1 14 september 2009 effects of the global economic crisis on thai economy & development plan...

11 4 September 2009 www.nesdb.go.th

Effects of the Global Economic Crisis on Thai Economy & Development Plan

Ampon Kittiampon-Secretary General

Office of the National Economic and Social Development Plan


Outline

• Effects of Economic Crises in 1997 and 2008 on the Thai Economy

• Crisis Measures in the Two Crises

• Economic Structural Changes in Two Decades

• Effects of 2008-Crisis on the Development Issues Facing the 11th National Economic and Social Development Plan (2012-2016)


1997

Important Events• Tom Yum Kung Crisis• Financial Institution Crisis and

rapid depreciation of Thai Baht lead to collapse of investor confidence and capital outflow

• Economic recovery partially resulted from export growth, as world economic still in good shape.

2008

Important Events• Hamburger Crisis • From Food & Fuel crisis to

collapse of US financial system dramatically effect world economic and Thailand economy; export, tourism and agricultural price.

• Thailand financial stability still strong; strong financial institutions, high level of national reserves and manageable level of public debt.

‘97 Crisis Indicators 2008

- 104. (‘98) GDP 2 .6

-79. (‘96) Current Account/GDP 00.

27 (‘97) National Reserve (Bil. USD) 111

52.4 (‘95) Short-term debt (Bil. USD) 248.

57 (‘00) Public debt/GDP 369.

45 (‘98) NPL/Loan 319.

-2.8 (‘99) Fiscal account (cash)/GDP -03.

- 79. (‘98) Growth in private sector loan

93.

588. (‘98) CAPU 677.

- 98. (‘98) Capital Flow (Bil. USD) 128.

1 ,423 (‘99) Unemployment (‘000) 522

4.4 Unemployment Rate 1.4

15.25 (‘97) MLR 6.75-7.00

56.06 12 JAN 98)

Exchange Rate (THB/USD) 33.38

355.81 (‘98) SET Index 449.96

Rescue Package• Receive IMF fund worth 4

billion USD (14 AUG 97)• Increase policy rate• Financial Institutions:

established special fund to help raise require reserve in both tier 1 and 2.

• Pass special bill to borrow extra capital, total of 300 bil. Baht, for financial institution rescue plan

Rescue Package• Reduce Policy rate• Stimulus Package 1 (short-

term measures)• Stimulus Package 2 ‘09-’11

(medium to long term plan)• Pass 2 special Bills to borrow

extra capital, total 800 bil. Baht, for Stimulus Package 2

Economic Crisis in ‘97 and ‘08

2001 911

20

-02

2003

Iraq – USA war; SARs

20

-04

2005

Avian influenza (Bird Flu); Tsunami

20

-06

20

07

Surge in oil price; Domestic political situation

‘97 ‘98

World growth 4.2 2.8

Priv.consumption

-1.4

-11.5

Priv.Investment

-30.4

-52.3

Export (G&S) 7.2

82.

Import (G&S) -11.3

-21.6

Inflation 5.6

81.

GDP -1.4

-10.5

Q4/08

2008

World growth -0.2 2.8

Priv.consumption

2.1 2.5

Priv.Investment

-1.3 3.2

Export (G&S) -8.9 6.0

Import (G&S) 1.0 7.5

Inflation 2.1 5.5

GDP -4.2 2.6


4

Direct impacts on financial institutions

Related impacts on International capital

movement

Impacts on Thai exports and tourism

- Total foreign exposure (which includes loan in foreign currency and investment in foreign debt and equities) as a

percentage share to total assets of financial

institutions was only approximately 7.5% - Hence, direct impacts on financial institutions were limited.

