Will Thailand’s economy crash in 2013?
A Thai friend and I were having a conversation about the Thai economy this weekend and he soon shared with me his conviction that Thailand’s economy will crash in 2013. A pretty intelligent guy who majored in Economics at an American university, I definitely listened to him when he talked about the Thai economy crashing in 2013. And, of course, I asked why he thought it would.
His conviction that the Thailand economy will crash in 2013 comes down to several factors that are so vital to the Thai economy and yet seem to be in such trouble.
The Thai Baht is Too Strong – The Thai baht is incredibly strong against the dollar at the moment. While this time last year the dollar bought around 30.6 baht, in 2013 the dollar currently only buys 29.5 baht. While that might not seem much, it’s actually an almost 4 percent increase in the value of the baht.
That means, anyone bringing money into Thailand from outside the country gets 4 percent less than they did last year. And, anyone buying Thai products outside the country is paying a higher purchase price. So, it’s not surprising Thailand’s exports are markedly lower. So low in fact, Thailand did not meet its export goals last year.
Meanwhile, some in Thailand are saying the Thai central bank should intervene to artificially lower the value of the baht as it’s damaging the country’s export industry.
Food Prices in Thailand Rising Rapidly – The cost of food in Thailand is increasing quite worryingly, especially for those Thais on limited incomes. As people are having to spend more money on food, they’re spending less on other products.
My food bill in Thailand, for instance, (I buy pretty much the same every week) has increased by around 15 percent since this time last year. That, for me, is approximately 900 baht ($31) a month more than the same time last year for the exact same items.
Add that to the income I have decreasing by 4 percent last year as the baht to the dollar was higher (I don’t work in Thailand, so all my income comes from overseas) and needless to say I now buy less food or cheaper food.
Every westerner I know living in Thailand on income from overseas has said the same thing. We’re all spending less.
Eurozone Still Struggling – Thailand’s main export market is the Eurozone. When the Eurozone is still struggling, Europeans are buying fewer Thai exports, which is the main contributing factor to why Thailand’s exports have fallen. This is expected to continue into 2013.
With other factors remaining the same, the struggling Eurozone could also negatively impact Thailand’s economy and possibly cause the Thai economy to crash in 2013.
The Thai Rice Scheme – The Thai rice scheme has been a disaster for Thailand and will likely get much worse as time goes on.
All it means is, in order to be able to help poor Thai rice farmers make more money when they sell rice, the Pheu Thai government decided to buy up much of Thailand’s rice at a higher price than normal. This has caused the price of Thai rice to sky rocket and the export of Thai rice to fall.
Consequently too, Thailand is now no longer the world’s largest rice exporter and millions of tons of Thai rice are now sitting in warehouses as many of the usual buyers refuse to pay the higher price.
According to some analysts, if the Thai rice scheme is allowed to continue, it could severely damage the Thai rice industry permanently and, thus, Thailand’s economy.
Whether Thailand’s economy will crash in 2013, nobody knows. But, as most other Asian economies aren’t likely to be doing too well in 2013 either, the likelihood of a Thai economy crash could be higher than we might think.