Mild impacts anticipated for Thailand

 SCB Executive Vice President and Chief Economist Dr. Sutapa Amornvivat viewed that Thailand has borrowed small amounts of money from European banks, with public debt as low as 42 per cent of gross domestic product (GDP). Under the circumstances, the government has enough budget to stimulate the local economy. Revenue earned locally could offset any shortfall in export revenue due to the global economic slowdown.
 She said the export sector will be not be adversely affected because exporters have already turned to shipping their products to countries other than Europe and the US. Products taking the brunt of the export slowdown include natural rubber, automobiles, and electronics, while other products, particularly foodstuffs, will be minimally impacted because they are indispensable goods with lower production costs. Thailand also has bargaining power with the products in the world market.
 As for Thailand's economic outlook in 2012, Sutapa projected the economy would grow around 4 per cent, driven by domestic consumption instead of export growth. Inflationary pressure will ease, although minimum wages will increase since oil prices are unlikely to rise significantly. In this scenario, interest rates should not increase considerably from now on. Overall, the Thai economy should weather external economic fluctuations given the fact that its economic fundamentals remain strong, said Sutapa.
 But due to the global rebalancing, for emerging markets as a whole, Sutapa predicted that many countries will shift focus to exporting to others in the region and rely more on domestic consumption, with the state sector playing an active role in stimulating the economy. Regional currencies will remain volatile due to financial market uncertainties and fund flows. In addition, should European banks, which are the main lenders, experience trouble, emerging markets will experience a lack of capital sources, which could shake mega-investment projects.
 Volatility would remain high in the global economy, she said. Although the US Federal Reserve and Treasury Department have come up with measures to remedy ailing financial institutions and inject liquidity into the system, the crisis has not yet been tackled. Worse still, it has escalated and spilled over into the real economic sector as can be witnessed by the slow recovery of lending and stricter loan terms and conditions imposed by financial institutions. Simultaneously, unemployment remains high, making it difficult for the economy to pick up.
 The public debt crisis in Europe is also still of great concern as it has spilled over to major countries like Spain and Italy. The problem has a direct impact on the financial sector because financial institutions made huge investments in government bonds. Under the circumstances, should governments experience debt problems and need to restructure debt, risks taken by the banking sector will increase.
 Sutapa said Europe will face greater challenges than the US since it needs approval from member countries if it wants to take any measures. Although the German parliament voted to increase the size of the European Financial Stability Fund (EFSF), it remains in doubt whether it has sufficient funds to remedy the ailing European economy. With the public debt crisis persisting, it is very difficult to make an economic growth forecast in Europe.
 Her views are expressed at the SCB annual conference today. Entitled “Thailand: Moving Forward with the New Government", the conference features the keynote speech by Bank of Thailand Governor Prasarn Trairatvorakul on Thailand's economic direction in 2012.
 A panel discussion will be held at the forum, featuring SCB Chairman of the Executive Committee Vichit Suraphongchai along with the country's leading business leaders. Panellists will air their perspectives on economic challenges and opportunities in Thailand under the stewardship of the new government as well as ways to fight against global economic fluctuations. The forum will also serve as a venue for an exchange of knowledge and experiences by participants for use in adjusting their future business plans.