Thailand's economy grows faster-than-expected 4.9 percent in third quarter as exports gain

Herald Tribune

BANGKOK, Thailand: Thailand's economy grew a faster-than-expected 4.9 percent in the third quarter from a year earlier on higher exports and government spending, according to official figures released Monday.

Despite the baht's appreciation against the dollar, exports rose 11.6 percent in the quarter, according to the Ministry of Commerce.

The National Economic & Social Development Board raised its 2007 growth forecast to 4.5 percent from 4.0 percent, though this would still be a lackluster performance by regional standards. China is growing at more than 10 percent a year and Vietnam is expanding at more than 8 percent. Last year, the Thai economy grew 5.1 percent.

Still, consumers appear reluctant to spend and businesses are wary of making new investments amid the political uncertainty after last year's coup, despite a series of interest rate cuts, economists said. They believe the economy's prospects will likely be brighten once a new government is formed following upcoming elections on Dec. 23.

Economists polled by Dow Jones Newswires predicted that gross domestic product would expand 4.4 percent in the quarter. On a seasonally adjusted basis, the economy grew 1.5 percent from the second quarter.

The development board raised its forecast for 2007 exports growth to 16 percent from 13 percent to reflect better-than-expected trade numbers in recent months. The 2007 imports growth forecast was raised to 10 percent from 7.5 percent.

The agency's secretary-general, Ampon Kittiampon, expects exports growth to slow to 10 percent in 2008 but also expects the economy to get stimulation from government spending on infrastructure projects, low interest rates and from improved consumer and business confidence.

Higher oil prices are likely to increase inflation next year, he said, with the consumer price index forecast to rise 3.0 percent to 3.5 percent compared with the projected 2.3 percent increase this year.

Vietnam gaining quickly on Thailand in economic race

www.vneconomy.com

The Nation newspaper on December 2 quoted Preechachai Chauychoo, a Thai businessman who has lived in Viet Nam for the last 15 years as saying that it would take Viet Nam just over a decade to catch up with Thailand’s current stage of development, given its rapid growth rates.

According to the paper, Viet Nam is currently the darling of foreign investors from Japan, China’s Taiwan, the Republic of Korea, Singapore, the United States and the European Union. The country joined the World Trade Organisation (WTO) in January of this year and has attracted a combined direct investment inflow of US$16 billion in the first 11 months of 2007.
Besides FDI, hundreds of thousands of affluent overseas Vietnamese send remittances amounting to US$5 billion every year.

The paper said Viet Nam, with a population of 84 million compared to Thailand’s 64 million, has witnessed significant credit growth and increases in property values, resulting in strong domestic demand and purchasing power.

Viet Nam’s entry to the WTO has also opened the door for its financial markets to enter into a new stage of development, while the opening of the stock market has led to changes in the capital market with a greater inflow of funds from banks and companies as well as foreign and domestic investors in various business sectors.

The paper also noted another driving factor for development in Viet Nam is the Vietnamese government’s commitments to reforms, which should lead to a more level playing field for the private sector. Necessary revisions to real-estate law have been introduced to facilitate foreign investment in the sector.

The paper added that Thailand may appear to be as many as 27 years ahead of Viet Nam by per capita income comparison.

But “such a measure is probably misleading, given Viet Nam’s political stability, commitment to reforms, extensive privatisation programme, rising GDP and foreign direct investment and its promulgation of a new land law, among other factors.”

INSTANT VIEW 2-Thailand Q3 GDP grows 1.5 pct q/q

Reuters Monday December 3 2007

BANGKOK, Dec 3 (Reuters) - Thailand's economy grew a seasonally adjusted 1.5 percent in the third quarter, beating analyst expectations of 1.3 percent growth, the state-run National Economic and Social Development Board (NESDB) said on Monday.

