Economy. impending disaster?

[PattayaDaz]

Rising fuel costs. Exobitant land prices. Cars and motorbikes bought on HP.

Poor repayment history. Higher interest rates. Corruption. Politicians self interest. Competition from neighbour countries. Thai airlines worries.

Water shortages. Trouble in the South. After affects of the Tsunami.

Poor standard of education. Inequalities and difficiencies.

Is the Thai enconomy heading for another crash? Can the current "boom"

be sustained ?.....Or is it just a falsehood proped up by govenment money..with only a few people deriving any benefit? :?

[Malky]

I think you could be right. If you look at Bangkok, there is constuction going on everywhere.It does make you wonder where Thailand is going to get the money to pay for it.

A friend of mine, who is a financial director for a UK based company in Thailand, told me that he thinks Thailand is going to bankrupt itself again in the next 2 or 3 years.

So it's probably not a good idea to be looking to invest in property in Thailand at this moment in time.

[zeusbheld]

interesting question, many of the concerns apply globally.

would be great if some of the ppl on here who are running businesses in thailand at a fairly high level would weigh in...

all issues connected to fossil fuel costs are inherently not going to go away (inherently, coz the fosisil fuels WILL eventually go away, and in the meantime get more and more expensve).

not being the sort of person one would trust to run a business, i dont have much to say that is useful on the subject, except that i suspect the dark clouds might be global rather than just over thailand..

[MikeAussieGuy]

I have lots fo friends in the financial industry here in Thailand.

All, say Thailand is heading for a major crash like in 98, only difference is the banks are more solid and will not have the problems of the same magnitude as last time. But, they will be in serious trouble due to the amount of loans and the inability of the consmer to pay back. No sympathy here for them, a friend on 12,000 bt a month just got a 40,000 bt credit card.

Given the BOT rules on credit, this should never happen.

Anyway I have done as all my Thai friends have done, liquidated what we dont need ot not performing, whack the cash in the bank, and await the inevitable.

Cause sure as I'm writing this, Thaksin and his cronies are sucking everythiing out of this country, and when things get bad, he will just resign before it hits the fan, then in a few yers time say he didnt cause it as he already had resigned, then come back for a second term, and suck the country dry again.

What your seeing is a facade, the truth is behind the lies.

Only those doing business over here and involved in the financial industry or property know the real truth behind the lies of this government and what is in store for Thailand.

[O123ok]

Spot on Mike,

To highlight just one area, I have friends that are involved in government scheme to build low cost housing. Once the contract has been issued(which is only done if you grease the right palms), the contract is immediately sub-contracted out,and they wash their hands of the whole affair and walk away with a handsome profit.Housing inspectors are paid off to turn a blind eye to shoddy workmanship,and the bank managers which issue the bank instruments are all on the take as well. I can't see how this can sustain itself for very much longer without the kee hitting the pat lom.

Without a doubt,I too see "The Chairman" doing a bunk and successfully making a comeback. Thai's suffer from an unbelievably short term memory when it comes to their government. When will they learn? Probably about the same time that the government finally decides to invest in educating the population. i.e. never.

[Cosmo]

From time to time, every economy goes through a correction - especially when its has been growing too fast - Thailand is not immuned to such a correction.

Whilst I agree with you guys that there will be a correction, I do not personally think it will be as severe as the 1997 financial meltdown.

In the first place, Thailand has a good foreign reserve - over $60 billions USD at last count.

Secondly, most of its major constructions are privately owned and operated with tolls and users pay system in place.

Thirdly, there are good controls in place to dampen the Thai baht speculations in the forex market.

Nevertheless, I do agree that some parts of the economy is overheating...a good example is the property market - a similar situation to Australia.

The biggest challenge facing the Thai government is to deflate some of the excesses in the economy without causing a recession.

But given the rise in the price of oil recently, the world economies may be headed for a slow down anyway and take the Thai economy with it.

Watch for what happens to China and the US.

My 2 cents worth....

[MikeAussieGuy]

Some good points Cosmo but I think somewhat generous in others. I think the word "correction" is a very soft way to describe what is on the horizon.

The problems are indemic in Thailand that caused 98, and are surfacing today again.

Huge investment in property on credit, look at Langsuan, Ruam Rudee, Saladaeng etc. etc. etc. and you see property being built that is all on credit. The major property developers like Raimond Land and Siri etc all have reported their position and fund raising requirements, all is on credit. How will all this property be sold? No matter what is happening in other countries with property bubbles etc. the fact is that regardless of the controls put into effect post 98, as usual most of it is a facade, unlike the in the countries you mentioned where the governments are accountable to the people not to their family bank accounts.

Get above the 15th level of any building and look at the horizon, the number of cranes and buildings under construction, its impossible that all this property can be sold, given the ex pats are not coming in the numbers that they use to and that there isn't enough Thais with money to buy all this up and then get a return on it. NPL will be back to 1999 levels. Look at the amount of credit outstanding by the general public as well, its scarey.

