

"We need to review things many times before signing them off, nobody wants to take a risk," one civil engineer working for the government in the northern province of Udon Thani told Reuters.

"The generals want to know everything and want things to be done quickly but their regulations are tough," the engineer said, requesting anonymity due to sensitivity over sounding critical of the government.

"If there is anything wrong, we will be in jail."

Thailand downgraded its economic forecasts on Monday by 0.5 percentage points to 3.0 to 4.0 percent for the year, but the country's central bank governor told Reuters on Friday that even 3 percent expansion in 2015 would be "a challenge."

If spending falls short, the country is likely to see growth targets slashed further, economists say.

Government investment spending was also needed to boost confidence and encourage more private investment, said Bank of Thailand Governor Prasarn Trairatvorakul. But the drive to clean up government has had unintentional consequences, he said.

"Civil servants are a bit tense with this anti-corruption mechanism," Prasarn said.

By April 24, nearly seven months into the fiscal year, the government had spent just 35.3 percent of its 450 billion baht ($13.49 billion) investment budget, Budget Bureau data shows.

That compares with October-April's 40.6 percent a year earlier, when the previous civilian government had been paralysed for months as protests shut down state offices. The coup had aimed to get both the government and the economy moving again.

The junta has warned senior officials of penalties for failing to meet spending targets, has demanded progress reports every 15 days, and has halved the time it takes to process an online auction for a government supply contract.

But after investment spending jumped more than 10 percentage points in March, it slowed to just 4 percentage points in April 1-24.

The sharp fall in oil prices, while a boon to an economy dependent on energy imports, also slowed spending as suppliers were asked to revise contracts to reflect lower energy costs.

"It took months to negotiate with contractors then," said Manas Jamveha, head of the Comptroller General's Department, whose team is tasked with chasing slow-spending officials.

The central bank made two interest rate cuts in March and April to help counter the economic malaise. It also liberalised capital flows to help temper the impact of a strong baht on exports. But that alone was insufficient, ANZ said in a research note on Monday.

"Risk of economic growth slippage is high if planned fiscal spending and investments do not materialise," ANZ said.

http://www.reuters.com/article/2015/05/19/thailand-economy-spending-idUSL3N0Y92C920150519

[Oytopikos]

Thailand to celebrate 'Rice and Farmer's Day' in June

Rice Department will celebrate "Rice and Farmer's Day" on June 5 by introducing seven new breeds of rice. The new rice strains include indigenous breeds that will soon be certified with Geographical Indicators as well as fast-growing strains that can be utilized outside of the rainy season.
Her Royal Highness Princess Maha Chakri Sirindhorn will inaugurate this year's ceremony and the department will unveil seven newly approved breeds of rice.

The department revealed that June 5 of every year is "Rice and Farmer's Day," as well as the anniversary of the day when King Rama VIII, IX visited the rice farms of Bang Khen district and sowed rice seeds into the fields. It is an auspicious day for rice farming in Thailand and honors all rice farmers in the Kingdom.

The department revealed that there are currently 60 million rai of rice paddies in the Kingdom, tended by approximately 17 million farmers. Rice exports have generated approximately 200 billion baht in annual revenue.

http://www.nationmultimedia.com/national/Thailand-to-celebrate-Rice-and-Farmers-Day-in-June-30261205.html

[Oytopikos]

Thailand will develop a new international commercial airport at an existing naval air base outside the capital, Bangkok, the transport minister said on Wednesday, as the country scrambles to accommodate an influx of tourists.

Thailand's tourism sector makes up about 10 percent of its economy, which has been recovering steadily since the army seized power in May last year to end months of political unrest.

"We have the intention to develop U-Tapao airport to become another commercial airport to support the increased passengers to land here," Transport Minister Air Chief Marshall Prajin Juntong told reporters.

By 2017, the airport is expected to service 3 million passengers annually, he added, but gave no estimate of the anticipated development costs.

The airport, about 140 km (90 miles) southeast of Bangkok, the capital, is less than an hour's drive away from Pattaya, famed for its beaches.

Its capacity now is around 200,000 passengers each year, mostly arriving by chartered flights from China and Russia, said navy commander-in-chief Admiral Kraisorn Chansuvanich.

The navy would manage the airport, he added, but in case of an excess of flights and passengers, it would turn to Thai Airways International Pcl and Airports of Thailand Pcl , the country's largest airport operator, for help.