KEY POINTS:

- The NESDB, which said in September it expected 2007 economic growth of 4.0-4.5 percent, now expects 4.5 percent growth.
- Q3 GDP expanded 4.9 percent from a year earlier, outpacing the second quarter's 4.3 percent, revised from 4.4 percent. (Reuters poll forecast Q3 +4.5 percent).
- GDP grew 1.3 percent in Q2 from the previous three months.
- For GDP data click on [nBAN000506] and for 2007 GDP forecasts click on [nBKT000569].

COMMENTARY:
PIMONWAN MAHUJCHARIYAWONG, ECONOMIST, KASIKORN RESEARCH CENTER

"Q3 GDP was slightly higher than expected at 4.6 percent. This should be driven by improving domestic demand. We think the higher-than expected Q3 should help GDP growth to grow at the upper range of 4.5 percent for the whole year.

"We have to monitor oil prices and the impact from the subprime crisis on the U.S. economy, which may affect our exports. These two factors will have impact on economic growth next year, when we expect growth in a range of 4.5-6 percent.

"In the worst case, every $10 rise in oil prices could cut GDP growth by 0.7 percent."
USARA WILAIPICH, ECONOMIST OF STANDARD CHARTERED BANK

"The Q3 growth came in a surprise on the upside thanks to strong exports. However, exports are unlikely to repeat their impressive performance next year amid slowing global growth.

"Therefore, Thai economic growth will be determined largely by domestic demand, which still looks weak despite early signs of recovery. That suggests relaxing fiscal policy must take a greater role in 2008."

ISARA ORDEEDOLCHEST, ECONOMIST, KTB SECURITIES

"The Q3 GDP figure came out better than expected and compared to the previous quarter. It tells us that the overall economy has improved significantly although oil prices are still high.
"However, there are a few concerns that we have to keep an eye on. One of them is how the new government is going to implement investment policies."

BACKGROUND:

- The Bank of Thailand (BoT) expects 2007 economic growth in a range of 4.3-4.8 percent after revised 5.1 percent growth in 2006.
- The central bank has halted its aggressive monetary easing since July after five rate cuts of a combined 175 basis points to 3.25 percent this year.
- It has held its key interest rate steady since July after signs of a recovery in consumption and investment. Analysts expect it to keep rates unchanged until at least the second half of 2008, even though inflation is rising.

Higher inflation on the cards for next year

The Nation (4 December 2007)

Thailand is bracing for higher inflation next year, with consumer prices expected to rise 3-4 per cent, from 2.5 per cent this year, due mainly to high energy prices.

The Commerce Ministry yesterday came up with two inflation scenarios based on controllable key factors like gross domestic product (GDP), exchange rates, interest rates and minimum labour wages, as well as crude-oil prices, saying inflation could rise to 3-3.5 per cent, or even 3.5-4 per cent.

The scenarios were released after inflation spiked 3 per cent year on year last month, compared with only 0.4 per cent in October. Together with a global economic slowdown and the US sub-prime mortgage fiasco, high oil prices will remain a risk factor to the economy next year.

The National Economic and Social Development Board predicts the Dubai oil price will be between US$75 to $80 (Bt2,500 to Bt2,700) per barrel and that the baht will average 32-33 to the greenback. Despite the high oil prices, the Thai economy is expected to expand 4-5 per cent next year, following 4.5-per-cent growth this year, the think-tank said yesterday.

The Commerce Ministry's prediction of 3-3.5-per-cent inflation was based on GDP growth of 4-5 per cent, the baht stabilising at 33-33.50 against the US dollar, a repurchase rate of 3-3.5 per cent, a minimum wage of Bt194 a day and Dubai crude oil remaining at $80 to $85 a barrel and retail petrol at Bt29.39 to Bt30.09 a litre.

Keeping the GDP growth, repurchase rate and minimum wage the same, the ministry predicted 3.5-4 per cent inflation through slight changes in the other figures: a weaker baht at 33.50-34 to the dollar, crude oil at $85 to $90 a barrel and retail petrol at Bt30.09 to Bt31.39 a litre. But for the strong baht, energy costs would be higher and hence push up inflation.