7000 cases before he ACCC, only a handful resolved is 2004, half a dozen done this year before the ACCC members quit due to corruption allegations themselves. Conveniently as the airport scanner issue came up and the other disasters like the runway cracks, which as usual is caused by cutting corners with construction after the government people take their 20% cut leaving insufficient funds to do it properly. I'm sure Thaksin landing on the new runway wont instil confidence, it is when the airlines and international authorities approve the runways which NOT ONE has done thus far. Usual BS to hide the truth from Thai citizens.

With the recent media attention world wide of the near autocratic powers of Thaksin and his attitude to the media, the confidence of overseas investors is disappearing fast. Add the oil price, the reserves now at $44bil not the healthy $60bil of several months ago, tourism shot to pieces (the truth of the real figures not published but go to Phuket and see the truth), the trouble in the South that will escalate North in time, and everything else that appears daily in the newspapers, the future is not encouraging.

I hope it is a correction, I have 3 companies here so I do want a healthy economy, but until we have a government that is here for the people and not for their bank accounts, I doubt Thailand will ever reach its deserved and real potential.

My 2 satang worth, Amen.

[robbie36]

Wow we have a lot of amateur economists here. Where are the inherent structural imbalances that existed in the economy pre the 1997 economic crash - caused by a fixed exchange rate, large twin government deficits combined with massive over-borrowing in US dollars by Thai corporates.

Government finances. There is a small fiscal surprlus compared to a large government deficit pre-1997. Although the trade account has moved into deficit this is exaggerated by the seasonal weak first half and by ignoring the large invisibles surplus. The annual current account deficit will be no more than 3% of GDP compared to 10% in 1997. Meanwhile forex reserves are at record levels.

Consumer borrowing. Almost non-existent in the last cycle consumer borrowing has increased. But mortgage financing is equivalent to 18% of GDP compared to 30% of GDP in Malaysia and over 75% of GDP in places like the UK and US. Total consumer credit (including credit card receipts is under 30% of GDP). Thai consumers are large savers not large borrowers.

Interest rates are rising. Yes they are but when deposit rates get down to 50 basis points and inflation is rising they can really go only one way. Interest rates are still very low - for instance AIA are offering fixed rate 15 year mortgages for 5.99% half the lowest level of interest rates in the last economic cycle.

Property market is overheating. Property prices are back where they were pre-crisis in baht terms - say Bt65,000/sqm in Sukhumvit. But the baht has fallen 60% and so they are 60% cheaper in US dollar terms. Meanwhile interest rates are half pre-crisis levels so that property is twice as affordable. It is possible to buy a condo for the same monthly payment as your rental - something that was never possible in the last cycle - and that is why people are buying. And you say prices are high? What other major capital city in Asia or in the western world has property prices as low as in Bangkok.

The big problem in the last cycle was massive corporate over-borrowing (principally in US dollars) but there has been a massive deleveraging of corporate balance sheets since then. Look at the loan deposit ratio of the banks or the average corporate balance sheet. More to the point most corporates have switched out of US dollar borrowings into baht borrowings. The huge current account surplus of recent years has refinanced both the Government and corporate Thailand's balance sheets.

Yes oil prices are a bugger - Thailand is very dependent on oil imports and rising oil prices increase inflation, affect the current account and will inevitably depress economic growth. But will they really stay at this level forever (in which case you could argue the global economy is in trouble). Has the world change that much over the last 3 years that justify oil prices rising from US$12 to US$65 a barrel or are we looking at a more temporary demand and supply imbalance?

You guys can talk yourself into a recession if you want. I dont see any structural imbalances here unlike in the US, Japan, Europe or even China. My business will report record profits this year and I expect to see further growth next year. Quite frankly, I like to see less competition and a slow down from the boom of the last few years would be no bad thing. This country is a great place to do business and a great place to live which is why we are here - if the grass is greener elsewhere there is a whole world waiting for you out there.

[WiCKeDBiRD]

This country is a great place to do business and a great place to live which is why we are here - if the grass is greener elsewhere there is a whole world waiting for you out there.

The best statement I have ever read on TF Forums this year ....

-WB-

[WiCKeDBiRD]

Don't worry, as soon as the Siam Paragon is completed, everything will be OK.

Yeeppppppp !!!

-WB-

[robbie36]

The major property developers like Raimond Land and Siri etc all have reported their position and fund raising requirements, all is on credit. How will all this property be sold?

One of the problems with the property market is that it is the same developers - like Siri and Raimon - who went bankrupt in the last cycle, who are back doing business in this cycle. They are busy oversupplying the market with exactly the same product - high end condominiums, that they oversupplied the market with last time.

