Bangkok Post 25/03/08
Honeymoon's over, now get down to work
The world seems to have stopped asking whether there will be a recession in the US and now the main question is how long this recession will last _ and how it will impact Thailand.
There are some rules of thumb _ in the US, recessions are expected to last on average 10 months and, moreover, equity markets usually bottom-out four months before the end of the recession.
If this scenario plays out, and assuming that the recession effectively began in January, then we might see the US market bottom out near the end of June, with the overall economy picking up from October.
I am not sure if this will play out but one thing I am sure of is that there will be an impact on the Thai economy.
Thailand's exports to the US as a percentage of total exports has been in well documented decline. However, since exports overall have increased as a percentage of contribution to the GDP, the impact of trade with the US to our GDP has, in fact, been increasing. Moreover, our other trading partners similarly have their economies coupled with the US and thus any slowdown will also translate into an impact on Thailand. Hence the need to bolster our domestic economy _ both consumption and investment.
In my previous column two weeks ago, I wrote about the Shadow Government's economic proposals to the government. In brief, we proposed a 50-billion-baht package designed to simultaneously reduce the economic burden for those in need, which would also provide for immediate stimulation to the economy through greater consumption.
It is unfortunate that the government subsequently chose not to go through with this, as I think they have missed a golden opportunity not only to provide real help to those in the greatest economic distresss but also to buttress our economy in preparation for worse to come from overseas.
Instead, the recent cabinet meeting confirmed so-called Phase 3 of their economic plan, which will have almost no impact on the economy overall. It calls for 15 billion baht directed to the SML programme and another three-year extension on farmers' debt. Neither will bring new money into the system, as the SML programme is merely using funds initially directed towards the previous government's similar village scheme. In effect, this is just a change in name.
What has concerned me from the start with the way this government operates is its lack of cohesion. The tax reduction plan was a good example: a jumble of ideas all with opposing effects on the economy. This week came another startling example: the cabinet resolution for the Ministries of Transport and Finance to respectively seek to transfer control of the BTS to the MRTA and to acquire the debt and equity of BTS from its private owners.
Korn Chatikavanij