Internal Trade Department director-general Siripol Yodmuangcharoen yesterday named the price of oil as the most important factor affecting inflation. The current high prices will continue into next year, when the Dubai price is estimated to average $85 a barrel, compared with an estimated average of $58 to $65 this year. The expected average retail price of petrol is expected to rise from Bt28 a litre this year to between Bt30 and Bt31 next year.

Although Dubai crude recently surged past $80 a barrel and inflation skyrocketed last month, Siripol insisted this year's inflation rate would be within the 2.5 per cent target. In the first 11 months, inflation was 2.2 per cent.

Due to several rounds of fuel-price increases, some goods and services have gone up this year. For instance, milk-product prices rose 8 per cent, Siripol said.

He insisted the Energy Ministry's decision to float the price of cooking gas would have only a minor effect on inflation. It is also an indirect cost of the food and services sector. For instance, the cooking-gas price will increase Bt18 per 15-kilogram tank and food dishes 4-5 satang.

Meanwhile, the department will soon launch a campaign in which participating shops will hang up a banner promising consumers to make price increases in satang.

Commerce Minister Krirk-krai Jirapaet said this would raise the value of satang coins, while consumers would not feel much affected. For example, if the price of cooking gas raises the cost of making a meal 2 satang per dish, vendors can cover the cost by raising the price 50 satang, say from Bt20 to Bt20.50.

GDP set to rise 5.1%, says OIE

The Nation (4 December 2007)

Forecasters say political stability will bring investor, consumer confidence

Gross domestic product (GDP) in the manufacturing sector will increase 5.1 per cent next year despite a number of negative factors, the Office of Industrial Economics (OIE) forecasts.

It has projected a 4.5-per-cent GDP growth for the sector this year despite higher oil prices, a global economic slowdown and sub-prime mortgage problems in the United States.

Meanwhile, the Manufacturing Production Index is forecast to rise from 7.7 per cent this year to 8 per cent next year, driven by a higher inflow of investment and rising domestic consumption.

OIE director-general Atchaka Sibunruang Brimble said the situation in the industrial sector would recover because political stability will boost investor and consumer confidence.

"I believe industrial investment will rise and play a significant part in boosting the country's GDP next year, while exports will continue to slow because of economic problems in industrial powerhouses like the US and China," she said.

Production in the electronics industry is expected to grow 10-15 per cent next year due to higher demand for hard-disk drives and air-conditioners.

Atchaka said a lot of electronics goods from China are being rejected by international buyers because of poor quality. This will provide a window of opportunity for Thai manufacturers to boost market share.

The automotive industry is another key industry in powering the country's economy. It has targeted to boost production to 1.4 million units, an increase of 12 per cent year on year.
The increased output will be distributed equally domestically and abroad.

In addition, the economy will be stimulated by the government's infrastructure mega-projects and expansion plans for the petrochemical industry, which will involve a Bt100-billion outlay.
Also, some export-oriented industries are suffering from the baht's appreciation this year such as textiles while food manufacturers are expected to see dramatic growth next year due to tax exemptions from free-trade agreements.

The textile industry's upstream and midstream production will expand 8.8 per cent, while finished products should grow by about 2.1 per cent.

Meanwhile, exporters will be focused more on Asean member countries. It is expected that markets in the region will grow 10 per cent for upstream and midstream products and 5 per cent for downstream products.

TT&T announces 2008 restructuring

Bangkok Post (4 December 2007)

Three subsidiaries to list on SET, MAISeoul _ TT&T, the provincial fixed-line telephone provider, has announced a business restructuring roadmap for 2008 with new licensing agreements. TT&T plans to list its three flagship subsidiaries _ Triple T Broadband Co, TT&T Subscriber Services Co and Triple T GlobalNet Co _ on the Stock Exchange of Thailand and MAI next year to increase capital of at least two billion baht.

The strategy is aimed at increasing the group's revenue by 20% to 8.7 billion baht next year, and help the parent company earn a profit in 2009 after facing losses since 2003.

TT&T expects 7.3 billion baht in revenue this year with a declining loss. However, in the first nine months of this year the company reported a consolidated net loss of 1.4 billion baht. compared with a loss of 573 million in the same period last year.

