Thailand Business Forecast Report Q3 2008

Publication Date	June 2008
Publisher	Business Monitor
Product Type	Report
Pages	62
ISBN Number	1744-8808
Product Code	BMI00821

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Summary

New Administration: Innocent Until Proven Otherwise? We maintain a broadly sanguine outlook on the economy and the Thai political scene as we move into the second half of 008, although there are lingering risks on both fronts. The return to a democratic government bodes well for a normalisation of policymaking, and the pro-market ethos of the new administration will be welcomed by the business community. Meanwhile, the fledgling administration, under Prime Minister Samak Sundaravej, has, among other things, promised a fiscal stimulus package and reforms to the country's tax regime and investment laws. However, the fate of the ruling six-party coalition, dominated by the People's Power Party (a reincarnation of former premier Thaksin Shinawatra's Thai Rak Thai party) is by no means certain as they are under investigation by the country's Election Commission for alleged malpractices in relation to last year's ballot. If found to have circumvented the country's electoral laws they risk being dissolved - something which could potentially trigger yet another round of elections (and by extension another spell of political uncertainty).

The freshly elected government is likely to remain in a mild state of suspense over the coming months, amid nervousness that the country's Election Commission could unearth damaging details relating to last year's elections. Indeed, the governing parties' controversial plan to amend the 2007 constitution has been interpreted as an attempt to insulate itself from potential flak, and even potential dissolution. As we go to print, the charter amendments are still to be deliberated in parliament and it appears as though the opposition's demand for a referendum over the matter will not be met. Clearly, Prime Minister Samak Sundaravej faces some difficult choices, as pressing ahead adamantly with the constitutional changes could reignite the ire of the public and military.

The Thai economy kicked off 2008 on a robust note, with first quarter real GDP growth ticking up to 6.0%, from an already healthy .7% in Q 07. The return to civilian rule and fairly accommodative fiscal and monetary policy has no doubt helped rejuvenate consumer and business optimism.

However, parallel with the rebound in sentiment, the inflationary gauge has also been registering some potentially worrisome pressures of late. High food and oil prices have pushed consumer price inflation back north of the 6.0% mark, last visited in 2006. The corollary of this is that the Bank of thailand has been forced to halt its easing cycle, keeping the one-day repo rate on hold at . % at its May 1 meeting. Unless price growth metrics subside in the coming months there is a risk of a resumption of monetary tightening, something which could put a spanner in the works of the government's pro-growth policy programme.

The government's mooted five-year tax restructuring programme and changes to investment laws augur well for the business environment in H208 and could help bolster Thailand's relative standing in BMI's Business Environment Ratings. The Sundaravej administration is planning sizeable infrastructural projects which should help lift sectors such as construction and real estate. Moreover, the proposed fiscal stimulus package includes possible tax breaks for individuals and small-to-mediumscale enterprises. A key short-to-medium term threat is the uptick in inflation and the continued appreciation of the baht, both of which pose palpable risks to investment plans and margins ahead.

Content

Executive Summary
- New Administration: Innocent until Proven Otherwise?
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- Constitutional Kerfuffle to Fizzle out?
- Tensions Surrounding The Governing Coalition's Mooted Plans to Amend The 2007 Constitution Are Still Brewing,
- but There Are Some Indications That The Incumbents May Be Backpedaling, out of Concerns over The Possible Fallout
- Should They Forge Ahead with The Changes
List of Tables
- Table: Thailand Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Domestic Demand to Cushion External Slowdown?
- We Maintain Our Broadly Sanguine Outlook on The Thai Economy in View of The Return to Democratic Rule,
- Pro-Market Policies and A Fairly Buoyant Momentum in Domestic Demand
List of Tables
- Table: Economic Activity
- Exchange Rate Policy
- Baht Still Has Room for Appreciation in 2008
- We Believe That The Thai Baht Can Continue to Appreciate against The US Dollar in 2008, Thanks to Improved
- Political Conditions, Positive Macroeconomic Fundamentals, and Strong Investment
List of Tables
- Table: Exchange Rate Policy
- Monetary Policy
- Bot: Playing The Waiting Game
- We Are Expecting The Bank of Thailand to Maintain Is Current Neutral Stance with Regards to Interest Rates over
- The Remainder of 2008 as IT Continues to Weigh Downside Risks to Growth with Upside Risks to Inflation
List of Tables
- Table: Monetary Policy
- Balance of Payments
- Rampant Imports Drag on Current Account
- While Exports Continue to Hold up Well, despite Recessionary Headwinds in The US and A Stronger Baht,
- Thailand's Current Account Surplus Will Be Whittled Away in 2008 as Soaring Oil and Commodity Prices Push
- Import Growth to 30.0%
List of Tables
- Table: Balance of Payments
Chapter 3: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The World
- Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors and Global
- Businesses over The Coming Years
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversity through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices
- Regional Overview
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for Its
- Natural Resources
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Forecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity
Chapter 4: 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: Labour Force Quality
- Table: Asia, Fdi Inflows
- Table: Bmi Trade Ratings
- Table: Top Export Destinations (US$Mn)
- Operational Risk
Chapter 5: Key Sectors
- Commercial Banking
List of Tables
- Table: Annual Growth Rate Projections, 2007-2012 (%)
- Food & Drink
List of Tables
- Table: Food Category Sales Indicators - Historical Data & Forecasts