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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
21 4 September 2009 www.nesdb.go.th
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)
31 4 September 2009 www.nesdb.go.th
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
41 4 September 2009 www.nesdb.go.th
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
51 4 September 2009 www.nesdb.go.th
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)
61 4 September 2009 www.nesdb.go.th
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
71 4 September 2009 www.nesdb.go.th
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.
81 4 September 2009 www.nesdb.go.th
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
91 4 September 2009 www.nesdb.go.th
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.
101 4 September 2009 www.nesdb.go.th
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
121 4 September 2009 www.nesdb.go.th
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)
131 4 September 2009 www.nesdb.go.th
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.
141 4 September 2009 www.nesdb.go.th
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
151 4 September 2009 www.nesdb.go.th
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
161 4 September 2009 www.nesdb.go.th
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)
171 4 September 2009 www.nesdb.go.th
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)
181 4 September 2009 www.nesdb.go.th
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
191 4 September 2009 www.nesdb.go.th
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)
201 4 September 2009 www.nesdb.go.th
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
211 4 September 2009 www.nesdb.go.th
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
221 4 September 2009 www.nesdb.go.th
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
231 4 September 2009 www.nesdb.go.th
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
241 4 September 2009 www.nesdb.go.th
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
251 4 September 2009 www.nesdb.go.th
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
261 4 September 2009 www.nesdb.go.th
Technology and Technology and InnovationInnovationInformation TechnologyInformation Technology
NanotechnologyNanotechnology Cognitive TechnologyCognitive Technology
BiotechnologyBiotechnology
271 4 September 2009 www.nesdb.go.th
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
281 4 September 2009 www.nesdb.go.th
New Economic and Business New Economic and Business ModelModel
State CapitalismState Capitalism Sustainable CapitalismSustainable Capitalism
291 4 September 2009 www.nesdb.go.th
New Global Politic LandscapeNew Global Politic Landscape
301 4 September 2009 www.nesdb.go.th
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
311 4 September 2009 www.nesdb.go.th
Thank yougoinggreen