Foreign tourists in Thailand in April numbered 2.28 million, drawn mostly from China and Malaysia, up 18.3 percent from a year earlier.

The World Bank forecasts an increase of up to 3.5 percent in Thailand's GDP in 2015. Tourism will "really help the economy this year," said the Bank's senior Thailand economist, Kirida Bhaopichitr, along with cheaper oil and public spending. (Reporting by Aukkarapon Niyomyat; Writing by Pairat Temphairojana; Editing by Clarence Fernandez)


http://www.reuters.com/article/2015/06/03/thailand-economy-airport-idUSL3N0YP3JJ20150603

[Oytopikos]

Baht continues downward trend

The downward trend of the Thai baht continues on the back of US dollar rally.

As of 2.25pm, the baht was at 33.74 per dollar, from yesterday close of 33.64. It recently fell to the six-year low at 33.78-79. The greenback has also strengthened against other major currencies as well as the currencies in Asean.

Yesterday, the dollar was above 13,000 Indonesian rupiah, the level unseen since 1998.

The baht has fallen sharply since the Bank of Thailand cut the policy rates while the central bank governor signalled the bias towards a weaker curreny, to revive the domestic economy.

Many currency strategists predicted the dollar upswing would start next month on expectations that Fed Chair Janet Yellen will set the stage for a hike in the third quarter at the upcoming policy meeting.

The Fed has said that a rate rise, which most economists expect will come in September, will be dependent on improving economic data. Friday’s employment report could provide a spark if new jobs created in May exceed the 225,000 market consensus.

"The onus on economic data to surprise sharply to the upside over the next few weeks is fairly high, else the Fed may be unable to prepare the market at the June FOMC for hikes commencing in the third quarter," analysts at Barclays wrote in a note.

The US currency is up more than 20 per cent since last summer.

What could have a big impact is a resolution to the stand-off between Greece and the European Central Bank, the European Commission and the International Monetary Fund. Currency speculators have been long dollars and short euros in recent days as worries over a potential Greece default have risen.

In the latest Reuters poll, forecasters have moderately upgraded their expectations of the euro, although they expect the common-currency to trade lower in the coming twelve months.

The euro is expected to fall to $1.05 in six months and further to $1.04 in a year.

But the number of analysts who forecast the euro to trade at or below parity against the dollar has fallen - from 22 in April, 19 in May to 15 in the current poll.

The poll also showed strategists were confident that sterling will be less vulnerable to a dollar rally.

Although the consensus that the pound will weaken to $1.50 in six months and $1.51 in a year, from $1.53 currently, this represents a significantly stronger set of forecasts when compared with the May poll.

After the centre-right Conservative party unexpectedly won an overall majority in May’s election, easing political uncertainty, a majority of the common contributors raised their forecasts for the pound from last month’s poll.


http://www.nationmultimedia.com/business/Baht-continues-downward-trend-30261587.html

[halfway inn]

WEAK CONSUMER PURCHASING POWER

Prices nosedive to hit 66-month low



16 April 2015

The prices of overall consumer goods are expected to remain stable in the second quarter as consumer purchasing power remains feeble.

Retailers and shopping malls are likely to continue their promotional campaigns to stimulate sales.

Santichai Santawanpas, deputy director-general of Internal Trade Department, said authorities have been closely monitoring consumer product prices and found there is relatively high competition among department stores, modern trade and general shopping outlets.

"The likelihood of manufacturers or retailers increasing prices over the next couple of weeks is slim, as consumer purchasing power has been shrinking because of falling farm prices and most consumers are wary. Falling oil prices have also lowered production costs," he said.

Based on 450 products and services, the consumer prices that gauge the country's inflation were reported to fall for the third consecutive month in March to a 66-month low, mainly because of weak global oil prices.

Prices shrank by 0.57% year-on-year last month, slightly more than the 0.52% fall in February, reported the Commerce Ministry.

In the first three months of this year, consumer prices fell by 0.5% year-on-year thanks to a decline in non-food items and beverages, which dropped by 1.7%.

Last month the ministry cut its inflation projection to 0.6-1.3% from 1.8-2.5% previously, based on oil prices of US$50-60 a barrel, an exchange rate of 32-34 baht to the US dollar and GDP growth of 3-4%.

"We expect global oil prices to rise later this year, driven by higher demand during the cool season, propping up inflation accordingly," said Mr Santichai.

