Q+A-Will Thai economy sustain its recovery after unrest? | Reuters
BANGKOK, Sept 8 (Reuters) - Three months after the worst
political violence in modern Thai history, the economy is back
on course, with the hard-hit tourist sector recovering rapidly
and economic growth of 7 percent feasible for 2010.
The unrest in April and May seems to have had only limited
impact, with Southeast Asia's second-largest economy even
managing to grow in the second quarter, against most forecasts.
Consumer confidence has risen and exports remain strong.
However, growth in the second half is likely to be lower
than a robust first half due to a global slowdown and base
effects.
Below are details of how firms, tourism and the export-led,
$264 billion economy are faring [ID:nSGE65703R].
WHAT ARE GDP FORECASTS?
The economy escaped a widely expected contraction in the
second quarter, growing 0.2 percent from the first and
prompting the state planning agency, the NESDB, to raise its
2010 growth forecast sharply to 7.0-7.5 percent from the
3.5-4.5 percent seen in May shortly after the unrest ended.
[ID:nSGE67M06A]
Prime Minister Abhisit Vejjajiva has made a similar
forecast, while the International Monetary Fund predicts as
much as 8 percent, which would be the highest rate in 15 years
and probably the best performance among Southeast Asia's big
economies.
The central bank forecasts 2010 growth of 6.5-7.5 percent.
It raised its policy rate 25 basis points in both July and
August to 1.75 percent to curb inflationary pressures as the
economy picks up and is expected to tighten again next month.
[ID:nSGE65103A].
The economy expanded 10.6 percent in the first half from a
year earlier, the highest in 13 years, but growth is likely to
be lower in the second half, with 4-5 percent forecast by the
NESDB.
Finance Minister Korn Chatikavanij said last month the
economy might post a small fall in the third quarter from the
second as the global slowdown hits exports. [ID:nSGE67U0GQ]
Export growth in the second half may be lower than in the
first, especially with the baht THB= at 13-year highs. But
the central bank has forecast 2010 export growth of up to 27.5
percent, saying baht strength has not harmed competitiveness.
HOW'S TOURISM DOING?
Foreign tourists are returning to the "Land of Smiles",
where the tourist sector is equivalent to 6 percent of GDP and
employs at least 15 percent of the workforce.
The Tourism Authority of Thailand, which had cut its target
for arrivals this year to 13 million from 15.5 million, is now
forecasting at least 14.5 million, up from 14.15 million in
2009, when tourism also faced political turmoil.
[ID:nSGE6860CQ]
The NESDB predicts more than 15 million foreign tourists
this year. The Association of Thai Travel Agents, a private
body, is keeping its 13 million target but says 15 million is
possible.
The number of foreign tourists rose 15 percent in July from
a year earlier after May's 11.8 percent drop. In January-July,
the number rose 13.8 percent from a year earlier to 8.77
million.
In Khao San Road, Bangkok's budget hotel area, occupancy
has picked up to a normal 80 percent, while five-star Centara
Grand hotel said occupancy had risen to 45-50 percent from 30
percent during the unrest, but 60-70 percent is more normal.
WHAT ABOUT BUSINESSES?
Business in Bangkok's main shopping area, badly hit by the
unrest, has largely returned to normal. Consumer confidence is
rising after suffering a record drop in April. [ID:nSGE67A04G]
Central Pattana Pcl (CPN.BK), whose Central World mall --
the second largest in Southeast Asia -- suffered the biggest
loss from arson as the protest was put down on May 19, said
last month it expected revenue growth of at least 10 percent
this year and would partially reopen the mall late this month
or early next.
Thai Airways (THAI.BK) reported a better-than-expected net
profit in the second quarter, although that was due to a
currency gain that offset a drop in passengers. [ID:nBAK003103]
Airports of Thailand Pcl (AOT.BK) posted a
bigger-than-expected loss in April-June. But it says passenger
numbers at the main Bangkok airport has risen to a normal level
of 100,000 per day on average [ID:nBAK003102].
Top convenience store operator CP All Pcl CPALL.BK posted
a better-than-expected profit in the second quarter as
consumption picked up. Car firms are expected to see a 37
percent rise in domestic sales this year, according to Toyota.
The property sector is thriving, with new projects
sprouting across Bangkok to tap pent-up demand [ID:nSGE67T0FS].
However, some analysts are concerned about the
sustainability of economic growth following a decline in
factory output in July from June and with big firms holding off
new investment, pending clarity on a dispute at the country's
largest industrial estate.
Last week, a court allowed all but two of 76 projects
halted because of environmental concerns to go ahead, angering
environmentalists who said they might appeal. [ID:nSGE68118P]
The Board of Investment is keeping its target for overall
investment pledges at $16 billion this year, saying the court
ruling will boost investor confidence. Despite all the
problems, investment applications from foreign investors rose
46.5 percent in the first seven months from a year before.
[ID:nSGE6820FA]
WHAT HAS BEEN DONE TO HELP?
The government has introduced relief measures, including
tax breaks, grants and soft loans, to help tourism, businesses
and people affected by the unrest.
Buyers of domestic tour packages from agents can deduct up
to 15,000 baht ($483) from their taxable income, and tour
operators will get tax breaks, too. Insurance firms that make
payouts related to the unrest can offset some of that against
tax.
Smaller firms affected by the unrest have been offered
loans of up to 4 million baht. A 50,000 baht one-off grant is
given to businesses that suffered arson during the unrest and
7,500 baht a month is given for up to six months to employees
who lose income.
