Over at my friend’s Ake’s website, www.chartingthailandeconomy.com, he put up a little graph showing a big downward revision for 2011 growth.
Well look, the post-flood recovery progress begun in December 2011 with factories and industrial estates restarting and the government’s plan for rehabilitation (including the THB 350 bn flood reconstruction and water management plan) won’t have a substantial impact on the economy until the second half of the year, it’s common sense really. We traveled to look at all three major affected industrial estates in December 2011 (Rojana, Navanakorn and Bangkradi) to see then that most companies were only in the process of cleaning up from the floods and would only likely begin production beg-mid 1Q12 with things ramping up throughout 2Q12 before running at full capacity within 3Q12, if you’ve only worked as a stock analyst/investor/economist you’d be surprised, but personally having had to run a subsidiary of manufacturing company before, things just take time in the real world…

Back to the Thai economy, there are still structural headwinds mainly regarding the government’s ability to get flood defences up before the next monsoon season thereby improving investor confidence in Thailand and secondly continued political “stability”thus ensuring that the plans of infrastructure investment can go ahead uninterrupted. If this is the case a full economic recovery by 2H12 can be easily achieved.

Just fyi, specific to the infrastructure plans, over THB 2 trn is planned to be spent over the next decade (on transportation networks, utilities, telco, energy).

Personally I’m not too fussed over the interest rate for this year in Thailand. As mentioned in a previous post we weren’t surprised to see the BOT cut rates 25bps at it’s last meeting given that they are a reactionary agency. Going forward we wouldn’t be surprised to see another cut in rates at their next meeting in March, and it may only be until the end of the year once the economic data demonstrates a recovery before they will increase rates again. There is one slight chance that rates may go higher in 3Q12 given the inflationary pressures from the implementation of higher minimum wages in April ’12.

Finally regarding politics, we’ve spoken in extensive detail with several members of the Pheu Thai party and political commentators to understand what may happen when the banned 111 politicians from Thai Rak Thai and in the end we doubt that it would have a substantial impact upon the current “stability” that we have. I’ll have a longer post about it next week with names that we think may return to the political arena and reasoning for it.

So what about all this economic talk? Thailand will recovery, interest rates will continue to be relatively low, we may still experience some slight instability and uncertainty along way but isn’t this how Thailand operates? Some constant niggles regarding politics and yet business still continues. I’m actually quite satisfied that this country is able to prevent itself from growing too quickly which may lead to bubbles forming and then busts afterwards, because there is nothing wrong with a constant growth rate of 4-5%…..