All the figures point to an even more gloomy economic view
Global financial markets appear to have plunged into a violent, gigantic whirlpool, as evidenced by the latest 20-per-cent drop in equity prices in developed markets.
The MSCI All-Country World Index of 45 nations entered into a bear market Firday for the first time in more than two years.
The worsening European debt crisis and threat of a US recession has erased more than US$10 trillion from equities since May, according to Bloomberg.
In Bangkok, the Stock Exchange of Thailand fell 32.43 to close the week at 958.16, with trading value of over Bt50 billion.
Deputy Prime Minister Kittirat na Ranong said the Thai bourse's decline should be short-term as the Yingluck government is preparing to boost the domestic economy to counter external threats. Earlier, he said the government will boost wage earners' income by raising the minimum wage to Bt300 per day from the current Bt150-220.
In addition, it will raise the rice paddy price to Bt15,000 per tonne from less than Bt10,000 via the rice subsidy scheme.
Both policies will raise the grassroots purchasing power to help cushion the external impacts on the Thai economy, which heavily depends on the export sector.
Exports currently account for as much as 70 per cent of Thai GDP, while domestic consumption is about 40 per cent.
According to Kittirat, the higher incomes of wage earners and farmers will help boost domestic consumption at a time when external demands for Thai products have been hit by the eurozone and US debt crises.
In a bid to ease the global financial turmoil the Group of 20 major economies pledged late last week to mount a powerful response to the rising challenges facing the world economy, according to Bloomberg.
At a meeting of G-20 finance ministers and central bankers, they issued a joint statement that member countries would deliver "a strong and coordinated international response to address the renewed challenges facing the global economy".
These finance chiefs also noted "heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment".
Citing the sharp drop in equity prices, Mohamed El-Erian, chief executive officer of Pacific Investment Management Co, said the world is poised for a financial crisis.
On September 21, the US Federal Reserve said there are "significant downside risks" in the US economy, prompting the central bank to announce a $400 billion plan to spur growth, as the recovery from the worst contraction since the Great Depression falters.
"The market is pricing itself into a recession," said Ng Soo Nam, the Singapore-based chief investment officer at Nikko Asset Management Co, which oversees about $154 billion in investments.
"Stocks are looking cheap, but it will take a lot of courage to believe that. Things could get worse. The risk of a sovereign-debt default in Greece is the most significant concern."
According to Bloomberg, the MSCI All-Country World Index has retreated 19.8 per cent since July 22. It fell after Standard & Poor's cut the US credit rating following a debate over raising the nation's borrowing limit, speculation intensified that Greece will default, and Chinese inflation accelerated to a three-year high.
The slump pushed the price-earnings ratio for the index down to 11.4, the lowest since March 2009 and 46 per cent less than the 16-year average, data compiled by Bloomberg shows.