But there are some important differences in this cycle. First, nearly all projects now have financing dependent on presales of 40% of total units. In other words many projects you see out there - such as the Met and the Regents - simply are not going to happen. They wont get the presales, so they wont get the financing.

Second, you have to be careful when you talk about supply. Even new supply of high end condos is expected to be around 12,000 units in Bangkok in 2005 compared to over 30,000 in 1995 and 1996.

Meanwhile some developers are doing very well. Land and Houses will see record sales and record profits this year, LPN - which sells low end condos to Thai consumers - is seeing sales rise 50% this year and is struggling to keep up with demand. When you can buy a condo in Asok for as little as Bt7000 a month, that is attracting a lot of buyers.

Consider other areas of the property market - prime A office space. Very difficult to find - as there as been no significant build for 8 years - and rents are rising. It isnt all doom and gloom out there.

[zeusbheld]

This country is a great place to do business and a great place to live which is why we are here - if the grass is greener elsewhere there is a whole world waiting for you out there.

The best statement I have ever read on TF Forums this year ....

-WB-

r36's posts are what i was fishin' for... i liked the detailed breakdown too...

hurrah and huzzah. wow, i'm convinced...

lemme pack my bags and move to bangkok. OH. RIGHT. already doin that. in bkk 9 september...

[WiCKeDBiRD]

This country is a great place to do business and a great place to live which is why we are here - if the grass is greener elsewhere there is a whole world waiting for you out there.

The best statement I have ever read on TF Forums this year ....

-WB-

r36's post is what i was fishin' for... i liked the detailed breakdown too...

Yes... he owns a Super Duper Trooper Brain... lucky him!

I do want one just like his.... 8) :wink:

The best thing that ONE could ever have in life is to have a Super wicked Brain.:idea:

hurrah and huzzah. wow, i'm convinced...

lemme pack my bags and move to bangkok. OH. RIGHT. already doin that. in bkk 9 september...

Hooooraayyyyyyyy

-WB-

[Cosmo]

Thanks for the micro update on Thailand guys....very interesting!!

Personally, I am an optimist - I do not see a crash coming - just a mild correction. More likely it will be driven by the price of oil.

Watch for hurricane Katrina this evening......if it hits the oil rigs in the Gulf of Mexico....then price of oil will shoot up to $80 USD a barrel.

Right now, on the trading floor in Melbourne, Australia - it is priced at $70 USD.

Did I say I was an optimist?

Ha..... :twisted:

[WiCKeDBiRD]

Wow we have a lot of amateur economists here. Where are the inherent structural imbalances that existed in the economy pre the 1997 economic crash - caused by a fixed exchange rate, large twin government deficits combined with massive over-borrowing in US dollars by Thai corporates.

Government finances. There is a small fiscal surprlus compared to a large government deficit pre-1997. Although the trade account has moved into deficit this is exaggerated by the seasonal weak first half and by ignoring the large invisibles surplus. The annual current account deficit will be no more than 3% of GDP compared to 10% in 1997. Meanwhile forex reserves are at record levels.

Consumer borrowing. Almost non-existent in the last cycle consumer borrowing has increased. But mortgage financing is equivalent to 18% of GDP compared to 30% of GDP in Malaysia and over 75% of GDP in places like the UK and US. Total consumer credit (including credit card receipts is under 30% of GDP). Thai consumers are large savers not large borrowers.

Interest rates are rising. Yes they are but when deposit rates get down to 50 basis points and inflation is rising they can really go only one way. Interest rates are still very low - for instance AIA are offering fixed rate 15 year mortgages for 5.99% half the lowest level of interest rates in the last economic cycle.

Property market is overheating. Property prices are back where they were pre-crisis in baht terms - say Bt65,000/sqm in Sukhumvit. But the baht has fallen 60% and so they are 60% cheaper in US dollar terms. Meanwhile interest rates are half pre-crisis levels so that property is twice as affordable. It is possible to buy a condo for the same monthly payment as your rental - something that was never possible in the last cycle - and that is why people are buying. And you say prices are high? What other major capital city in Asia or in the western world has property prices as low as in Bangkok.

The big problem in the last cycle was massive corporate over-borrowing (principally in US dollars) but there has been a massive deleveraging of corporate balance sheets since then. Look at the loan deposit ratio of the banks or the average corporate balance sheet. More to the point most corporates have switched out of US dollar borrowings into baht borrowings. The huge current account surplus of recent years has refinanced both the Government and corporate Thailand's balance sheets.

Yes oil prices are a bugger - Thailand is very dependent on oil imports and rising oil prices increase inflation, affect the current account and will inevitably depress economic growth. But will they really stay at this level forever (in which case you could argue the global economy is in trouble). Has the world change that much over the last 3 years that justify oil prices rising from US$12 to US$65 a barrel or are we looking at a more temporary demand and supply imbalance?

