THE FUTURE - what lies ahead for LOS?

[rxpharm]

That topic has been discussed quite a bit here: Baht vs. Major Currencies. Please post in that thread for discussion of the Pound vs. Baht.

[manarak]

* manarak pulls his crystal ball out of his ass *

2009-2010 forecast for Thailand:

- 08/09 tourist season results will be bad, as much as -20% to -25%
- the low season will be one of the worst of the last years
- exports will drop even more, also by about 20%
- 09/10 tourist season will not be much better
- political situation will stabilize, because Taksin's ability to mobilize people is falling. Taksin could attempt an all-out offensive before the next election though. Regarding that matter, let's wish a long life to the King. Situation will be OK later if next election's winners support the palace
- condo prices will suffer, as will prices of houses in the 7.5 to 15 million baht range
- construction market will suffer from the crisis, but building material costs will remain high after a selloff
- many bars will close down, as will many trendy clubs
- currencies: USD and all USD dependent currencies (GBP, AUD) will fall even more over the whole year 2009. I expect the swiss franc, the yen and the euro to be stronger (1 USD for 0.50 EUR is not unrealistic). I imagine prices of 1 swiss franc for 50 baht and maybe 1 EUR for 65 baht. The baht will accompany the USD, so it will only show slight gains over the USD (maybe 10 to 15%?), so the USD will bounce between 30 to 35 baht The rinminbi will have no choice than to go down along with the dollar. I expect Russia to be a big winner of the current crisis (and maybe the russian rouble too). Russia can do without imports, except for food - but Russia can pay Belarus and Ukraine with gas and oil fore their wheat and livestock. On the other hand, Russia is one of the biggest energy and metals exporters, and the prices are dictated by the market - making the rouble fall will not diminish revenues on these exports, so there will be a constant inflow of money.
Expect to see proportionnally more russki-speaking guests in pattaya and phuket.
- Unemployment will rise much more than what thai gov. expects. Going back to Issaan and farming rice and chicken will become more trendy among thai bargirls.
- there is a possibility that the thai government choses to continue mega-projects in these times of crisis
- visa and work permit regulations will probably get tightened even further
- there will be some tensions between thais and burmese/cambodian workers

... and I hope that the following happens ...

- I will make enough $ from the internet to leave my job
- the price of property in east pattaya drops enough for me to actually buy something nice
- a cure against AIDS is found

[thegame925]

WORLD AFFAIRS

Cheaper Isn€™t Better
As the global recession deepens, Asian nations can no longer export their way to prosperity.

By Ruchir Sharma | NEWSWEEK
Published Jan 24, 2009
From the magazine issue dated Feb 2, 2009

Over the past few months economic trends across the world have broadly followed a similar logic: what goes up must come down. And then there's Thailand.

The Thai economy, which missed out on the growth boom of this decade, is now more than fully participating in the economic meltdown. In fact, Thailand looks set to be one of the few developing Asian economies to contract in 2009.

Thailand's travails are, in a way, the most extreme example of all that has gone wrong with the erstwhile East Asian tigers. While the problems with the United States economy have been well telegraphed for a long time now, the widely held view until a few months ago was that Asia was coming into its own in economic terms. The mere mention of the continent would conjure up images of booming growth, surging consumer spending and buzzing entrepreneurial energy.

But the reality is that outside of the sensational stories of China and India, domestic demand in much of Asia has been moribund, even during the golden era of high world economic growth from 2003 to 2007. That left the region as dependent as ever on exports. And now with global trade collapsing, the Asian model of "exporting your way to prosperity" stands well and truly broken.
For years the popular thinking among economists was that the fastest path to development was to ship out cheaply produced goods to the industrial world, while undervaluing one's currency to make those goods even less expensive in export markets.

The model worked well in the 1980s and '90s, when only a few Asian countries such as South Korea and Malaysia were playing the export field and the United States was in the midst of a consumption binge. But the export pie is finite, and cracks began to show up in the mid-'90s with the growing presence of China. The sharp devaluation of the Chinese currency in 1994 was cited as an important factor in the eventual outbreak of the region's economic crisis in 1997-98.

