Thailand’s economy slows, foreign investors on the sidelines

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Thailand’s economy slowed in the third quarter this year as the trade war and a slowdown in tourism started to bite, prompting the government to lower its annual growth forecasts.

Southeast Asia’s second-largest economy grew 3.3 per cent on an annual basis, falling short of analyst projections of a four to 4.2-per cent expansion. Gross domestic product (GDP) showed no growth from the previous three months.

“Although other engines were quite solid, the two major engines of exports and tourism share a big proportion of the country’s GDP and that weighed on the data,” the Kasikorn Research Center said.

Exports, which account for more than 60 per cent of the nation’s GDP, dropped 5.2 per cent in September – the first drop in 19 months. This shows the trade spat between the US and China is beginning to have an adverse effect on outbound shipments.

The fall in Chinese visitors to the country pushed down revenue from tourism, which makes up a whopping 12 per cent of the GDP, and possibly up to 20 per cent when the grey market is factored in. Nearly 50 tourists from China were killed in a boat accident in July, while a number of other incidents with Chinese visitors also didn’t help.

Adding to that is the slump in foreign direct investment and money outflow from the country. Foreigners sold around a net $8.7 billion of Thai stocks this year, the most since data began in the late 1990s.

There is also a unhealthy relation between tourism revenue and foreign direct investment, a recent Bloomberg comment showed. Compared to some 12 per cent of GDP in tourism revenue, foreign direct investment is weak at just 1.8 per cent, the lowest figure amid Thailand’s ASEAN peers Malaysia, Philippines, Vietnam and Indonesia

“Foreigners increasingly see Thailand as little more than a giant beach resort, choosing to invest instead in Vietnam’s manufacturing prowess and Indonesia’s underbanked youth. Tourism revenue as per GDP has far the highest ratio in Southeast Asia. By contrast, the country’s inbound foreign direct investment could politely be described as paltry,” the Bloomberg comment noted, attributing the problem to Thailand fragile political situation.

“The country has a history of political turmoil and natural disasters that should give investors pause. Since 2004, Thailand has undergone a devastating tsunami, two military coups, violent street protests, destructive floods and the bombing of a shrine in Bangkok – among other disruptive events,” the comment goes on, adding that a closely contested election scheduled for 2019 could be followed by a backlash and protests once again.

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Reading Time: 2 minutes

Thailand’s economy slowed in the third quarter this year as the trade war and a slowdown in tourism started to bite, prompting the government to lower its annual growth forecasts.

Reading Time: 2 minutes

Thailand’s economy slowed in the third quarter this year as the trade war and a slowdown in tourism started to bite, prompting the government to lower its annual growth forecasts.

Southeast Asia’s second-largest economy grew 3.3 per cent on an annual basis, falling short of analyst projections of a four to 4.2-per cent expansion. Gross domestic product (GDP) showed no growth from the previous three months.

“Although other engines were quite solid, the two major engines of exports and tourism share a big proportion of the country’s GDP and that weighed on the data,” the Kasikorn Research Center said.

Exports, which account for more than 60 per cent of the nation’s GDP, dropped 5.2 per cent in September – the first drop in 19 months. This shows the trade spat between the US and China is beginning to have an adverse effect on outbound shipments.

The fall in Chinese visitors to the country pushed down revenue from tourism, which makes up a whopping 12 per cent of the GDP, and possibly up to 20 per cent when the grey market is factored in. Nearly 50 tourists from China were killed in a boat accident in July, while a number of other incidents with Chinese visitors also didn’t help.

Adding to that is the slump in foreign direct investment and money outflow from the country. Foreigners sold around a net $8.7 billion of Thai stocks this year, the most since data began in the late 1990s.

There is also a unhealthy relation between tourism revenue and foreign direct investment, a recent Bloomberg comment showed. Compared to some 12 per cent of GDP in tourism revenue, foreign direct investment is weak at just 1.8 per cent, the lowest figure amid Thailand’s ASEAN peers Malaysia, Philippines, Vietnam and Indonesia

“Foreigners increasingly see Thailand as little more than a giant beach resort, choosing to invest instead in Vietnam’s manufacturing prowess and Indonesia’s underbanked youth. Tourism revenue as per GDP has far the highest ratio in Southeast Asia. By contrast, the country’s inbound foreign direct investment could politely be described as paltry,” the Bloomberg comment noted, attributing the problem to Thailand fragile political situation.

“The country has a history of political turmoil and natural disasters that should give investors pause. Since 2004, Thailand has undergone a devastating tsunami, two military coups, violent street protests, destructive floods and the bombing of a shrine in Bangkok – among other disruptive events,” the comment goes on, adding that a closely contested election scheduled for 2019 could be followed by a backlash and protests once again.

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