[Bangkok Post] Interest Rate Frenzy Hits Thai Economy

 

Following a landmark $20 billion package approved by the IMF, Thailand’s conditions send its economy into a much deeper hole


In a hotly debated move, Thailand accepted a $20 billion Lending Arrangement with a condition to increase its interest rates to 20%. This unprecedented jump has been met with widespread protests from consumers and business owners alike, as most businesses are no longer able to secure loans in the face of suffocatingly high interest rates. Higher costs of borrowing have suppressed investments in Thailand, and largely discouraged MNCs and foreign firms from expanding their operations in the country. Large-scale projects have been halted, and research and development activities have declined sharply in response to such monetary tightening.


The Thai economy is expected to contract with a GDP growth estimate as low as -4.1% due to the exacerbation of the recession by the IMF-stipulated policy. While the Thai baht’s devaluation seems to have reached its peak, capital control measures have not mitigated the recession as the IMF has predicted in its controversial package. Thai economists and citizens alike have erupted in protests against the unpopular IMF conditionalities as political unrest brewed. Experts are debating if there is any path remaining for Thailand’s economy to avoid further recession. Although the Thai baht has depreciated and exports are expected to grow, the high interest rates have discouraged an increase in production and growth in exports is expected to remain sluggish for at least the next few months.
Location: Bangkok, Thailand

Comments

Post a Comment

Popular posts from this blog

[Financial Times] Thai Baht Loses its Peg, Value Plummets

The beginning of an exchange rate-induced crisis in what was a tiger economy  A shocking tragedy befalls the Kingdom of Thailand as the state proceeded to float its currency following its perceived inability to sustain its peg to the greenback. A series of speculative attacks amounted to a sharp depreciation of the Thai baht, sending ripples across interlinked financial systems in the Asia-Pacific region. Notably, huge current account deficits, growing real estate asset bubbles, lax regulations in the financial sector, and dwindling foreign exchange reserves diminished investor confidence in the currency and the economic strength of the country. Inevitably, compounded with rumours of a currency devaluation, speculative attacks largely undermined the Bank of Thailand’s ability to defend the baht, ultimately floating the currency. 
Read more

[Asia Times] Thai Imports at Record Low, Worry Brewing

Trade conditions worsen, exporters panic while domestic producers celebrate   With the further depreciation of the Thai baht, Thailand’s quantity demanded for imports has declined  due to a diminishing external value of the Baht (and hence more expensive foreign goods for Thai locals).  This has led to a fall in export demand for trade partners like Japan and Indonesia, with this impact being  the worst in South Korea. In the past month, South Korean exports of electronics, manufacturing materials,  and even basic construction materials like wood and cement have declined by 10.2% as these  export-oriented industries see their long-term profitability being threatened. Smaller enterprises have been  pushed to the brink of insolvency, with a few companies barely breaking even.  Thai manufacturers are ecstatic about such uncompetitive markets, however the general consumer does  seem to think differently. Prices are slowly rising as well, with the...
Read more