ADB worries domestic consumption not a panacea for long-term growth
The Asian Development Bank (ADB) noted in a recent report which included Thailand that although exports are expected to rise by 5 percent this year, this is a very sharp decline when compared to the 20 percent-plus annual growth that was being experienced prior to the Eurozone economic crisis.
A senior country economist with the ADB, Dr Luxmon Attapich, noted, “There is not much we can do to impair diminished export orders this year.” Nonetheless, she claimed many exporters viewed the downturn as a temporary situation and they believed 2013 would prove a better year, “as they have time to do better marketing of their goods,” she stated.
Of course, the other argument is that this is also the case with other regional nations and their exporters who, no doubt in many cases, will also be concentrating on improved marketing and international exposure.
As the ADB noted, wage rises in Thailand have helped boost domestic consumption and the government’s spending programmes have also helped to ease the impact from a contraction in exports.
Yet the ADB warns the effects of these measures will not be long lasting, even though Thailand’s economy is expected to grow by an estimated 5 percent in 2013, largely on the back of public investment in water-management projects that have a massive 350 billion baht budget spread over a number of years.
The ADB suggests the effects of the Eurozone debt crisis as well as the chances that the US economy will remain subdued are going to impact on Thailand’s economy, as, of course, these factors are going to do on every country engaged in global trade.
A worrying sign as far as the ADB is concerned was the government’s rice pledging scheme. This, they claim, resulted in a whopping 43 percent decline in rice exports as of the middle of 2012.
Dr Luxmon suggested the only positive to this was “higher domestic consumption. The impacts of many of these [government spending programmes] would be short-lived. Moving ahead, I’m not entirely sure they can address income inequality.”
Public debt is expected to increase to just under 50 percent of gross domestic product by 2015, up from its current 43 percent, and exclusive of the enormous 2.2 trillion baht plans to spend on infrastructure projects.
Within ASEAN, Thailand’s income-disparity Gini coefficient is higher than its neighbours. According to Craig Steffensen, the ADB’s country director, this was due to poor human resource investment.
He scathingly compared the problems of the Thai education system and the State Railways of Thailand, saying both needed modernisation yet nothing concrete had been done to execute them.