Commerce Ministry spokeswoman Duangkamol Jiambutr said the government was committed to continuing the Thong Fa (Blue Flag) low-cost mobile scheme in crowded communities as it could cut living costs for people.

A low-cost department store project initiated by the Commerce Ministry is also about to get off the ground.

The budget department stores would be run and invested in by the private sector, which would set up the outlets at easily accessible locations.

State authorities would coordinate with suppliers and handle public relations.

The first low-cost department store is expected to open in May, with 14 slated for this year and 142 in five years.

"These stores would run the same as discount stores in Germany that sell only average brands with simple packaging," she said.

Somchai Pornrattanacharoen, president of the Thai Retailers and Wholesalers Association, hailed the idea.

"Normally packaging and marketing represent 30-40% of production costs," he said.

"If we focus only on the quality of the products it is possible to cut prices."

However he objected to the Blue Flag scheme, which allows leading manufacturers to sell their products at lower costs.

"If the government really wants to see cheaper products, small manufacturers should be promoted so a wider selection of products is available," Mr Somchai said.



bangkok post

136 budget stores ready for launch

Wednesday, 10 June 2015

The government is set to introduce low-cost department stores next week in a bid to tackle the rising cost of living.

Commerce Minister Chatchai Sarikulya said 136 budget stores nationwide would open on June 19 as a pilot project to sell more than 30 consumer products at prices about 20% lower than similar products sold in general outlets.

The budget stores will be run and invested in by the private sector, while the Commerce Ministry will act as the coordinator with suppliers and wholesalers and handle public relations.

Gen Chatchai said the low-cost stores would offer an additional channel for consumers.

Normally, packaging and marketing costs represent 30-40% of a product's production costs.

Products sold through the budget outlets will be available in simple packaging and focus only on the quality of the products rather than attractive packaging.

Gen Chatchai said the government planned to expand the projects to cover every province but insisted the expansion would be cautiously run to prevent any impact on existing outlets.

The minister said the government was looking for ways to sell cheap packaged rice to the people as assigned by Prime Minister Prayut Chan-o-cha by using state rice stocks.

The Agriculture Ministry has been assigned to select rice cooperatives or rice communities to handle packaging, while the Interior Ministry will find the best ways to distribute the cheap rice to low-income earners.

More details will be discussed at a meeting of the National Council for Peace and Order on Friday.

Gen Chatchai also insisted the government would try its best to prevent any negative effect on the normal market for packaged rice. "This initiative is aimed at promoting social enterprises, as a group of farmers or cooperatives will be allowed to handle the rice packaging and learn distribution techniques," he said.

The government controls 16 million tonnes of stocks, down from 18 million tonnes accumulated from previous rice-pledging schemes.

Remaining stocks include 2.6 million tonnes of high-quality rice ready to sell and 13-14 million tonnes of substandard grains.

The ministry has sold 2.1 million tonnes, fetching 22.4 billion baht so far.

The government plans to call bids for another 2.6 million tonnes of high-quality rice from state stocks between now and August while transferring low-quality and substandard grains to the industrial sector.


bangkok post

[thailandgr]

Euro decline expected: “Thailand will soon be 24% more expensive for European tourists!”

Currency-Euro-baht

Small and medium-sized Thai tour operators are encouraged to sell their trips instead of euros into US dollars. This is because the company expects a further depreciation of the euro.

Large tour operators in Thailand have already prepared for the Greek crisis and a further depreciation of the euro, but many smaller agencies have yet to do so, says Ming Kwan Metmowlee, president of the Association of Thai Tourism Marketing (ATTM).

Yesterday the baht showed a price of 37.50 against the euro and 33.81 against the dollar. According to Ming Kwan is expected that the euro will end this year or early next year to fall further to almost 33 or 34 baht. On Monday, the euro had a rate of 37.60 baht, which is a decline of 16.4% compared to January 2014, when the euro was worth 45 baht.

If the currency continues to fall and the rate of the euro will soon be equal to that of the dollar, then takes a holiday in Thailand over 24% more than in 2014.

The Tourism Authority of Thailand (TAT) is concerned about the economic woes in Greece and thinks that there are fewer European tourists to Thailand will travel through the depreciation of the euro.

