Forbes says Thailand headed for another 1997-style crash

[JaiDee]

    http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

 

 

 

''Thailand's Bubble Economy Is Heading For A 1997-Style Crash''

[zaronxas]

I think this guy is a 'contributor' which is to say he is not formally employed by Forbes and his opinions are his own, not Forbes'.

 

That said, I don't think it will be as bad as 1997 but I do think there is real estate bubble in Thailand.   The amount of new construction in Bangkok is excessive and irrational.  Especially considering many of the finished buildings are more or less empty.  

[Hefe]

I certainly don't wish any nasty economic straits on anybody, but I do remember that my second trip to LOS was half as expensive as my first trip the year before & that sort of sealed the deal for me as a regular return visitor along with a couple of other things. 

 

And Bali that year was as cheap as anyplace I have ever visited, so I guess I would be lying if I said I wouldn't take advantage of it again. I also rationalized that I was helping the local economies by pumping dollars into them at a bad time. But I know there was a huge amount of suffering in the region then.

[lance2546]

As I recall, the USD strengthened to a peak of 57 baht/$1 during the 97 crash. 

[saab1]

I was in Thailand back in 2003 and was getting 70 Baht upwards, cant remember if it was 2003 or 2004, but 1 of those years, I remember going to change some money in Bangkok and I was shocked, I got 82.50 Baht to the UK Pounds, so I took advantage and cashed a load, just aswell  cos it dropped the next day back into the 70s !  those were the good old days, so whether this  possible bubble in Thailand effects the exchange rate remains to be seen, but surely if there is a bubble, this will attract more tourists, if we get more Baht to our currency.

[Tomcat]

.   The amount of new construction in Bangkok is excessive and irrational.  Especially considering many of the finished buildings are more or less empty.  

 

 sounds like China , would not be surprised if the shit hit the fan there as well. 

[Hefe]

 sounds like China , would not be surprised if the shit hit the fan there as well. 

 

I came across an interesting factoid about China a few years ago. As it is a command economy & not a free market system, when they release their GDP figures they include in the positive column the amount of housing built, not housing sold like most countries do. So what exists there now are numerous, elaborate  entire "ghost cities" (as opposed to just buildings) that are almost completely unpopulated (unsold) but this amount of expenditure on materials, employment, production, etc without any consumption (profit) are all totalled up as pluses for their economy, unlike the rest of world's GDP numbers.  So I suspect this may help the floor fall out from their economy. 

[Snick]

Interesting article, but there is a huge difference between now and 1997.

In 1997 the Thai Baht was pegged to US Dollar and international borrowing was USA denominated. When the Thai's could not support the Baht it was like the titanic hitting the iceberg, the economy crashed overnight.

 

Today the Baht is not pegged and most Bonds are denominated in Baht, so while the economy does suck its not going to crash over night its just going to slow down ( maybe, a lot ).

 

Thailand might have just found a bit of luck though, Japan has just announced 'expansionary measures' including printing money and investing their huge pension portfolio in domestic and foreign stocks. That Japanese money could easily find its way to Thailand (since the two biggest Asian economies China and S Korea dislike the Japanese).

 

Snick's prediction , sub par growth in the 1% to 3% range. With a recession possible if there are any 'shocks'. Some kind of government action for personal debt relief, lots of a mega-projects to try and help economy (and help corruption). Continuing weakness in Baht especially compared to USD, and a strong possibility of a stock market 'correction' (i.e. sudden 10% drop).

 

But like most forecasts, I could be wrong and its real hard to know WHEN this could happen, the stock market could tank next week or in 2 years. Crisis always take longer to develop then you think and then strike faster.

 

PS I'd probably be a buyer after a 15% drop, I did that last time it happened and made some good $$$

[xyzzy]

Dollar/Baht chart FWIW

[Snick]

Funny, I just posted how Japanese investment could 'save' Thailand and then I read this

 

http://www.bangkokpost.com/business/news/442272/japan-envoy-warns-of-investor-exodus

 

 

 

Japan envoy warns of investor exodus FBA changes to affect 'at least half' of firms.At least half of all Japanese companies operating in Thailand would be forced to surrender operational control or relocate if proposed changes to the Foreign Business Act go ahead...

 

This is what I meant by 'shocks', the Thai's doing something incredibly stupid 

[saab1]

Excellend read !

 

But is this new law going send a message to all foreign investors not just the Japanese, which in turn could send investors to other countries like Vietnam or Cambodia, where these 2 countries encourage foreign investment, and if im not mistaken, foreigners can actually own land and property outright

[Snick]

if this law passes, and its a big if, it would be a disaster. Fortunately it t has been proposed before and killed off by sane heads.

 

The exceptions would be BOI companies and Amity treaty companies; and possibly ASEAN companies. Others, especially Japanese, would be insane to open new companies and would probably be forced to sell off their existing companies rather than continue to put up the money but not have control. 

[saab1]

The question is ? Will this law be passed, and if companies start pulling out of Thailand,how will this effect the Thai economy . ? can Thailands economy survive on tourism alone  ??

[Snick]

No, Yes, No