Back then, a slowdown in the export growth of countries such as Thailand resulted in trade deficits widening to unsustainable levels. But instead of rebalancing the economy to rely more on domestic growth, Thailand increased its reliance on exports in the aftermath of the late-'90s financial crisis. It was the easy way out, since the global economy was booming. Currently, exports form a larger part of the Thai economy than domestic consumption€”a rather anomalous situation.

For all the firepower of its export machine, Thailand never regained the heady expansion of the 1980-96 era. While growth in emerging markets on average doubled from the 3.5 percent pace of 1980-2002 to 7 percent between 2003 and 2007, Thailand's growth downshifted to 5 percent, from 6 percent, during the same period. Foreign capital that funded the emerging-market boom bypassed Thailand for markets with better domestic-demand stories. More important, net exports contributed nearly half of Thailand's growth in recent years, making it particularly vulnerable to a global economic shock.

Some of Thailand's problems stem from the fact that the political class has spent the past few years engaged in a standoff over the controversial leadership of exiled ex-president Thaksin Shinawatra and his successors, rather than reforming the economy. Thailand has had three different prime ministers since September 2008, while other governments been focused on countering the economic meltdown.

Political masochism reached new heights in December 2008 when protesters seized Bangkok's airports, leaving 350,000 international tourists stranded just ahead of the peak tourist season. The aftereffect is apparent in Bangkok's deserted hotel lobbies and room-occupancy rates running well below 50 percent€”in what was a global tourism hotbed. Analysts estimate that the airport protests along with the general slowdown in world travel could knock off nearly 2 percentage points from Thailand's growth in 2009.

Thailand's leaders need to get their act together. To move to the next stage of economic development, Thailand must unlock domestic demand by creating the right economic incentives for private enterprise to flourish within the country. Businesses cite the poor regulatory environment, cumbersome labor laws, long customs procedures and the poor education system as factors holding back local growth. Thailand itself has not seen an investment upturn since the 1997-98 crisis, leaving its infrastructure in need of a fix as well, something critical in boosting domestic demand.
Following the Asian financial crisis, Thailand, like many of its neighbors, focused on fortifying themselves against any external shock by building up massive foreign-exchange reserves and running current-account surpluses. The one positive result of such mercantilist policies is that much of the region is currently not stretched in credit and investment terms. The deep psychological scars from the 1997-98 financial crisis prompted consumers and companies in the region to pay down debt and stay away from taking any excessive leverage resulting in record-low loan-deposit ratios in the banking system.

But in the effort to protect themselves from any homegrown crisis, these countries ignored the potential negative effects from a falloff in global demand. Malaysia, for instance, continues to gear its economy mainly to manufacture electronic goods, which are now also produced in lower-cost economies including China and Vietnam. Meanwhile, the larger and relatively more advanced economies of South Korea and Taiwan have been unable to shift to a service-sector-oriented model that would allow them to grow at a faster rate. Little wonder that apart from Thailand, Korea and Taiwan are the other developing Asian economies set to contract this year.

History is littered with instances of countries getting stuck at some relatively low per capita income level due to their inability to implement reforms needed to transition to a higher plane. In contrast, Japan reached a much higher per capita income level of $30,000 in the early '90s before stagnating, even though exports as a share of GDP averaged only 10 percent through much of its strong growth phase, while in Thailand exports currently make up 60 percent of GDP and the per capita income level is just $4,000. Japan's greater success was due to the fact that in the 1970s and '80s its policymakers focused on creating the right conditions for a virtuous domestic investment and consumption supercycle.

The "exporting your way to prosperity" model served many of the East Asian economies well when U.S. demand was ripping ahead, and some of the large emerging markets, such as India and Brazil, were still only marginal players in the export markets. But now, with the developed world set for a protracted period of subpar growth and newly emerging economies including Vietnam and Bangladesh arriving on the global scene to get a piece of the action in the low-value-added export segment, it's time for economies like Thailand to seek new direction. Otherwise, they risk becoming just nice places to visit€”and not even that when their restless people are blocking the airports.

Sharma is head of emerging markets at Morgan Stanley Investment Management. © 2009

Direct Link to Newsweek article

[dummy_plug]

Great article and it rings true. However, the silver lining is that it's good news for us? Who wants Thailand to turn into another Japan anyways?

[manarak]

Who wants Thailand to turn into another Japan anyways?

so true, I am fully satisfied with the non-development of Thailand.