Thailand Business Forecast Report Q1 2009

Publication Date	November 2008
Publisher	Business Monitor
Product Type	Report
Pages	67
ISBN Number	not applicable
Product Code	BMI03038

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Summary

Staving Off A Slump

2009 will prove a year of challenges for Thailand in view of ongoing political tensions and a highly probable economic slowdown, induced in no small measure by global recessionary forces. Worryingly, the political rifts in Thai society that resurfaced in 2008 are unlikely to heal any time soon, with the protesting People's Alliance for Democracy (PAD) seemingly hellbent on dislodging the government. In the worstcase scenario of further large scale clashes between pro and antigovernment supporters, we could see the powerful military once again stepping in and seizing control. A more benign outcome would be fresh elections, although this too may not solve the underlying friction, as the ruling People Power Party (PPP) still enjoys significant support, particularly among the country's rural poor, and thus very likely would be reelected. With the political scene likely to remain in a state of flux, the authorities will struggle to mobilise efforts to prevent a 'hard landing'.

The fate of the government remains highly uncertain, with the Constitutional Court (as we go to print) still not having delivered its verdict in the fraud case lodged against the People Power Party and two of its smaller coalition partners in relation to the 2007 election. If proven guilty, these parties will be dissolved, and the PPP has already prepared for such an eventuality through the establishment of a shellparty to which party members can migrate. As for the controversial proposal to amend the 2007 charter, the government appears to be pushing ahead despite discernible hesitation among coalition members, and this could serve to complicate dialogue with the protestors. Further political ructions are to be expected in 2009, and the backdrop of a deteriorating economy makes the government's predicament a very messy one indeed.

Despite a probable loosening in fiscal and monetary policy to buoy the economy, the odds are stacked in favour of a fairly marked deceleration in growth in 2009. We are currently forecasting a slowdown in real GDP expansion to 3.8%, from a downwardly revised 4.2% for 2008, and stress that the risks are tilted firmly to the downside. This projection is predicated on a dim outlook for the important export sector, continued political tension, volatile financial markets and the attendant subdued business and consumer sentiment. In view of the glum growth outlook, and a deceleration in inflation, we expect the Bank of Thailand to embark on a fairly dramatic trimming of its benchmark oneday repurchase rate, bringing it as low as 2.0% by end2009.

Foreign direct investment is likely to suffer in 2009, due to the heightened global risk aversion and the shaky domestic political situation. Japan and Singapore (which accounted for over half of net FDI inflows in 2007) have both officially fallen in to technical recession, and this will likely result in significantly pared back investment abroad in 2009. Faced with a disorderly slump in business activity and investment the authorities have announced a number of initiatives to try to soften the downturn. The Thai Board of Investment (BoI) has offered 'universal zoning' to six industries deemed especially vulnerable to the slowdown, and these will enjoy maximum incentives regardless of where in the country they run projects. The Stateowned ExportImport Bank (Exim) has also devised softloan programmes to assist ailing exporters, particularly in the smalltomedium scale bracket.

Content

Executive Summary
Staving Off A Slump
Chapter 1: Political Outlook
- Swot Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Political Wounds Still Open
- Still At Risk Of Being Disbanded, The Ruling People Power Party (Ppp) Appears To Be Pressing Ahead With The
- Contested Amendment Of The 2007 Constitution
List Of Tables
- Table: Political Overview
Foreign Politics
Tensions Over Temple Abate, But Still No Resolution
Following A Weeks Of Tension Between Thailand And Cambodia Over A Disputed Strip Of Land Along Their Border,
Thai Prime Minister Somchai Wongsawat Held Talks With His Cambodian Counterpart Hun Sen On October 24 2008
Chapter 2: Economic Outlook
- Swot Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Bracing For A Slowdown
- Despite A Probable Loosening In Fiscal And Monetary Policy To Buoy The Economy, The Odds Are Stacked In Favour Of
- A Fairly Marked Deceleration In Growth In 2009
List Of Tables
- Table: Economic Activity
- Exchange Rate Policy
- ShortTerm Outlook
List Of Tables
- Table: Exchange Rate Policy
- Monetary Policy
- Monetary Easing In The Offing
- The Odds Of Monetary Easing By The Bank Of Thailand (Bot) Have Increased Markedly, In View Of A Sharp Deceleration
- In Inflation And A Deterioration In The Economic Outlook. The Bots Focus Is Now Likely To Turn Almost Exclusively
- Towards Preventing A Dramatic Slowdown In The Economy
List Of Tables
- Table: Monetary Policy
- Balance Of Payments
- External Outlook Worsening
- The Outlook For Thai Exports Has Worsened Significantly Over H208, And Although There Has Been A Parallel Fall In The
- Import Bill, We See A Definite Risk That The Current Account Could Dip Into Deficit Territory In 2009
List Of Tables
- Table: Balance Of Payments
- Chapter 3: 10Year Forecast
  - The Thai Economy To 2018
  - Escaping The Middle Income Trap
  - The Thai Economy Should Grow Reasonably Robustly Up Until 2018 But Could Struggle To Make A Sustained Departure
  - Above Trend
List Of Tables
- Table: LongTerm Macroeconomic Forecasts
- Chapter 4: Special Report
  - Why The Us Can Remain World Superpower
  - Wealth Is Shifting East
  - The Uss Current Financial Woes Will Not Necessarily Undermine Its Position As A Global Superpower
List Of Tables
- Table: Geopolitical Power Index
- Chapter 5: Business Environment
  - Swot Analysis
  - Bmi Business Environment Risk Ratings
  - Business Environment Outlook
List Of Tables
- Table: Bmi Business And Operational Risk Ratings
- Institutions
List Of Tables
- Table: Bmi Legal Framework Ratings
- Infrastructure
- Market Orientation
List Of Tables
- Table: Asia, Fdi Annual Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
- Chapter 6: Key Sectors
  - Telecoms
  - Executive Summary
  - Bmi Has Revised Its Outlook For 2008: Following The 2.3mn Net Additions Reported In Q108 Lower Than The Quarterly
  - Average In 2007 We Estimate 62.2mn Subscribers, Achieving A Penetration Rate Of 97%
List Of Tables
- Table: Telecoms Sector Mobile Historical Data & Forecasts
- Pharmaceuticals
- Executive Summary
- The Thai Pharmaceutical Market Holds A Modest Growth Potential, Which Is Driven By Growing Population,
- Healthcare Sector Modernisation And Economic Development, As Well As The Government Programme To Extend
- Universal Healthcare Insurance And Schemes Funding Arvs For Hiv/Aids Patients
List Of Tables
- Table: Pharmaceutical Market Forecast
- Chapter 7: Bmi Global Assumptions
  - Global
List Of Tables
- Table: Global Assumptions
- United States
- Eurozone
- Japan
- China
- Commodities