chiangmai
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Post by chiangmai on Jul 20, 2020 8:22:27 GMT 7
I'm interested to understand peoples thoughts about the Thai economy and where it's headed, my view is that fundamentally it is in good shape but is fast approaching a point where strategic changes could have either a heavily negative or positive social impact.
The decision to ban international tourism (11.5% of GDP) is a trade off against a higher covid death toll which will disrupt the tourism industry and the employment figures. Despite the industry employing between 6 and 8 million people I think there's a need to rationalise the industry and to get rid of the overlap and poor quality duplicates hence not altogether a bad thing I reckon. Assuming the ban lasts all year, dometic tourism which is 7.5% of GDP will take up some of the slack, as will diverted spending by Thai's who would otherwise have gone overseas, that's worth a further 7% of GDP.
The GDP forecast for the year is currently -8.1% which presumably will change at some point, (it's not clear if that includes the THB 1.9 trill that government borrowed or not).
In terms of human capital the workforce is circe 39 mill (2015), 62% of which is in the informal sector and not covered by social security, the tax net is about 11%. Unemployment has been historically very low 1% plus 4% in transition but what it might be currently is very unclear, one estimate is that unemployment is currently 9% plus 4% in transition.
Exports as of January stood at 64% of GDP, of which international tourism was 20%. New ways have been found to maintain export numbers although last month did take a hit. Gold, arms shipments and now agricultural sales direct to China by rail have been among some of the inventive ways to keep numbers high.
Finally to complete this picture, debt to GDP was low at 42%, of which less than 4% was in foreign currency loans, I think the inclusion of the 1.9 trillion loans (900 bill from BOT) brings the ratio up to 53% but I'm not certain.
The questions in my mind are: whether Thailand is prepared to throw international tourism under a bus (and potentially around 4 million of the workforce also), in favour of diversifying away from reliance on overseas income. Would the population allow that or would it be too much of a catalyst for unrest and change, because the alternative seems to be to open up the country to outsiders and potentially suffer a much higher death toll from the covid virus? There does not seem however to be a financial or economic imperative to resume international tourism although others may not agree.
Any one?
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chiangmai
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Post by chiangmai on Jul 20, 2020 17:04:41 GMT 7
I suppose this subject is an acquired taste, either you're interested or you're not and most are not, that's OK.
But it's funny to watch people over at the other place screaming indignantly that GDP will fall by at least 20% of more, mostly because tourism is producing very low numbers and that BOT is lying through their teeth as one person wrote. Sadly such folk don't understand that government spending is part of the GDP calculation and gov. just borrowed 1.9 trillion Baht (or about USD 63 bill.) and that could easily offset any loss of GDP resulting from no tourists, if and when it is spent. So -8.1% is very possible if not likely...we shall see. But I can't bring myself to log on and tell'em, it's a pointless and thankless task.
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Post by rgs2001uk on Jul 20, 2020 21:15:44 GMT 7
I dont know what questions you are asking, at least your average peon Thai has the opportunity of moving away from the tourist reliant industry and back into the mainstream Thai sector, whether the salary will be enough to pay for the lastest I phone or Red Plate car is another matter. Here In Bkk, building sites are just about all Burmese these days, petrol stations the same, hospital cleaning staff the same, there are plenty of jobs for the Thais to relocate to. Too be honest, whats happening right now, reminds me, off pre Tom Yam Kung crisis, the locals are on the p**s like theres no tomorrow, all the while drinking while the tourist market can no longer afford to come here. For me personally, there was a difference in investing in the SET at 73 baht to the quid, as opposed to 37 baht to the quid. Tourists dont live in the same Thailand as I do, when all this shit kicked off, instead of walking to the local beauty salon, hair dresser or massueuse shop, the aforementioned shops simply came to your house. The streets of Bangkok are littered these days with green shirted, grab, food to go, etc motocy types, one door closes, another opens. The other week I was down in Sattahip, the place was rocking, covid, what covid, farang, what farang, Thai style entertiainment at Thai prices. The above are the prices I was paying.
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Post by rgs2001uk on Jul 20, 2020 21:19:56 GMT 7
To answer another question touched on above, no, i will not be investing any more money into Thailand, as mentioned, not exchange rate friendly and better returns elsewhere.