[thailandgr]

The Bank of Thailand (BOT) receives foreign exchange warning
The Bank of Thailand (BOT) should think twice before increasing its usage of foreign exchange rates as one of the central bank's monetary targets since Thailand's hand is already showing and the repercussions could be severe, said Usara Wilaipich, senior economist at Standard Chartered Bank.
"If we leave it to the fundamentals and we are more patient, the baht will be weaker by itself in the next five years from the increase of imports since the rate of investment will eventually increase as machines will expire and the private sector has practically not invested in the past eighteen years. Public investment is also increasing," she said.

Thailand is carrying a current account surplus of US$2.127 billion as of May 2015 and the country is a net creditor with lending worth around $190 billion with a government debt of around $140 billion (46 per cent of the $373.8 billion gross domestic product).

The country has a foreign exchange reserves worth $160.274 billion as of June, 2015, and it is a net importer of oil where the global price has dropped by 50 per cent to around $55 per barrel and expected to be at this level for a while from the increase in supply in the United States.

"I am personally concerned and surprised about the central bank's growing usage of foreign exchange rate as one of the monetary targets since it is costly and risky and we might be under the control of the market instead of being in control of our own rate," she added.

Her call came after the BOT's Monetary Policy Committee (MPC) provided the depreciation of the Thai baht as one of the reasons why the committee has decided to consecutively cut the policy interest rate in March and April this year.

As a result, the baht has been trending down since the MPC's decision and the currency is currently heading towards a six-year low from the strengthening of the US dollar and foreign speculation that BOT will decide to cut the policy interest rate once again at their meeting on August 5.

The baht was trading at Bt32.835 per US dollar on April 29 (the day of the consecutive cut) before trending down to closed at Bt34.895 last Friday on July 24.

Supant Mongkolsuthree, chairman of the Federation of Thai Industries, who has been advocating for the baht to be weak to help exporters since the beginning of the year last week expressed his concern that the baht is depreciating too fast and it could hurt the country's financial stability and further worsen the private sector's sentiment to invest.

Usara explained that Thailand is already showing our hand since even though we are a net creditor but there is only around $50 billion left to play with ($190 billion credit against $140 billion debt) against baht speculators, who together have much more capital and they know that the country will not allow its debts to trump its reserves.

"We can start to play with $50 billion in hand but later on we will be under the control of the speculators because they will come with collective hands and their character is to keep on playing, they will not stop, so the best way is to keep to the fundamentals and keep ourselves healthy," she said.

"Fast or slow the baht will weaken from the increase in imports but slower will be better for us in the long run since we need to invest and quickly weakening the baht would mean that investing will be more costly," she added.

http://www.nationmultimedia.com/business/BOT-receives-foreign-exchange-warning-30265255.html

[thailandgr]

Thailand's economy isn't a Land of Smiles


Dario Pignatelli | Bloomberg | Getty Images
Farmer Pramote Kongburi inspects his dried rice field in Praek Siracha, Chainat province, Thailand, on July 3, 2015

Thailand's worst drought in a decade appears to have ended, but the damage could cast a shadow on the economy for months to come.
"Thailand has turned from the land of smiles to the land of frowns. Indeed, deep frowns that are unlikely to cheer anytime soon," ANZ economists said in a recent note.

The crippling dry weather that first emerged in late 2014 is no longer present in the country's 67 provinces, the deputy head of Thailand's disaster prevention department told Reuters last week. But with more than 40 percent of the country's population engaged in agriculture, the drought has exacerbated troubles in an economy already weighed down by slowing manufacturing, shrinking exports and rising external debt.

That's spurred sharp growth downgrades. Credit Suisse is now expecting 2015 economic growth at 2.5 percent on year, down from 3.1 percent previously, while JP Morgan is pricing in a 2.6 percent rise, down from a June estimate of 3.5 percent.

Assessing the damage

Thailand is one of the world's biggest rice exporters, but the drought has impacted 80 percent of rice farming land, possibly causing a 15-20 percent drop in output, according to the Thai Rice Exporters Association.
"Not only is offseason [rice] crop production down, even planting of the main [rice] crop season will likely be delayed to August from June-July normally," said Credit Suisse research analyst Santitarn Sathirathai.
To be sure, agriculture as a whole accounts for less than 10 percent of Thailand's gross domestic product (GDP), but "the more significant drought-related risk to growth will be if water rationing also affects industrial areas, potentially curbing manufacturing output," warned Benjamin Shatil, a JPMorgan economist, in a report earlier this month.