($1=31.02 baht)
(Additional reporting by Khettiya Jittapong; Editing by Alan
Raybould)
political violence in modern Thai history, the economy is back
on course, with the hard-hit tourist sector recovering rapidly
and economic growth of 7 percent feasible for 2010.
The unrest in April and May seems to have had only limited
impact, with Southeast Asia's second-largest economy even
managing to grow in the second quarter, against most forecasts.
Consumer confidence has risen and exports remain strong.
However, growth in the second half is likely to be lower
than a robust first half due to a global slowdown and base
effects.
Below are details of how firms, tourism and the export-led,
$264 billion economy are faring [ID:nSGE65703R].
WHAT ARE GDP FORECASTS?
The economy escaped a widely expected contraction in the
second quarter, growing 0.2 percent from the first and
prompting the state planning agency, the NESDB, to raise its
2010 growth forecast sharply to 7.0-7.5 percent from the
3.5-4.5 percent seen in May shortly after the unrest ended.
[ID:nSGE67M06A]
Prime Minister Abhisit Vejjajiva has made a similar
forecast, while the International Monetary Fund predicts as
much as 8 percent, which would be the highest rate in 15 years
and probably the best performance among Southeast Asia's big
economies.
The central bank forecasts 2010 growth of 6.5-7.5 percent.
It raised its policy rate 25 basis points in both July and
August to 1.75 percent to curb inflationary pressures as the
economy picks up and is expected to tighten again next month.
[ID:nSGE65103A].
The economy expanded 10.6 percent in the first half from a
year earlier, the highest in 13 years, but growth is likely to
be lower in the second half, with 4-5 percent forecast by the
NESDB.
Finance Minister Korn Chatikavanij said last month the
economy might post a small fall in the third quarter from the
second as the global slowdown hits exports. [ID:nSGE67U0GQ]
Export growth in the second half may be lower than in the
first, especially with the baht THB= at 13-year highs. But
the central bank has forecast 2010 export growth of up to 27.5
percent, saying baht strength has not harmed competitiveness.
HOW'S TOURISM DOING?
Foreign tourists are returning to the "Land of Smiles",
where the tourist sector is equivalent to 6 percent of GDP and
employs at least 15 percent of the workforce.
The Tourism Authority of Thailand, which had cut its target
for arrivals this year to 13 million from 15.5 million, is now
forecasting at least 14.5 million, up from 14.15 million in
2009, when tourism also faced political turmoil.
[ID:nSGE6860CQ]
The NESDB predicts more than 15 million foreign tourists
this year. The Association of Thai Travel Agents, a private
body, is keeping its 13 million target but says 15 million is
possible.
The number of foreign tourists rose 15 percent in July from
a year earlier after May's 11.8 percent drop. In January-July,
the number rose 13.8 percent from a year earlier to 8.77
million.
In Khao San Road, Bangkok's budget hotel area, occupancy
has picked up to a normal 80 percent, while five-star Centara
Grand hotel said occupancy had risen to 45-50 percent from 30
percent during the unrest, but 60-70 percent is more normal.
WHAT ABOUT BUSINESSES?
Business in Bangkok's main shopping area, badly hit by the
unrest, has largely returned to normal. Consumer confidence is
rising after suffering a record drop in April. [ID:nSGE67A04G]
Central Pattana Pcl (CPN.BK), whose Central World mall --
the second largest in Southeast Asia -- suffered the biggest
loss from arson as the protest was put down on May 19, said
last month it expected revenue growth of at least 10 percent
this year and would partially reopen the mall late this month
or early next.
Thai Airways (THAI.BK) reported a better-than-expected net
profit in the second quarter, although that was due to a
currency gain that offset a drop in passengers. [ID:nBAK003103]
Airports of Thailand Pcl (AOT.BK) posted a
bigger-than-expected loss in April-June. But it says passenger
numbers at the main Bangkok airport has risen to a normal level
of 100,000 per day on average [ID:nBAK003102].
Top convenience store operator CP All Pcl CPALL.BK posted
a better-than-expected profit in the second quarter as
consumption picked up. Car firms are expected to see a 37
percent rise in domestic sales this year, according to Toyota.
The property sector is thriving, with new projects
sprouting across Bangkok to tap pent-up demand [ID:nSGE67T0FS].
However, some analysts are concerned about the
sustainability of economic growth following a decline in
factory output in July from June and with big firms holding off
new investment, pending clarity on a dispute at the country's
largest industrial estate.
Last week, a court allowed all but two of 76 projects
halted because of environmental concerns to go ahead, angering
environmentalists who said they might appeal. [ID:nSGE68118P]
The Board of Investment is keeping its target for overall
investment pledges at $16 billion this year, saying the court
ruling will boost investor confidence. Despite all the
problems, investment applications from foreign investors rose
46.5 percent in the first seven months from a year before.
[ID:nSGE6820FA]
WHAT HAS BEEN DONE TO HELP?
The government has introduced relief measures, including
tax breaks, grants and soft loans, to help tourism, businesses
and people affected by the unrest.
Buyers of domestic tour packages from agents can deduct up
to 15,000 baht ($483) from their taxable income, and tour
operators will get tax breaks, too. Insurance firms that make
payouts related to the unrest can offset some of that against
tax.
Smaller firms affected by the unrest have been offered
loans of up to 4 million baht. A 50,000 baht one-off grant is
given to businesses that suffered arson during the unrest and
7,500 baht a month is given for up to six months to employees
who lose income.
($1=31.02 baht)
(Additional reporting by Khettiya Jittapong; Editing by Alan
Raybould)
