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Economic bubbles are back to haunt Thailand

来源:建广律师事务所     2013-01-04
字号:T|T

            The government is deliberately building up economic bubbles. The aim is to win nationwide popular support 

ahead of a grand design for national reconciliation and a wholesale rewrite of the Constitution. A combination of

 debt-based consumption and populist economic programmes is designed to prop up the economy, hard hit by 

the deteriorating external account as a result of dwindling exports. But the whole plan will also lead to bubbles 

that pose great danger to the Thai economy in the years ahead.





    Let's examine the bubbles that are now prevailing throughout the economy. The spending binge goes 

crazy:



Bubble #1: The first-car policy has created artificial demand for automobiles, particularly among middle- and 

lower-income people. Auto sales are likely to hit 1.43 to 1.45 million units this year. This represents a growth

 rate of 63 per cent over last year and 114 per cent over 2010. If the economy were to face a sudden 

downturn next year, many first-time buyers taking advantage of the rebate will not be able to pay the

 monthly installments. The government will lose Bt80 billion in tax rebates as each buyer will be entitled

 to a refund of Bt100,000. Instead of accelerating mass transit systems to reduce costs and alleviate traffic 

congestion, the government promotes a huge bubble in the automobile sector. National fuel bills will rise to

 further undermine the country's balance of payments.



Bubble #2: Retail sales are likely to grow 15 per cent this year and 38 per cent over the 2010 figure.


Bubble #3: Real estate expands 53 per cent this year. A real estate boom creates both economic and 

financial bubbles. Most economies, including Japan, the US and Spain, among others, are suffering severe

 pain in the aftermath of the bursting of their real estate bubbles. Thailand is travelling down this route.



Bubble #4: Mortgage lending by the commercial banks jumps 32 per cent this year. A construction boom

 and real estate boom go hand in hand with a mortgage lending boom.



Bubble #5: The advertising industry grows 53 per cent this year as a result of buoyant domestic demand.


Bubble #6: The rice price pledging programme represents another huge bubble. Last year this price pledging

 programme cost the government Bt376 billion. And the government is now sitting on a massive overpriced 

 rice stock of 10 million tonnes. This year the cost of implementing the programme will rise to Bt432 billion 

 as the government continues to buy "every grain of paddy" from farmers.



Bubble #7: The subsidy scheme for first-home buyers will cost the government Bt12 billion in revenue loss.


Bubble #8: The three-year debt moratorium programme will cost the government Bt1.5 billion a year.


Bubble #9: The minimum wage of Bt300 per day will be implemented nationwide starting in January. This

 policy will hurt small and medium-sized enterprises the most and does not take into account the different

 level of economic development in each region.



Bubble #10: Corporate income tax has been slashed from 30 per cent to 23 per cent. This will lead to 

government revenue loss of Bt52 billion this year. Next year corporate income tax will fall further to 20 

per cent, resulting in government revenue loss of Bt74 billion.



Bubble #11: Personal income tax has been slashed to promote consumption. This will result in a loss of

 revenue of Bt32 billion next year.



Bubble #12: Trying to holding down inflation, the government continues the foolish policy of oil subsidy.  The

 diesel subsidy will cost the government Bt90 billion this year.



Bubble #13: Free computer tablets for school kids will cost the government Bt16 billion this year and Bt12 billion

 next year.



Bubble #14: Raising the salary scales of government officials and part-time officials will cost Bt18 billion this year

 and Bt23 billion next year.



Bubble #15: PM Yingluck Shinawatra's many foreign trips hardly have any benefit for the country. They are

 also bubbles.



In spite of the massive bubbles being created, the Thai economy will grow only 4.7 per cent this year and 5 

per cent next year, accordingto the World Bank's estimate. The bubbles create a short-term feel-good 

factor. But we all know that bubbles eventually pop. And when they pop, they can bring down the entire 

economy. We have not learnt the lesson of 1997. ( Thanong Khanthong)