Reduced output in turn, will hurt employment.
"We believe the drought effect on lower farm output, led by a 30 percent drop in paddy output in January-May, worsened labor market conditions as farm employment shed 700,000 jobs in June," noted Citi economist Jun Trinidad.
The unfavorable weather also depresses agricultural incomes, which has a knock-on impact on consumer spending.



Thailand's worst drought in a decade appears to have ended, but the damage could cast a shadow on the economy for months to come.
"Thailand has turned from the land of smiles to the land of frowns. Indeed, deep frowns that are unlikely to cheer anytime soon," ANZ economists said in a recent note.
The crippling dry weather that first emerged in late 2014 is no longer present in the country's 67 provinces, the deputy head of Thailand's disaster prevention department told Reuters last week. But with more than 40 percent of the country's population engaged in agriculture, the drought has exacerbated troubles in an economy already weighed down by slowing manufacturing, shrinking exports and rising external debt.
That's spurred sharp growth downgrades. Credit Suisse is now expecting 2015 economic growth at 2.5 percent on year, down from 3.1 percent previously, while JP Morgan is pricing in a 2.6 percent rise, down from a June estimate of 3.5 percent.


Thailand is one of the world's biggest rice exporters, but the drought has impacted 80 percent of rice farming land, possibly causing a 15-20 percent drop in output, according to the Thai Rice Exporters Association.
"Not only is offseason [rice] crop production down, even planting of the main [rice] crop season will likely be delayed to August from June-July normally," said Credit Suisse research analyst Santitarn Sathirathai.
To be sure, agriculture as a whole accounts for less than 10 percent of Thailand's gross domestic product (GDP), but "the more significant drought-related risk to growth will be if water rationing also affects industrial areas, potentially curbing manufacturing output," warned Benjamin Shatil, a JPMorgan economist, in a report earlier this month.

Reduced output in turn, will hurt employment.
"We believe the drought effect on lower farm output, led by a 30 percent drop in paddy output in January-May, worsened labor market conditions as farm employment shed 700,000 jobs in June," noted Citi economist Jun Trinidad.
The unfavorable weather also depresses agricultural incomes, which has a knock-on impact on consumer spending.
"Rural households are hit by a perfect storm in agriculture, drying up their cash flows when the debt burden remains elevated," said Credit Suisse's Santitarn, referring to the nine consecutive months of declines in international rice prices and the ruling military-backed government's efforts to halt subsidies.
"Although the government has stepped up to provide $1.8 billion worth of soft loans to support farmers, we suspect the damage has been done. We expect this to act as further headwinds to consumption going forward," Santitarn said.
Consumers certainly don't seem to be in the mood to open their wallets much.
Consumer confidence witnessed its sixth straight month of declines in July, according to the ANZ-Roy Morgan index, and further depreciation is likely.


"Looking ahead, we expect consumer sentiment to remain persistently downbeat, with the economy failing to gain traction and agricultural income depressed by the protracted drought," ANZ warned.

Interestingly, reduced crop harvests won't necessarily see domestic food prices spike.
"The pass-through to consumer price inflation has been very modest so far," stated JPMorgan's Shatil. "That may reflect the fact that the government still has large stockpiles of rice, but is likely also a consequence of the benign global food price environment, which continues to pull down headline prices."

Stimulus isn’t the only answer

Faced with a sluggish economy, the Bank of Thailand will likely cut interest rates to a historic low of 1.25 percent later this year from 1.5 percent currently, Credit Suisse said.
But monetary easing alone may be insufficient to deal with the drought consequences, according to ANZ. In addition to easing, it believes the Bank of Thailand will also allow the baht to weaken.
Citi's Trinidad agreed: "A bias for a weak baht will persist, which can improve farm export earnings despite lackluster volumes and thus support rural consumption."

[Oytopikos]

Rubber farmers asked for 1,250 baht per rai, govt gave them 1,500. Last week US$1 billion to help rice farmers approved by govt.

AGRICULTURE
Govt OKs B13bn in subsidies for rubber farmers

3/11/2015
Reuters News agency

The cabinet on Tuesday approved measures worth 13 billion baht to help rubber farmers and support falling prices...

The government said it would pay a direct subsidy of 1,500 baht per rai for up to 15 rai per household, for about 850,000 households.

The government subsidy is actually higher than the 1,250 baht per rai requested by rubber farmers.