President Prachuab Tantinond said TT&T was moving more into integrated internet services through the three licence-based subsidiaries, with planned investment of almost three billion baht next year in areas where TT&T fixed-line network uncovered.

The company would freeze all fresh investment and business activities in the core provincial fixed-line business to focus on services that entail lower costs under new licensing contracts.

TT&T also plans to invest in WiMax wireless broadband technology and third-generation (3G) once the National Telecommunications Commission (NTC) issues the next-generation broadband and mobile licences.

''The strategy is to shift away from overly high revenue-sharing payments for fixed-line services, which requires us to pay 43% of fixed-line revenue to TOT Plc _ by far the highest rates in the industry,'' Mr Prachuab said.

In comparison, he said, subsidiaries under the TT&T umbrella operating fixed and wireless broadband, voice-over Internet protocol (VoIP), IPTV, international internet gateway (IIG), international direct dialling (IDD) and data communications services pay 7% of their annual revenue under licences from the NTC. This includes a 3% licensing fee and a 4% universal service obligation (USO).

Prasitchai Kritsanayunyong, senior vice-president for corporate finance, said TT&T expected the proportion of its licence-based services to increase from 40% this year to 50% next year.
Triple T Subscriber Services would generate up to 3.7 billion baht and Triple T Global Net 560 million baht. The two firms are planned to list on MAI stock market next year.

Triple T Broadband, expected to list on the SET early 2008, is expected to generate revenue of between 1.5 billion and two billion baht next year with total broadband subscribers of 550,000, up from 300,000 by the end of this year. But the company did not consolidate revenue into the group as TT&T has only a 12.5% stake.

''Our regulatory fees now have been reduced to 30% of revenues compared with 40% last year,'' Mr Prasitchai said.

He admitted that TT&T would still face losses next year due to its high investment costs for broadband infrastructure, declining fixed-line revenue, a price war among mobile operators and TOT price-cutting on domestic long-distance call rates.

TT&T shares closed yesterday on the SET at 1.00 baht, down two satang, in trade worth 4.26 million baht.

TT&T expects higher income

The Nation (4 December 2007)

TT&T expects to achieve consolidated revenue of Bt8.7 billion next year, up from Bt7.3 billion estimated for this year.

TT&T president Prachuab Tantinon said 60 per cent of this year's revenue would come from businesses under the TOT concession and the rest from those under the licence by the National Telecommunications Commission (NTC).

TT&T operates fixed-line telephone services across the country outside of the Bangkok metropolitan area under TOT concession. It posted revenue of Bt5.609 billion in the first nine months of the year for a net loss of Bt1.4 billion.

Prachuab said the company would list its TT&T Subscribers Services and Triple T Broadband subsidiaries on the Stock Exchange of Thailand (SET) and its Triple Global Net subsidiary on the Market for Alternative Investment.

Internet service and content provider TT&T Subscriber ex-pects revenue to more than
double to Bt3.7 billion next year, from an estimated Bt1.5 billion this year.

Triple T Broadband, which holds a network service licence from the NTC, expects revenue of Bt700 million this year, but Prachuab declined to specify its revenue target for next year.

Triple T Broadband is in the process of increasing its registered capital from Bt110 million at present to Bt1.2 billion, as part of plans to list on the SET.

Triple Global, which holds an NTC licence for operating an international Internet-gateway service and international-call service, has targeted revenue of Bt560 million next year, up from an estimated Bt300 million this year.

TT&T has spent about Bt50 billion on business development since its debut in 1994.
"Now we're waiting for a Wi-Max licence from the NTC, to provide wireless broadband service," Prachuab said.

Recently, the NTC said it expected to finish drafting Wi-Max licensing terms and regulations this year.

Next year, TT&T plans to spend about Bt700 million to develop TT&T Subscriber's operations further and Bt70 million to develop Triple T Global's.
Prachuab said TT&T was not looking for a strategic partner to support the firm's planned investment.