- Capital outflows from portfolio investment - Thai stock market’s volatility and decline

in set index and hence decline in wealth

- Depreciation of baht currency

- Contraction in world demand - Decline in trade

finance- Growing concern over protectionism

Impacts of sub-prime and world economic crisis on Thailand

2008 2009

Q4 Q1 Q2

Export Value (%YoY)

-9.4 -19.9 -26.1

No. Foreigner Tourists (million)

3.1 3.5 3.4

(%YoY) -17.2 -15.8 -16.5

2008

Q2 Q3 Q4

Net Capital flow (b.US$) -3.13 0.69 1.64

Set Index (avg.) 822.4 675.3 422.8

Daily avg. turnover(million baht)

19,959 12,212 12,612

Currency (baht/US$) 32.2 33.8 34.8


Outline






1997-Economic Stabilization

High priority on stabilizing the currency and financial system

to restore confidence

Great emphasis on replenishing international

reserves to restore confidence in currency

Restructuring financial sector


1997-Rebuilding the reserves, stabilizing currency, and lowering prices

IMF bailout package Short period of strict monetary policies to

- rebuild international reserves, - restore confidence in the exchange rate,

- control inflation.


1997-Financial Sector Restructuring

Segregating unviable Segregating unviable fin. Institutions fin. Institutions

& addressing FIDF & addressing FIDF problemproblem

Addressing Addressing the NPL problemthe NPL problem

Strengthening supervisionStrengthening supervisionof theof the

remaining institutions remaining institutions

Strengthening and Strengthening and recapitalizing viable recapitalizing viable financial institutionsfinancial institutions


Stimulus Package I

2008-Policy mix/Policy coordination to stabilize and stimulate the economy

Monetary Policy

Low Interest Rate policy

From 2.5% to 1.25%

Closely monitoringof

financial liquidity

Macro prudential policyto prevent

financial imbalances and to ensure stability of

financial institutions

Fiscal Policy

Support for consumer spending

through…

Public investmentProjects

Stimulus Package II

Personal tax cuts &Transfer payment e.g. more generous unemployment insurance benefit, subsidy to seniorcitizen, cash handout for low income-earners, free education, etc.

3-Years Public Investment Projects e.g. Infrastructure projects, education development-related projects, water system development projects, health care upgrading-related projects etc.


10

- Strong boost to domestic demand is key and imperative for the road to recovery in 2009 while Thai exports will contract throughout 2009. The measures under SP I are aimed to mitigate impacts of economic slowdown.

- In January 2009, Abhisit's government announced a Bt116.7 billion (US$3.35 billion) stimulus package aimed at boosting domestic demand shore up an economy which has been battered by the global downturn and political turmoil and last year's airport blockade. Excluding an amount paid back to treasury balance, this is a one-year 2,700 mil. USD (or 93,000 million baht) program.

- The stimulus package was based on 4 principles as guidelines for implementation, namely timely, transparent, temporary, and targeted.

- The plan comprised a mix of cash handouts for low earners, tax cuts, tax deductible for mortgage payment up to 300,000 baht, expanded free education, monthly payments to the elderly and volunteer health-care workers, and subsidies for transport and utilities.

- If implemented by Q2/2009, potential boost of GDP is expected to be around 0.5-0.7 percent of GDP.

2008-Stimulus Package I

111 4 September 2009 www.nesdb.go.th 11

-25

-20

-15

-10

-5

0

5

10

15

47 48 49 50 51 52

% YOY

Seasonally Adj. GDP(qq,%annuallised)

GDP (%YOY)

• The contraction was attributed to the sharp fall in exports and tourism driven by a collapse in global demand during the worst recession, and the impacts of domestic political turmoil and the spread of influenza A(H1N1) that jeopardized consumer confidence and leading to a decline in tourism and consumer spending.

• Production fall in many sectors such as manufacturing (-11.4%), construction (-2.7%) and Hotel & restaurants (-5.8%)