Nothing to do with present day exchange rates, signed a pre tom yam kung crisis farang, who thinks that anything over 40 baht to the pomie peso is a bonus.
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chiangmai
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Post by chiangmai on Jul 21, 2020 4:44:34 GMT 7
Totally agree about anything over 40 being a bonus, it's the new normal.
Where I was hoping to get to with this was to better understand if society is about to change as a result of economic factors, I think a wholesale change in direction of tourism would be a good thing as you've pointed out. I also feel the winds of change blowing quite strongly, I think the large scale unemployment could well be a catalyst for something.
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Post by rgs2001uk on Jul 21, 2020 20:56:41 GMT 7
Totally agree about anything over 40 being a bonus, it's the new normal. Where I was hoping to get to with this was to better understand if society is about to change as a result of economic factors, I think a wholesale change in direction of tourism would be a good thing as you've pointed out. I also feel the winds of change blowing quite strongly, I think the large scale unemployment could well be a catalyst for something. I dont know what media channels you follow, the winds of change are already blowing quite strongly. You mentioned unemployment, from what I have been watching, its not the red shirt rice farmer peons of thakisn that are leading the chants, its the middle class Thais with uni degrees who are wondering why there might not be any jobs for them, as usual in Thailand, the dissent starts in the unis. Personally, I feel the strong baht is no help either. For example, a farang I know, used to live here on a 1500 pound a month pension, income, 100k+ per month, exchange rates killed him same pension, now less than 60k baht per month, not enough to renew his visa. Out the door you go Khun Farang, no doubt there are countless others just like him, money that used to go into the local econmy is now gone, Said farang told me, 40k baht per month were his expenses, 10 for condo rent, and spend 1000 baht per day. Was watching Amarin news earlier, the case that has a nation gripped, who killed nong chompu? For me personally, i like certainty in my life, I am waiting for the pommie peso to hit 40, then I will transfer money over here, I aint fussed if the pound goes to 41 or 42, I know what 40 baht to the pound will buy me, and I am quite happy to lock in at that.
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chiangmai
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Post by chiangmai on Jul 22, 2020 5:21:55 GMT 7
Change needs a catalyst and merely being ex-military in government isn't enough. The two prime candidates for me currently include keeping the country closed to tourism and the loss of jobs that would entail (around 4 mill. people), and, the resultant debt sparked by stellar NPL's and business closure, both of which have their base in the covid19 virus pandemic. The risk to government and the potential unrest caused by both those things is huge, as we're beginning to see with the various demonstrations. I don't think that the impoverished rural poor being hungry and out of work alone will contribute much by way of forcing change, that segment has always been an overhead to all governments and doesn't contribute much by way of taxes in the good times. But as the middle classes suffer damage they might find they share common ground with the rural poor which combined could make for a sizeable and powerful voice. A successful vaccine soon could however change the landscape very quickly.
So, open up the country and also the potential for a high death toll from the virus, a move that would fall out on government, or, stay closed and suffer internal unrest which also is a risk to government....it's a damned if you do or don't scenario.
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chiangmai
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Post by chiangmai on Jul 22, 2020 7:16:13 GMT 7
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chiangmai
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Post by chiangmai on Jul 22, 2020 14:09:14 GMT 7
A couple of other important aspects of the Thai economy, just to paint a more complete framework within which to frame questions about, what might happen:
Everyone knows why the Baht is strong, right? Of course, its value is manipulated by three blokes who meet in the back room of the Bank of Thailand (BOT) every few days and decide what level it needs to be at in order for the elites to buy their villa's and toys overseas using USD. But in the real world, things work slightly differently and the FOREX market dictates THB value based on supply and demand, underwritten by the economic fundamentals of the country including, debt levels, current account surplus and the levels of foreign currency reserves.
As USD is sold and THB is purchased so THB strengthens, do the opposite and it weakens, pretty simple stuff really. So what happens when the Chinese, who are allegedly propping up the Thai economy (cough cough), sell Yuan and buy Baht, moreover, what do they buy? The answer to the first part of that question is, not much at all really since the Yuan largely tracks USD whereas THB operates a managed floating peg but its value is tied to USD by virtue of export bill settlements - put more simply, selling Yuan and buying THB does not in itself increase the value of THB.
