Thailand hit by economic slowdown

Thailand Hit By Economic Slowdown

Thailand’s gross domestic product (GDP) growth has reached its slowest quarterly rate in a year in the third quarter of just 0.1 per cent on a seasonally adjusted basis, prompting the government to cut this year’s growth estimate once again.

Southeast Asia’s second-largest economy behind Indonesia, which is heavily trade-dependent, showed the weakest rate since a contraction in the third quarter of 2018, the National Economic and Social Development Council said. On an annual basis, GDP rose 2.4 per cent in the third quarter, less than the forecast of 2.6 per cent. From April to June, growth was just 2.3 per cent, the weakest pace in nearly five years.

The government lowered its 2019 GDP estimate to 2.6 per cent, down from the 2.7 to 3.2 per cent forecast range in August.

The slowdown is already affecting domestic businesses and employment, with a higher unemployment rate and shrinking factory production looming with analysts predicting that things may take a turn for the worse in 2020, as there are hints that an economic recovery is still out of sight.

The global trade tensions are a major cause for the problems. Some 70 per cent of Thailand’s GDP comes from exports, and the US-China trade dispute in tandem with the strong baht are having a sizable impact.

Adding to this is technological disruption, a challenge for which Thailand seems not to be very well prepared, as well as weaker manufacturing and lower revenue in the services sector. This all means that many businesses have had to resort to cost-cutting measures to counter weakening revenues amid bearish sentiments.

Car manufacturing and assembling, a major industry sector in Thailand, is already struggling. Both General Motors Thailand and Ford Thailand are undergoing restructuring accompanied by job cuts. The Federation of Thai Industries has revised its outlook for the country’s car production in 2019 to two million vehicles, down from 2.15 million.

Automatisation and technologic disruption

With technology trending towards robotics and automation to serve electric vehicle production, mass layoffs are anticipated over the next three years in the domestic automotive industry, the Employers Confederation of Thai Trade and Industry said, predicting that the number of workers subject to layoff could reach as many as 300,000 over the next three years.

Technological disruption caused by automated systems and artificial intelligence brings changes in most manufacturing and the services sector, namely in the financial industry, retail and wholesale.

Observers say that unemployment will raise further since Thailand’s workforce is poorly equipped to handle this disruption.

“Thailand’s economic structure is not compatible with the ongoing technological disruption,” economist Somjai Phagaphasvivat said, noting that “the country’s education system does not support adoption of modern technology, nor skills development.”

Informal emplyoment

All this does not correspond with Thailand’s official unemployment rate of one per cent as of September this year, which is one of the lowest figures worldwide. Economists say that this number given by the country’s statistics office is heavily distorted.

First of all, because there is no universal unemployment insurance in Thailand, real numbers about who is employed and who isn’t are hard to come by. Secondly, for those who lose their formal job there is no impetus to stay unemployed for long and they invariably enter the so-called informal sector or seek out a part-time job, and they are counted as employed.

There are estimates that the informal sector of the Thai economy, comprising anyone who’s not covered by formal work arrangements, accounted for more than 64 per cent of the total workforce in 2013. This group includes street vendors and motorcycle taxi drivers, self-employed and those operating in grey areas of the economy such as prostitution.

Going by the number of unemployed individuals, defined as those seeking social security benefits while being unemployed, there were almost 185,000 at the end of August, a 9.3% year-on-year rise.

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Thailand's gross domestic product (GDP) growth has reached its slowest quarterly rate in a year in the third quarter of just 0.1 per cent on a seasonally adjusted basis, prompting the government to cut this year's growth estimate once again. Southeast Asia's second-largest economy behind Indonesia, which is heavily trade-dependent, showed the weakest rate since a contraction in the third quarter of 2018, the National Economic and Social Development Council said. On an annual basis, GDP rose 2.4 per cent in the third quarter, less than the forecast of 2.6 per cent. From April to June, growth was just 2.3...

Thailand Hit By Economic Slowdown

Thailand’s gross domestic product (GDP) growth has reached its slowest quarterly rate in a year in the third quarter of just 0.1 per cent on a seasonally adjusted basis, prompting the government to cut this year’s growth estimate once again.

Southeast Asia’s second-largest economy behind Indonesia, which is heavily trade-dependent, showed the weakest rate since a contraction in the third quarter of 2018, the National Economic and Social Development Council said. On an annual basis, GDP rose 2.4 per cent in the third quarter, less than the forecast of 2.6 per cent. From April to June, growth was just 2.3 per cent, the weakest pace in nearly five years.

The government lowered its 2019 GDP estimate to 2.6 per cent, down from the 2.7 to 3.2 per cent forecast range in August.

The slowdown is already affecting domestic businesses and employment, with a higher unemployment rate and shrinking factory production looming with analysts predicting that things may take a turn for the worse in 2020, as there are hints that an economic recovery is still out of sight.

The global trade tensions are a major cause for the problems. Some 70 per cent of Thailand’s GDP comes from exports, and the US-China trade dispute in tandem with the strong baht are having a sizable impact.

Adding to this is technological disruption, a challenge for which Thailand seems not to be very well prepared, as well as weaker manufacturing and lower revenue in the services sector. This all means that many businesses have had to resort to cost-cutting measures to counter weakening revenues amid bearish sentiments.

Car manufacturing and assembling, a major industry sector in Thailand, is already struggling. Both General Motors Thailand and Ford Thailand are undergoing restructuring accompanied by job cuts. The Federation of Thai Industries has revised its outlook for the country’s car production in 2019 to two million vehicles, down from 2.15 million.

Automatisation and technologic disruption

With technology trending towards robotics and automation to serve electric vehicle production, mass layoffs are anticipated over the next three years in the domestic automotive industry, the Employers Confederation of Thai Trade and Industry said, predicting that the number of workers subject to layoff could reach as many as 300,000 over the next three years.

Technological disruption caused by automated systems and artificial intelligence brings changes in most manufacturing and the services sector, namely in the financial industry, retail and wholesale.

Observers say that unemployment will raise further since Thailand’s workforce is poorly equipped to handle this disruption.

“Thailand’s economic structure is not compatible with the ongoing technological disruption,” economist Somjai Phagaphasvivat said, noting that “the country’s education system does not support adoption of modern technology, nor skills development.”

Informal emplyoment

All this does not correspond with Thailand’s official unemployment rate of one per cent as of September this year, which is one of the lowest figures worldwide. Economists say that this number given by the country’s statistics office is heavily distorted.

First of all, because there is no universal unemployment insurance in Thailand, real numbers about who is employed and who isn’t are hard to come by. Secondly, for those who lose their formal job there is no impetus to stay unemployed for long and they invariably enter the so-called informal sector or seek out a part-time job, and they are counted as employed.

There are estimates that the informal sector of the Thai economy, comprising anyone who’s not covered by formal work arrangements, accounted for more than 64 per cent of the total workforce in 2013. This group includes street vendors and motorcycle taxi drivers, self-employed and those operating in grey areas of the economy such as prostitution.

Going by the number of unemployed individuals, defined as those seeking social security benefits while being unemployed, there were almost 185,000 at the end of August, a 9.3% year-on-year rise.

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