You guys can talk yourself into a recession if you want. I dont see any structural imbalances here unlike in the US, Japan, Europe or even China. My business will report record profits this year and I expect to see further growth next year. Quite frankly, I like to see less competition and a slow down from the boom of the last few years would be no bad thing. This country is a great place to do business and a great place to live which is why we are here - if the grass is greener elsewhere there is a whole world waiting for you out there.

thank you.

Yellowsubmarine... very interesting pic of you that you have displaying on your PF. :shock:

-P' WB-

PS.. WiCKeD !!.... LOL.... 8) :wink:

[Malky]

Where I have my questions here is for those who don't have credit cards, don't have the capability of buying a car, hardly can afford just the basic education of their kids, and that's a large group in this country, that I consider standing in between being a 3'rd world country and a developed.

For those people who get the minimum salery, it has a big effect when they suddenly have to pay almost double for transport and the other things that will get more expensive because of the raising energy prices.

As for us, we all have to consider our self as well of, so we it won't be right for us to complain on our own behalf, but for sure we should have in mind what happen to those less fortunate

Excellent point Viggop. The people who will suffer most because of the rising energy prices are the poor Thais.

When they put the prices of transport up by 5 baht, it might seem like nothing to us but for them it is a big dent to their budget. All the price increases add up. :x

[MikeAussieGuy]

To get things into perspective, I also will have record profits and revenue due to one line of business being sold exclusively to a major financial institution for the next 5 years. This alone will provide 1.7billion bt in revenue for this period.

So, I am not out to be a gloom and doom man in my postings, but reality is reality and for the government to continue to BS about the truth of the economy and ignoring the underlying problems, not exposing just the symptoms, helps no one.

There are several websites to where one can read the information posted here such as : http://www.classbrain.com/art_cr/publish/thailand_economy.shtml is an example. So there is nothing new in Robs post or mine or anyone else's and a little bit of cutting and pasting can turn anyone into an "expert".

It doesnt matter if property prices are 5 bt a building, if there is no one that wants to buy it then it really doesnt matter how much it is. And whilst the confidence in Thialnd is low then the overseas investment will go elsewhere, there the grass may just be greener for investors.

The worst thing anyone can do is panic, however to be smug and believe what you want to believe because its more pallatable is not conducive to being prepared.

PS The comment on oil and can it sustain at $65 and is it only temporary, which is devasting a lot of countries including Thailand today hit $70.85 with $80 predicted within 7 days. Now get your pencil out everyone and work out this impact.

[robbie36]

Anyway I have done as all my Thai friends have done, liquidated what we dont need ot not performing, whack the cash in the bank, and await the inevitable.

Mike,

It is up to everyone to work out what they believe is happening to the economy. But if you really believe there is going to be a bad debt crisis, the worse thing you can do with your money is put it on deposit. Government's simply inflate away bad debts - what do you think is going on now - 0.75% deposit rates, reported inflation at 3% but nearer 10% I would guess. That is just watching your money waste away.

It reminds me of a mate of mine who believes that oil is going to run out in 10 years, who at the same time has just bought a new car.

Now if property is Bt5 a building and noone wants to buy, well I'll just have to the the 'mug' who ends up buying the buildings. Thailand is growing and will continue to grow simply by dint of its demographics.

[MikeAussieGuy]

Rob,

Cant disagree with much of what you said.

This is sure not my area of expertise but as a businessman and company owner I need of course to keep abreast of it all and make some opinions. However the more I read and research and talk to the "supposed" experts in government and industry, I guess the scariest thing is not what is being predicted, its the fact that there are 2 very opposite views from these guys. Whoa, arent they reading the same data??? how come 2 distinct views, now thats worrying. I guess thats why there is more tactical more than strategic thinking by the government in formulating fiscal policy.

Liquidating and holding cash is not the best thing to do I agree, however given a farang gets .75% in a savings account and nothing in a cheque account, and a CD is kinda not interesting due to the rates and one needs to be able to pull out money for a bargain quickly. This strategy is therefore only for short term to make the best of opportunites as they may present themselves. Take the bad with the better I guess. I am looking for a 30% + downturn in property values within a year, once the 11,000 apartments under construction in Bangkok come on stream in qtr 1 and 2 2006. Not as big a drop as 98 however it will do me fine for long term investment.

Anyway, I am here to stay, I live here, my life is here, the spicy food, the ladies, the culture, the country etc. is what brought me here, and the government and the economy will have come and gone a dozen times before I leave Thailand to go to that beach and blue sky in another world. The economy affects me sure but in reality I can weather out whatever so I wont lose sleep either way.

Now how about a beer.

[WiCKeDBiRD]

Rob,

Now how about a beer.

Ahem !!!! 8) :wink:

-WB-

PS......get in the line... do wait in Queue .. :shock: