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Thailand's economy in 2010: Growth in balance

Frederico Gil Sander's picture

In the years since the 1997/1998 Asian financial crisis, the Bank of Thailand (BoT) worked hard to build a heavy fortress around the nation’s financial sector. As a result, at a time when credit markets froze in developed countries and investors “fled to quality,” large amounts of capital still flowed into Thailand, where banks remained solid and well capitalized. Despite the financial strength brought by prudent policies, for the first time since the financial crisis, Thailand will see GDP and household consumption drop, and poverty could even increase in 2009. It is clear that the financial armor was insufficient to protect the economy from another crisis.

The culprit has been identified as Thailand’s excessive reliance on external demand, and talk of “rebalancing” growth towards domestic consumption and investment has become quite common (pdf). The idea of rebalancing makes some sense – but it can also be misleading. Let me explain.

Aceh five years after the tsunami: where have all the customers gone?

Harry Masyrafah's picture

It surprised me a little bit when I was driving my family along the west coast of Aceh a couple of weeks ago. Not too far from Banda Aceh, the capital city of Aceh’s province, a 15 meters wide- fresh-paved asphalt road built by the US absolutely has framed Aceh into another window of opportunity. This strategic road will connect Banda Aceh and some other districts in the west coast, which was washed away by the tsunami. Before the disaster, it was narrow and poorly maintained.

China leads rapid growth of online audiences in Asia

James I Davison's picture

The online population in Asian and Pacific countries grew by 22 percent last year. China led the growth with an incredible 31 percent increase – to 220 million – in total unique Web visitors. These latest numbers of the region’s explosive Internet growth are according to a report, released last month by Internet researcher comScore, measuring online audiences in the region and individual countries between September 2008 and 2009.

The report indicates that Internet audiences in Japan, India and South Korea also saw double-digit growth and that the Asia-Pacific region now has 41 percent – or 441 million people – of the global Internet audience. It’s interesting to see how quickly things have changed since the last time we wrote about an earlier report from comScore.

If you want to examine more of the report’s findings you can see the related press release, or download a presentation on the subject here. (Note: To download the slides, you have to provide them with your name and some contact info.)

I’ve pointed before to World Bank evidence that shows the Internet may lead to improved economic growth, job creation and good governance. What else do you think such increased connectivity could mean for development in the region?

The winds of change are blowing in Malaysia

Philip Schellekens's picture

The winds of change are blowing in Malaysia, as the government is taking on an ambitious agenda of structural reform. The objective is to climb up the income ladder and join the league of high-income economies. This is a difficult challenge – one which not many countries have successfully met in the post-war period.

Against this backdrop, the World Bank’s launch of a new report on the Malaysian economy (full disclosure: I lead the team who authors the report) is timely. The Malaysia Economic Monitor, which will be published twice a year, aims to provide context to the challenges facing Malaysia and serves as a platform for discussion and the sharing of knowledge.

In Thailand, finding the way back into growth: Step 1, switch the supply chains back on

Frederico Gil Sander's picture

As part of its regular monitoring of the corporate sector in Southeast Asia, the World Bank economic team I am part of in Thailand has been working on a short case study of supply chains of Japanese multinational companies (MNCs) in the electrical and electronics (E&E) industry. We wanted to hear directly from firms about how the crisis affected them, how they were able to adjust so quickly to the drop in demand, what the rebound looked like, and what were the prospects going forward to upgrade along the value chain. I have learned a great deal from these interviews, and have become convinced that supply chains are central to understanding the current crisis in Thailand and East Asia more generally.

Some facts: the crisis had a disproportionate impact on manufacturing. In Thailand, manufacturing represents about 40 percent of GDP, but contractions in manufacturing value added have accounted for about 75 percent of the contraction of headline GDP. Within manufacturing, the auto and E&E industries account for the bulk of the contraction. Most of the output in those industries is exported, and more than three-fourths of the decline in Thai exports during the crisis was due to falls in shipments from the auto and E&E industries. My conclusion is that the magnitude of the crisis in Thailand has been driven primarily by these two industries.

China: Robust growth in sight provides room for shift in policy focus

Louis Kuijs's picture

The economic data for the third quarter of 2009, released almost two weeks ago, confirmed an impressive recovery in China’s economy, supported by very large fiscal and monetary stimulus. Real GDP growth rose to 8.9 percent year-on-year in the third quarter. This is clearly good news, for China and many other countries whose economies are benefiting at the moment from strong demand from China. As the World Bank economic team for China (which I'm part of) argues in more detail in the new China Quarterly Update, it also means that it is time to consider a less expansionary macroeconomic policy stance and focus more on the structural reforms needed to rebalance the economy and get more growth out of the domestic economy on a sustained basis.

It’s not as if China has not been hit by the global recession. China’s real economy has been hit hard. Exports fell sharply since November last year, and the contribution of net external trade to GDP growth was minus 3.6 percent points in the first three quarters of this year – with the negative contribution particularly large in the third quarter (in year-on-year terms).

Regional Finance Roundup: Is East Asia leading the world out of the crisis?

James Seward's picture

Given that Asia is now widely seen as leading the world out of the crisis, it is fitting that the role of Asia was more prominently recognized in the global economic system in the recent G20 meeting held in Pittsburgh.  Since we last looked in July, the outlook for the emerging markets of East Asia has continued to brighten.  The latest regional forecasts come from the Asian Development Bank in its Asian Development Outlook (pdf) published last week.  It points to “the rapid turnaround in [Asia’s] largest, less export-dependent economies” and predicts that “the regional economy is now poised to achieve a V-shaped rebound.”  These are very positive words indeed!  As the graph below shows, the ADB has in fact upgraded its growth forecasts for a number of economies for 2009.

Although the signs are pointing upwards, performance is still mixed in a number of key areas.

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