The Thai economy contracted 6.0% in H1/2009

Thai Economic Situation in H1/2009

20

082008 2009

%YOY ทั้��งปี� Q4 Q1 Q2 H1

Private consumption 2.2.55

21.21.-2.-2.55

-23.-23. -2.-2.44

Government consumption 0.50.5 11.011.0 3.63.6 5.95.9 4.84.8

Total Investment 1.11.1 -3.3-3.3 -15.8-15.8 -10.1-10.1 -12.9-12.9

- Private 3.23.2 -1.3-1.3 -17.7-17.7 -16.1-16.1 -16.9-16.9

- Public -4.8-4.8 -10.2-10.2 -9.1-9.1 9.69.6 0.50.5

Export (G&S) 6.06.0 -8.9-8.9 -17.9-17.9 -22.8-22.8 -20.4-20.4

Import (G&S) 7.57.5 1.01.0 -31.6-31.6 -25.3-25.3 -28.4-28.4

GDP 2.62.6 -4.2-4.2 -7.1-7.1 -4.9-4.9 -6.0-6.0

2

0

0

8

2008

2009

%YOY ทั้��งปี� Q4 Q1 Q2 H1

Agriculture 5.5.00

1.1. 6 63.3.44

-2-277

0.0. 5 5

Non-Agriculture 2.2.44

-4.-4. 9 9

-8.-8.11

-5-500

-6.6-6.6

• Manufacturing 3.3.99

-6 .-6 . 7 7

-1-14.4.44

-8-844

-1-11.1.

4 4

• Construction-4.7

-1-12.2.88

-7.-7.99

2.2.55

-2.-2.77

• Wholesale and retail trade

1.1.99

-3.-3. 2 2

-4.-4.00

-3-333

-3.-3. 6 6

• Hotel & restaurants 1.1. 6 6

-7.-7. 7 7

-6 .-6 .00

-5-5.6.6

-5.-5.88

• Financial Intermediation 8.8.11

5.5. 5 54.4.00

5.5.66

4.4. 8 8

GDP 2.2.66

-4.-4. 2 2

-7.-7.11

-4-499

-6 .-6 . 0 0


Actual dataActual data Projection_2009fProjection_2009f

20062006 20072007 20082008 25 25

May 09May 09 24 24

Aug. 09Aug. 09

GDP (at current prices: Bil.Bht)7,841.

38,493.

3 9,105.0883,18.

878

63.

GDP growth (at 1988 prices, %) 5.2 4.9 2.6- 35( . ) –-25( . )

- -35( . )-30( . )

Total Investment (at 1988 prices, %) 3.9 1.3 1.1 -62. -100. - Private 4.1 0.6 3.2 -97. -148. - Public 3.3 3.4 -4.8 50. 50.Total Consumption (at 1988 prices, %)

2.9 2.7 2.2 20. 07.

- Private 3.0 1.6 2.5 04. -08. - Public 2.4 9.2 0.5 113. 94.

Export value of goods (%) 17.0 17.3 16.8 -150. -163.Import value of goods ( %) 7.9 9.1 26.4 -196. -242.Trade balance (Bill. USD) 1.0 11.6 0.2 83. 140.Current account (Bill. USD) 2.3 14.0 -0.2 93. 145.Current account to GDP (%) 1.0 6.1 -0.1 37. 56.

Inflation (%) 4.7 2.3 5.5- 05( . ) –05( . )

- -10( . )-05( . )

Economic Projection of 2009 (August 24, 2009)


13

Economic Management in 2009

Preparation of disease control plan to prevent the outbreak of 2009 new strain influenza

Acceleration of budget disbursement in the remaining months of FY 2009, and preparation of budget execution details so that disbursement of FY 2010 budget could be timely started in October.

Disbursement of public funds and implementation of public projects under the second stimulus package (SP2) must be promptly executed in the first quarter of FY2010 (October – December 2009).

Facilitation of credit extension by special financial institutions to entrepreneurs and SMEs who encounter liquidity shortage.

Implementation of agricultural prices guarantee scheme during period of falling prices.

Managing exchange prudently to prevent either sharp depreciation during the period of rising oil prices, or rapid appreciation that could harm exporters and tourism industry. However, exchange rate management should not fuel asset prices to rise faster than the pace of economic recovery.