...the government would take loans from the state owned Bank of Agriculture and Agricultural Cooperatives (BAAC) and start paying farmers in December.

Documents outlining the new rubber measures were issued on Tuesday by the government. The measures will cover production, education and living expenses for rubber tappers.

FALLING RUBBER PRICES FROM CHINA SLOWDOWN

Rubber prices have weakened as demand in China, the world's biggest consumer of the commodity, remains lacklustre due to China's economic slowdown.

Thailand is the world's top producer and exporter of rubber.

Rubber farmer groups demanded last week that the government approve aid measures to support higher living costs and lower prices of the commodity. But some said Tuesday the new subsidies would not be enough to take the sting out of falling prices.

"These measures aren't enough," northeastern rubber farmer Samai Sribang, 58, told Reuters. "I would rather see the government help raise rubber prices nationwide."

RICE SUBSIDIES OF $1 BILLION LAST WEEK

Help for rubber farmers comes after the cabinet last week approved measures worth about US$1 billion to help rice farmers, including grants and an interest rate reduction for farmers from state banks.

The farm subsidies come after much resistance from the military-led government which had vowed upon taking power last year they would end the country's populist subsidies.

But growing criticism from rice and rubber farmers, who have seen their incomes fall following the end of subsidy schemes introduced by the previous government, has forced the junta to make a policy U-turn.

http://www.bangkokpost.com/business/news/753076/cabinet-oks-b13bn-in-subsidies-for-rubber-farmers-source

[Oytopikos]

BANGKOK—

Thailand’s northeastern economy, among the poorest in the country, is looking to expand trade with neighboring Laos and business in the Greater Mekong Subregion (GMS) as it recovers from a two-year recession.

The downturn was triggered by an end of populist programs heralded by the former government of Yingluck Shinawatra. The May 2014 coup ended her almost three year administration and brought an end to programs led by a rice price pledging scheme.

Under the program, farmers were paid at rates some 50 percent above the global market before the effort collapsed, costing Thai taxpayers more than $14 billion and leaving farmers across the region deeply in debt.

While the good times lasted, funds triggered a boom in retail and commercial investment and spending. Major department stores sprang up in towns such as Ubon Ratchathani and Udon Thani.


But now retailers report sluggish sales and the Thai central bank warns of growing indebtedness among farmers as rice prices fall to their lowest in six years.

Agriculture accounts for some 20 percent of the region’s economy, followed by trade. Household incomes in the Northeast are the lowest in Thailand, at close to $550 a month, well short of the nearly $1,200 earned per month in the Bangkok region.

Border trade

But Athikarn Ringcharoen, president of the Chamber of Commerce in Amnat Charoen province, bordering Laos, said the local economy was starting to pick up although still below levels of two years ago.

Athikarn said government policy support and increased cross border trade with Laos, was helping the recovery. He added that despite the poor state of the global economy, the provincial outlook was “OK”.

Infrastructure spending is also set to come to the aid of the region.

Athikarn said plans to upgrade a Royal Thai Airforce airstrip to a regional airport less than 30 kilometers from Amnat Charoen town were also welcome.

Long term infrastructure set to benefit the region includes the $10 billion China-Thai 870 kilometer rail-line from Nong Khai, bordering with Laos, to Bangkok. On the horizon is the Japan-Thailand rail-line from Tak province, bordering Myanmar, to Mukdahan, bordering Laos.

Ubon Ratchathani University political scientist, Titipol Phakdeewanich, said cross border trade ties have helped eased the downturn.

“Many businesses are now more open to customers from Laos. If you go to different malls – they have signs in Lao [language] and when the market is more connected – to some extent – it helps to provide a cushion to the local economy. So the local economy in the area I don’t think it’s entirely dependent on the global market,” said Phakdeewanich.

Government spending

The military government’s economic czar, Deputy Prime Minister Somkid Jatusripitak, has announced spending of over $970 million in projects directed to 70,000 villages nationwide.

Analysts say the program mirrors similar initiatives under previous governments of so-called “village funds” to boost rural consumption.

The Federation of Thai Industries, while welcoming the programs, say more measures are needed to ensure growth is sustained.

The Federation warns the rural sector remains vulnerable to falling commodity prices that may impact some 30 million people in the farm sector – almost half the national population.


http://www.voanews.com/content/thailand-plans-to-boost-northeastern-economy/3164834.html