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Federation of Thai Industries says it’s too early to forecast possible deflation
People should not be too worried about possible deflation now that the inflation rate has moved closer to negative territory, according to the Federation of Thai Industries.
Prapat Photivorakul, chairman of the FTI, said some parties are anxious about the possibility of deflation after the latest inflation rate was almost negative. However, he feels that concern at this time is unwarranted since he thinks it will take another month to access the situation to gain a clear picture on deflation.
The FTI chairman said he thinks the fear stems from mounting concern over global economic slowdown, the baht’s volatility and continued economic uncertainty in the United States.
Still, he believes the Thai economy will manage to weather the storm given the improved status of Thai exports and increased production in the industrial sector.
Prapat said, “Many economic figures have improved. For instance, the production capacity in the industrial sector increased to 55% in the second quarter from 50% in the first quarter.”
“The production for the whole year is expected to average 52%, which shows good prospects for growth,” Prapat stated. He added, “At the same time, the baht has now weakened, which bodes well for the country’s export competitiveness.
“The recent appreciation of the baht stemmed from the weakening of the US dollar, not internal factors,” Prapat said. (TNA)
No need to raise VAT for now
Deputy Prime Minister Somkid Jatusripitak recently reiterated that he sees no need to raise the value-added tax as suggested by some of Thailand’s academics since the country’s fiscal position remains sound.
Somkid said the proposed increase in the tax aimed at easing public debts deserved consideration. But when this step is taken we must take into account the country’s economic conditions, business stability and fiscal position.
In his view, the VAT hike remains unnecessary for the present because public debts have only slightly increased under the current administration and are at a controllable level.
The deputy prime minister said the improvement rating of Thailand’s economic outlook by Standard & Poor’s was made by the leading credit rating agency for the first time in five years. It was very likely the agency would raise the country’s sovereign position from stable to positive outlook soon because the economy is showing signals of recovery, boosted by the one-year and half performance by the present government.
Regarding concern over non-performing loans, Somkid said the latest figures show the NPL level had not significantly increased and the government is dealing with the problem. (TNA)
Free trade areas between Thailand and trading partners will see progress this year
Thailand’s attempts to set up free trade areas with trading partners will be see progress by the end of this year, according to Foreign Minister Surakiart Sathirathai.
Surakiart recently stated that the government will forge ahead for concrete development on the establishment of free trade areas with Australia, Bahrain, China, Japan, and India.
Local producers and exporters should, therefore, take prospects of theses countries into consideration when planning investment and expansion of their exports so that they can be beneficiaries once the free trade areas are established.
Prime Minister Thaksin Shinawatra also raised the topic of the proposed free trade areas during his earlier meetings with leaders of the countries and received very positive response.
Surakiart said that he has instructed Thai ambassadors and consuls overseas to publicize Thailand’s key role in the so-called Asian Cooperation Dialogue (ACD), also initiated by Premier Thaksin, emphasizing on the country’s status as a production for exports hub of the countries taking part in the regional forum.
“Being clear about the framework of ACD, Thai envoys overseas will be able to coordinate with countries in and outside the ACD to publicize Thailand’s status as the production for exports center of the newly-established forum,” Surakiart said. (TNA)
Farmers’ incomes to receive boost
Thailand’s prime minister recently told a gathering of 10,000 people in the northeastern province of Khon Kaen that his administration plans to mobilize a budget of B30 billion to boost local farmers’ incomes through new initiatives over the next few years.
The government will initiate a joint farm management project between the Ministries of Commerce and Agriculture and Cooperatives which will enhance exports of agricultural products through bilateral trade agreements with trading partners.
“Commerce Minister Adisai Bodharamik will meet his Chinese, Indian, Pakistani and Vietnamese counterparts in October to discuss the setting up of a rice trade joint venture,” the PM said.
The Ministries of Commerce and Agriculture and Cooperatives will coordinate management of production, harvesting and sale of farm products to help boost their prices and improve quality. The government will also find markets for local produces under the One tambon-One product scheme, and plans to launch a project to protect intellectual property rights for producers of locally made products by 2004.
The government would also use satellite images to help solve the problem of land disputes. (TNA)
Government makes plans for early debt repayment to IMF
The government’s plan to repay the outstanding debts incurred with the International Monetary Fund earlier than scheduled is justifiable because Thailand’s international reserve is sufficiently strong now. Bantoon Lamsum, president of Thai Farmers Bank, said the international reserve stood at US$38-39 billion now, which is considered very strong.