Objectives

1. To enhance food and energy security, including increase productivity of agricultural and industrial sectors

2. To upgrade public infrastructures for both economic and social services to improve economic competitiveness and quality of life

3. To improve income-generating capacity of tourism sector4. To create new income-generating sectors in the Creative

Economy.5. To upgrade quality of education and holistically modernize

learning system6. To raise quality of public health care system for all Thais7. To create jobs and increase incomes for people at community

levels in order to improve their quality of life

• On January 13, 2009, the Cabinet approved the First Stimulus Package (SP I) worth 116,700 Mil-Baht 3334( , Mil-US$ ) in order to cushion the immediate impact from global financial crisis during Q2-Q3/ 2009

• IMF forecasted that the world economy would contracted by 0.5-1.0% and recovery would be prolonged. Consequently, Thai economy, specially unemployment, would be severely affected

• Thus, Thai government have initiated the Second Stimulus Package (SP II) (2010-2012) in order to create jobs and generate incomes through public projects investment, aiming to enhance Thailand’s competitiveness and to induce private investments in the future

Rationales

2008-Stimulus Package II


Water System/

Agricultures238,515 Mil-Baht

Public Infrastructur

e837,642 Mil-Baht

Tourism 8,506

Mil-Baht

Creative Economy

17,585 Mil-Baht

Education53,969 Mil-Baht

Public Health 10,441 Mil-Baht

Community91,708 Mil-Baht

Water Managemen

t

Technology & Standard

Improvement for

Agricultural Sector

Transport & Logistics

Image Revival

Tourism Marketing

Creative Tourism Products

Standard Improvemen

t

Tourism Site

Recovery

Cultural Heritage

Conservation and

Restoration

Arts and Cultural

Town

Creative Product

Promotion

Thai Handcraft Promotion

Thai Software Industry

Promotion

Design Industry and

R&D Promotion

Learning Community

Building

Quality and Standard

Improvement on Education and Learning

System

Intellectual Infrastructures Improvement

plan and Center of Education in sub-region and

region

Alternative Energy

Telecommu-nication

Tourism

Natural Resources

Education

Public Health

Science & Technology

Social SecurityQuality

Improvement on Teachers

and Education Reform

Production and

Strengthening Capacity of Medical and Health Care

Staff

Research and

development of medical technology

Program1.43 Tri-Baht

Sub-Program

2008-Stimulus Package II

Development Programs for

5 Provinces in Southern

Thailand

Investment Programs for Job Creation and Income

Generation in Communities


Outline






Economic structure: sensitive to external shock

• Production : more depend on manufacturing sector than others sector

• Employment : remains concentrate in agriculture sector though it’s gradually declined

• Demand side : more depend on external trade

26.2

12.6

17.920.2

23.1

8.9

40.1

14.3

22.9

13.8

0

5

10

15

20

25

30

35

40

45

Agriculture Manufacturing Wholesale andretail trade

services Others

1980

2008

29.7

21.4

29.5

66.5

11.7

51.8

8.9

56.6

72

220

10

20

30

40

50

60

70

80

Priv.Consumption Pub.consumption Total Investment Export (G&S) Import (G&S)

1980

2008

Economic structural changesSupply side (% of GDP)

Economic structural changes

Demand side (% of GDP)


Energy Consumption and GDP (at current prices)

4%

7%

12%

10%

13%

7%

0

0

0

0

0

0

0

0

1997 2002 2006 2007 2008 2009(Q1)

Import energy to GDP (at current prices)

• Energy : depend on import energy

Economic structure: sensitive to external shock

Energy ConsumptionGDP


Outline






2007 2009 2011 2013 2015 20 2007 2009 2011 2013 2015 20

17 2019 2021 2023 2025 2027 17 2019 2021 2023 2025 2027

World Economic CrisisWorld Economic Crisis

1. Regional economic cooperation 2. Asia economic power increase 3. New Financial Architechture 4. Aging Society 5. New technology-Innovation and

Human life style 6. Fuel Crisis 7. Global Warming

New Global Trends in the next 20 years

1.Human

Development

2.Strengthening grass

root community

3.Economic

restructuring

4.Bio-diversity

5.Good governance

1010thth National National

PlanPlan

1.1.World economic growth in the medium term World economic growth in the medium term expected to be slow.expected to be slow.

2.2.Financial market shift toward Multiple financial Financial market shift toward Multiple financial nodes and tighter financial rules and nodes and tighter financial rules and regulations.regulations.

