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Dear
friends,
People
have
high
expectations
of the
new
Prime
Minister
and his
cabinet,
especially
his
economics
team
that is
supposed
to
rejuvenate
Thailand’s
sluggish
economy
after
the
political
turmoil.
Additional
to
domestic
factors,
however,
the
country
has been
impacted
by
external
factors
as well.
Oil
prices
tend to
be
stable
Oil
demand
is now
lessening
due to
US
economic
slowdown
and
energy
consumption
adjustments
being
made in
China
that
favor
the
greater
use of
coal and
hydroelectric
power as
opposed
to oil.
But,
while
reduced
demand
lowers
oil
prices
in the
world
market,
the
decreased
production
of OPEC
countries
means a
reduced
oil
supply
that
pressures
oil
prices
to rise
– thus
conflicting
factors
create
counteractive
effects.
The
likely
consequence
is that
the
world
market
price
for oil
will
remain
stable
at 60-70
dollars
per
barrel.
Though
oil
prices
will
stabilize
at a
high
level,
this
will not
affect
Thailand’s
inflation
rate
next
year
because
the
price of
goods
will not
change
that
much.
Certainly,
the
effect
of
2005’s
adverse
current
accounts
balance
that
stabilized
oil
price
and
resulted
in very
expensive
oil
imports
will
have a
reduced
impact
in
2007.
The
economies
of trade-partner
countries
will
tend to
slow
The
IMF
estimates
the
US
economy
to grow
2.9% in
2007,
decreasing
from
3.4%
this
year.
This is
due to
the Real
Estate
market,
which is
an
economic
growth
factor,
now
experiencing
a
downturn,
together
with
serious
inflation.
The
Federal
Reserve
Bank of
the
United
States
therefore
continues
to
stabilize
a high
interest
rate,
which
may
result
in a
slowdown
of
consumption
and
investment.
As for
the EU,
analysts
anticipate
that
economic
growth
in 2007
will
lower to
2.5% due
to
economic
growth
in the
second
quarter
of 2006
already
being at
its peak,
at 3.7%.
In
addition,
strict
policies
are in
place to
solve
problems
of
fiscal
deficit
and high
debt in
the
government
sector
of some
countries
- also a
consequence
of
rising
interest
rates.
These
will
continue
to
affect
the
world
economy
throughout
the
remainder
of 2006
and into
the
following
year.
In
Japan,
if
Japanese
government
approval
is given
to
decrease
the
maximum
interest
rate
ceiling
for
loans
from
29.2% to
15-20%
in 2007,
Japan’s
economic
growth
rate
will
only be
1%,
dissatisfied
foreign
investors
withdrawing
their
investments
to cause
a
decrease
from a
2.5%
growth
rate.
Meanwhile,
the
trend of
China’s
economic
growth
has
slowed
off from
its very
high
rate of
11.3% in
the
second
quarter
of this
year,
with the
Central
Bank of
China
expected
to
increase
the
interest
rate in
order to
control
economic
growth.
The
slowing
economies
of trade-partner
countries
will
affect
Thailand’s
exports
with the
purchasing
power of
overseas
consumers
also
slows
and
causes a
demand
for Thai
export
products
to slow
as well.
Stricter
trade
regulations
The USA
is
considering
the
cancellation
of GSP
for
Thailand
on 1,123
items,
or 37.3%
of Thai
exports
to USA.
However,
it is
not
assured
that
Thailand’s
GSP will
be
canceled
as
approval
for GSP
conditions
must
first
undergo
consideration
by the
Congress,
which is
yet to
be
elected
in
November.
The
election
may also
affect
GSP
renewal
for
Thailand,
with the
USA
maybe
using
the
nation’s
coup as
a reason
for not
approving
Thailand’s
GSP
renewal.
The EU
is about
to
announce
new
measures
that
will
hinder
trade,
for
example,
from
November
4th,
2006, it
will
request
dioxin
examination
certificates
from
food
exporters
to the
EU, and
will
also use
sanitary
standards
for
aquatic
animals,
such as
fish,
shellfish,
shrimps
and
crabs.
In
addition,
it will
announce
standards
for the
examination
of
residue
substances,
claiming
that
Thailand’s
many
cremations
mean
that
incomplete
combustion
may
contaminate
food
chain
substances
and
remain
residually
in food
products.
To
adjust
production
structures
and
approaches
to be
compatible
with
strict
regulations
will
increase
entrepreneurs’
capital
costs
and
decrease
Thailand’s
competitiveness
in the
world
market,
maybe
causing
Thailand
to lose
her
former
market
share to
competitive
countries.
These
signs
show
that
Thailand’s
exports
may be
in bad
shape
next
year and
economic
growth
may be
lower
than
targeted.
Exports
thus may
not be
expected
to be a
major
factor
to drive
the
economy
in 2007.
As the
government
and the
private
sector
have
little
time
remaining
until
2007,
they
should
therefore
conduct
short-term
adjustments,
especially
to press
fiscal
arrangements
for
2007,
creating
deficit
in order
to help
stimulate
the
economy.
The
trend is
towards
inflationary
controls,
with
public
debt
still
being
within
the
framework
of
financial
sustainability.
This
will
allow
the
government
to
maintain
a
certain
level of
increased
debt
without
it
affecting
financial
stability.
In
addition,
the
government
should
enlist
private
sector
support
to
develop
import-export
standards
by
providing
enough
laboratories
to
examine
product
quality
before
export,
for
example,
laboratories
to
examine
dioxin
content.
There is
only one
at this
time,
and this
is
insufficient
to the
task.
The
government
should
also
help the
private
sector
by
opening
up new
markets,
which
the
government
has more
chance
to do at
lower
cost.
For
example,
Thai
embassies
overseas
can
search
for
market
channels
that
will
reduce
export
dependence
on some
trade-partner
countries,
and
reduce
risks in
the case
of a
slowing
world
economy.
As for
the
private
sector,
competitiveness
and
development
should
be
emphasized
rather
than
dependence
on trade
privileges
from
foreign
countries,
since
dependence
on
measures
that
interfere
with the
market
mechanism
will
make
entrepreneurs
lack
motivation
to
improve
themselves,
which
will not
be good
when
facing
competition
in the
long
run.
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