The answer to the second part is, pretty much everything although some will tell us that the Chinese are also propping up the Bond Market which is not true, although China does buy Thai bonds, just like everyone else in the world.
The Thai Bond Market holds about USD 445 bill. in value or about 80% of GDP, (excluding corporate bonds which are a further 24% of GDP). Only about 16% of the government/BOT bond total is foreign-owned whilst the majority is held by mutual funds, pension funds, insurance companies and private investors. 98% of Thai bonds are investment grade, the biggest foreign holders being Indonesia, Japanese and Malaysian governments who favour longer-term bonds whereas Thai’s are the main holders of shorter-term bonds. Given those things are true, it’s not reasonable to think that Chinese funds support the Thai bond market, not even remotely so.
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Post by rgs2001uk on Jul 22, 2020 20:15:02 GMT 7
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Post by rgs2001uk on Jul 22, 2020 20:16:58 GMT 7
A couple of other important aspects of the Thai economy, just to paint a more complete framework within which to frame questions about, what might happen: Everyone knows why the Baht is strong, right? Of course, its value is manipulated by three blokes who meet in the back room of the Bank of Thailand (BOT) every few days and decide what level it needs to be at in order for the elites to buy their villa's and toys overseas using USD. But in the real world, things work slightly differently and the FOREX market dictates THB value based on supply and demand, underwritten by the economic fundamentals of the country including, debt levels, current account surplus and the levels of foreign currency reserves. As USD is sold and THB is purchased so THB strengthens, do the opposite and it weakens, pretty simple stuff really. So what happens when the Chinese, who are allegedly propping up the Thai economy (cough cough), sell Yuan and buy Baht, moreover, what do they buy? The answer to the first part of that question is, not much at all really since the Yuan largely tracks USD whereas THB operates a managed floating peg but its value is tied to USD by virtue of export bill settlements - put more simply, selling Yuan and buying THB does not in itself increase the value of THB. The answer to the second part is, pretty much everything although some will tell us that the Chinese are also propping up the Bond Market which is not true, although China does buy Thai bonds, just like everyone else in the world. The Thai Bond Market holds about USD 445 bill. in value or about 80% of GDP, (excluding corporate bonds which are a further 24% of GDP). Only about 16% of the government/BOT bond total is foreign-owned whilst the majority is held by mutual funds, pension funds, insurance companies and private investors. 98% of Thai bonds are investment grade, the biggest foreign holders being Indonesia, Japanese and Malaysian governments who favour longer-term bonds whereas Thai’s are the main holders of shorter-term bonds. Given those things are true, it’s not reasonable to think that Chinese funds support the Thai bond market, not even remotely so. Any truth to the rumour those 3 blokes are you, Fletch and AyG?