3.3.Shortage of water supply and agriculture area.Shortage of water supply and agriculture area.4.4.Unemployment and aging population.Unemployment and aging population.5.5.Global warmingGlobal warming6.6.Fast pace of technology developmentFast pace of technology development7.7.Sustainable capitalism and CSRSustainable capitalism and CSR8.8.Regional trade and cooperation increaseRegional trade and cooperation increase9.9.Asian increase role in global politicAsian increase role in global politic

New born New born Risks after Risks after world world economic economic crisiscrisis


Multi Polar WorldMulti Polar World

Contribution to Global GDP GrowthContribution to Global GDP Growth• Shift toward

Multi-polar world

• BRICs gain greater power

• China become world 2nd beigest

economy• Recovery of each country will be differs from 1. affect

from economic

crisis and 2. Stimulus

package by each

government.

-1

0

1

2

3

4

5

6

IMFDeveloping Countries ChinaUSA Developed countries


Multiple Financial NodesMultiple Financial Nodes

Tighter financial rules, Tighter financial rules, regulation and regulation and

administer administer US Dollar losing powerUS Dollar losing power

New Financial New Financial ArchitectureArchitecture


zFoodFoodFuelFuelPrimary Primary ProductProduct

ss

Current economic crisis soften down

the effect

Economic recovery will

boost the effectLong-Long-termterm

Short-Short-termterm

Food and Fuel SecurityFood and Fuel Security


Shift in Social Sector Shift in Social Sector

Increase in Unemployment and Poverty

Increase in Unemployment and Poverty

Might not achieve MDGs 2015

Might not achieve MDGs 2015

Aging SocietyAging Society

Increasing risk of new born epidemic

Increasing risk of new born epidemic


z

Global Warming!!Global Warming!!

Change in environmental/

physical/ biodiversity

Effect towards agriculture sector and

food production

Conflict over national resourcesConflict over national resources

Shift in Shift in Environmental Environmental

SectorSector


Technology and Technology and InnovationInnovationInformation TechnologyInformation Technology

NanotechnologyNanotechnology Cognitive TechnologyCognitive Technology

BiotechnologyBiotechnology


ต่�อต่�อ

Trade Trade barrierbarrier

HardeHarder for r for

interninternationaationa

l l organiorganization zation and and

instituinstitutiontion

TighteTighter rules r rules

and and regularegulations tions

on on tradetrade

RegioRegionalisnalis

mm

IncreIncrease ase

regioregional nal

coopcooperatieration in on in AsiaAsia

Trade and Cooperation

Trade and Cooperation

Global Trade and Global Trade and CooperationCooperation


New Economic and Business New Economic and Business ModelModel

State CapitalismState Capitalism Sustainable CapitalismSustainable Capitalism


New Global Politic LandscapeNew Global Politic Landscape


Keep growth steady while minimize risk from volatile global economyKeep growth steady while minimize risk from volatile global economyShort-Short-term:term:Short-Short-term:term: Adapt to changesAdapt to changesLong-Long-term:term:Long-Long-term:term:

•Expand home-care service for elder, medical sector, Expand home-care service for elder, medical sector, health-care service and Long stay tourismshealth-care service and Long stay tourisms •Cooperation in production, tradeCooperation in production, trade andand investmentinvestment•Social and Environment sectorsSocial and Environment sectors•Financial cooperation to reduce external risksFinancial cooperation to reduce external risks

•Create advantage to become Agriculture Products HubCreate advantage to become Agriculture Products Hub•Create value creation in agriculture and food productsCreate value creation in agriculture and food products•Innovation and development in alternative energyInnovation and development in alternative energy

Aging SocietyAging Society

Food, Fuel and EnvironmentFood, Fuel and Environment

Economic and FinancialEconomic and Financial

•Green Job / Green Growth / Green EconomyGreen Job / Green Growth / Green Economy

•Expand market and increase regional cooperationExpand market and increase regional cooperation•Restructuring production sector Restructuring production sector

Global warming and Good governanceGlobal warming and Good governance

Regional cooperationRegional cooperation


Thank yougoinggreen

1 14 september 2009 effects of the global economic crisis on thai economy & development plan...

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