Therefore the plan to repay all debts in January next year will show Thailand is in a better position to service debt. It could also help boost investor confidence in the country’s economy. Bantoon said the overall economy has now improved as the government’s estimate that the economy would grow 3-4% this year was very likely.
The improved economic conditions will encourage lending by financial institutions. Foreign investors’ confidence has also increased as could be witnessed by the Cerberus Fund’s shifting of investment into Thailand.
Bantoon said many business sectors including property and tourism had markedly recovered. Exports of precious stones and ornaments, frozen seafood, and electronic parts had also improved while imports had not grown to the uncontrollable amount. (TNA)
More Japanese investment and tourists needed
Deputy Prime Minister Somkid Jatusripitak is making plans to visit to Japan in the near future hoping to draw more investment and tourists. He said Japan is one of Thailand’s key markets in terms of investment and tourism. It should not be likened to China since potential investors and tourists from Japan come to Thailand in much smaller numbers.
Dr Somkid, who is also finance minister, acknowledged a lot of Japanese investors have already established a firm foothold in Thailand. But since Japan is a sizable market, the government wants to attract more investment, particularly from the country’s small and medium-size enterprises.
He said his delegation will meet leading Japanese businessmen, particularly operators in tourism, to draw more tourists to Thailand. The deputy premier said he had instructed government agencies concerned to study the detailed strategy.
The planned visit will also aim to strengthen bilateral relations and trade cooperation. Target industries on which he wants to stress investment attraction include automobile, food, and electronics. (TNA)
NPLs in bank sector rise in July
Non-performing loans held by commercial banks in July increased by around 5 billion baht, with those at Bangkok Bank topping of the list, according to a report from the Stock Exchange of Thailand. So far, 7 out of 13 commercial banks have informed the SET their NPLs held as of the end of July totaled 211 billion baht, a rise of 5.4 billion or 2.63% from 206 billion in June.
Bangkok Bank experienced the sharpest rise, by 4.9 billion baht or 4.6% to 113 billion in July from 108 billion the previous month.
Thai Military Bank saw its NPLs increase by 983 million baht to 30.7 billion baht, Standard Chartered Nakornthon by 25 million to 811 million, UOB Radanasin by 14.2 million to 714 million, Thanachat by 257 million to 1.15 billion.
Still, Thai Farmers Bank saw its NPLs drop by 816 million baht to 61.4 billion and BankThai by 16 million to 3.7 billion. Deja Tulanand, senior vice president of Bangkok Bank attributed the increase in problem loans to the re-entry of NPLs.
However, such NPLs stemmed from the technical problem of the accounting system facing two major debtors in the sugar industry. He said he was confident NPLs held by the bank in August would not increase like those in July. (TNA)
MOC revises export growth estimate down to 3.5%
Commerce Minister Adisai Bodharamik has made a downward revision of this year’s export growth estimate to 3.5%, saying the slower than expected economic recovery in the United States has impeded growth.
Upon the assessment of the country’s export situation with exporters in all kinds of industries, he said, the ministry decided to revise the export growth target down to that level with total value of US$67.5 billion.
Previously, the ministry set the export target at 5.7% with total value of $69 billion this year and expected import would decline by 1.5% with total value of $64.2 billion. It is estimated the country would enjoy a trade surplus of $3.3 billion.
However, Dr Adisai said, the ministry believes the export figures will grow at an average of 8.6% for the rest of the year since economies of key destinations, except the US and Europe, remained strong.
He said the downward revision of the export growth estimate was made because Thailand had suffered a drop in the export of electronics, chicken and shrimp. In particular, shrimp exports plunged by around 40% due to non-tariff barriers imposed by the European Union.
In addition, the US economy failed to recover as expected in the second quarter of this year. Still, he was confident exports to the US in the next six months will not contract considerably because the country’s economy is still quite dynamic and its consumer index remains positive.
Meanwhile, Banpot Hongthong, director-general of the Export Promotion Department, said the export situation was expected to improve in the second half of this year as could be witnessed by the gradual increase of many exported products, particularly electrical appliances and textile and garment. But the shrimp export remained of concern and the government was trying to solve the problem. (TNA)
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