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chiangmai
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Post by chiangmai on Jul 23, 2020 4:53:35 GMT 7
A couple of other important aspects of the Thai economy, just to paint a more complete framework within which to frame questions about, what might happen: Everyone knows why the Baht is strong, right? Of course, its value is manipulated by three blokes who meet in the back room of the Bank of Thailand (BOT) every few days and decide what level it needs to be at in order for the elites to buy their villa's and toys overseas using USD. But in the real world, things work slightly differently and the FOREX market dictates THB value based on supply and demand, underwritten by the economic fundamentals of the country including, debt levels, current account surplus and the levels of foreign currency reserves. As USD is sold and THB is purchased so THB strengthens, do the opposite and it weakens, pretty simple stuff really. So what happens when the Chinese, who are allegedly propping up the Thai economy (cough cough), sell Yuan and buy Baht, moreover, what do they buy? The answer to the first part of that question is, not much at all really since the Yuan largely tracks USD whereas THB operates a managed floating peg but its value is tied to USD by virtue of export bill settlements - put more simply, selling Yuan and buying THB does not in itself increase the value of THB. The answer to the second part is, pretty much everything although some will tell us that the Chinese are also propping up the Bond Market which is not true, although China does buy Thai bonds, just like everyone else in the world. The Thai Bond Market holds about USD 445 bill. in value or about 80% of GDP, (excluding corporate bonds which are a further 24% of GDP). Only about 16% of the government/BOT bond total is foreign-owned whilst the majority is held by mutual funds, pension funds, insurance companies and private investors. 98% of Thai bonds are investment grade, the biggest foreign holders being Indonesia, Japanese and Malaysian governments who favour longer-term bonds whereas Thai’s are the main holders of shorter-term bonds. Given those things are true, it’s not reasonable to think that Chinese funds support the Thai bond market, not even remotely so. Any truth to the rumour those 3 blokes are you, Fletch and AyG? Certainly not me, I'm a relative novice at this stuff. I find country level economics fascinating for a number of reasons, it's like trying to build a complex jigsaw and finally seeing a picture take shape and understanding what it is. Every aspect is interconnected to so many other things yet after you've looked at it for a while the connections are very basic and you can't understand why other people can't see it also. Baht strength is one of those aspects, the Baht is strong because the country exports more than it imports and that creates a trade surplus which feeds the current account and the foreign currency reserves, what could be more simple than that. Yet people persist in the wild arse notion of the three blokes in the back room at BOT. It was actually naam who made me think more about the economy, he had a great way of passing along information and pointers that sparked my interest. Sadly, that interest sparked too late because I'd made a couple of costly mistakes before that, so now I sort of hope I can get others interested and help them understand some of the basics that I do. But most people, especially at TVF, associate that sort of learning with bankers, rich people and distrust and much prefer to cling to a belief that manipulation by the elites is the real answer, people in finance only exist to enrich themselves so that must be the reason/ answer for everything they do. But hey, so what, sometimes the thinking aloud part helps improve the picture plus the facts are there for others to pick up on (or not) as they chose. And it's surprising that there are people out there who have a deep interest in the subject but they are afraid to be identified because it's almost counter culture for typical expats, especially at TVF.
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chiangmai
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Post by chiangmai on Jul 23, 2020 5:54:25 GMT 7
This years GDP:
EXIM is the export/import bank that helps facilitate trade in Thailand, they now forecast a drop in exports this year of 8-10%, that's a USD 43-54 bill. loss. International tourism is forecast to fall from 40 mill. visitors to 8 mill., that's an approximate GDP loss of about USD 50 bill.
Say a loss of USD 100 bill in total.
But the government borrowed 1.9 trill. baht or USD 63 bill. to support the economy so the GDP loss is USD 100-63 bill. or USD37 bill., or 7% (BOT forecasts 8.1% so perhaps other factors not accounted for yet).
Meanwhile the debt to GDP ratio increases from 42% to 53%.
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chiangmai
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Post by chiangmai on Jul 23, 2020 7:32:00 GMT 7
The Baht faces fresh problems. The reduced of supply of USD coming into the country resulting from fewer exports and the dire lack of tourists means BOT will not be able to help weaken the Baht with the same regularity as in the past. On the upside, markets took a dim view of the all change in the MOF and BOT with several proposed candidates rejecting offers. As a result, THB finally made it onto the US Fed's top 20 list of currency manipulators, just. Despite popular belief to the contrary BOT was in the habit of intervening in the FOREX market almost monthly in an attempt to stop the rise of the Baht and evidence of this can be seen in the BOT monthly Foreign Currency Reserves report.
And as if that's not enough, the value of USD is falling even further, the Dollar Index is now at 94.XX which in an election year is not good news for the incumbent President although it might just be good news for everyone else!
All of this doesn't help exports which definitely need a helping hand but the problem is USD, much less so THB. For Brits, however, GBP/THB is looking the best it's been in a while, 40 is on the horizon, not exactly the 60 that was imagined by so many impoverished, rural, 7/11 doorstep sitting, pole dancer spouses, Leo swilling TVF members but still good enough for many of us....as has been said, it's the new normal.
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rott
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Post by rott on Jul 23, 2020 9:12:03 GMT 7
Will repayment of this debt cause major problems? I realise not just a question for Thailand but for all countries that have borrowed big. But how do you see Thailand managing things.
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