Thai Economy 2004
Thai economy in 2004 is
currently expected to grow at rate of 6.0 percent. This is lower than forecasts at the
beginning of this year and actual growth rate for 2003. The Thai economy in
2004 is slowing down due to both positive and negative factors emerging in
first half of the year.
Factors favoring economic growth
1.
The global economy will expand further, but it is
likely to slow down in the second half. Particularly the first eleven trade
partners of Thailand are expected to have average economic growth rate at 5.1
percent in 2004.
2.
The softening of the Thai baht is an advantage for
the export sector
3.
Private investment is supported by high and continued
increase in capacity utilization, low real interest rate, albeit the rise in
market interest rate, and improved corporate profitability.
4.
Household income is supported by favorable commodity
prices, improved corporate profitability as well as gains in the terms of
trade. This will in turn support household expenditure and partly offset the
adverse impact of the rise in oil price
5.
The disbursement rate of the government budget is
expected to be higher towards the end of fiscal year. In addition, spending on
new election campaigns will help boost up economic activities in the last
quarter.
6.
Oil price controls by the government during this year
is a positive for economics because Diesel is key factor for production
function.
Factors retarding economic growth
1.
There are three main causes of rising of oil price on
global market. First, the rapidly increasing demand. Second, the supply can’t
quickly respond to rising demand for oil.
Third, the impact of oil price rises on the global economy will be more
pronounced in 2005 because the global economy will slow down and suppliers will
offset the production cost by raising the price of goods.
2.
Avian flu outbreak. Europe and Japan have banned
Thailand‘s frozen chicken because of avian flu. Frozen chicken exports
decreased in both volume and value by more than 80 percent in the first 7
months of 2004 compared to the same period last year.
3.
The violence in the southern region of Thailand
4.
Bank of Thailand raised the benchmark interest rate
(R/P 14 days) to 1.50%. This matches the US Fed Funds rate, which has already
increased.
Many government and private
research institutions have adjusted their estimates of the economic growth rate
because of the positive and negative factors noted above. For example, Kasikorn
Research Center (KRC) changed their estimate of economic growth from 6.5 to
6.0, National Economic and Social Development Board (NESDB) changed from
6.5-7.5 to 6.0-7.0, and Fiscal Policy Office (FPO) changed from 7.1 to 6.5-7.0.
(See more detail in table 1)
Table
1 Economic Indicators
|
Economic Indicators
|
NESDB
|
FPO
|
KSC
|
TMB
|
|
Real
GDP Growth (%)
|
6
|
6.5-7.0
|
6
|
6.2
|
|
Private
Consumption Growth (%)
|
5.9
|
na.
|
5.5
|
na.
|
|
Investment
Growth (%)
|
13.8
|
na.
|
15.5
|
na.
|
|
Export
Growth (%)
|
21.1
|
18.6-20.3
|
20
|
18
|
|
Import
Growth (%)
|
25.6
|
27.2-27.9
|
26
|
24
|
|
Trade
balance (US billion)
|
1.7
|
(1.4)-(0.6)
|
0.59
|
0.5
|
|
Current
Account balance (US billion)
|
8
|
4.3-5.0
|
6.228
|
4.4
|
|
Inflation
Rate (%)
|
2.7
|
3.1-2.5
|
2.7
|
2.7
|
Sources : Forecasted and updated by KRC in September
2004
: Forecasted and updated by NESDB on September, 6 2004
: Forecasted and updated by FPO on August, 27 2004
: Forecasted and updated by Thai Military Bank (TMB) Research Department
in September 2004
Economic Outlook 2005
The Thai economic expansion
in 2005 is expected to be within the range of 5.5 to 6.5 percent by NESDB. In
addition, KSC and TMB predict the Thai Economy in 2005 to grow at 5.5 percent
as a result of external and internal factors. External factors are the slowing
down of global economy and an increase US Fed Funds rate. However, there are
many internal factors too such as increasing of inflation rate, and high crude
oil price in the world market. GAC represents the important
economy indicators from KSC, NESDB, and TMD in table 2
Table 2 Forecasting of Economic Indicators 2005
|
|
NESDB
|
KRC
|
TMB
|
|
Real
GDP Growth (%)
|
6.0
|
5.58*
|
5.5*
|
|
Private
Consumption Growth (%)
|
5.6
|
4.7
|
Na.
|
|
Investment
Growth (%)
|
14.5
|
13.3
|
Na.
|
|
Export
Growth (%)**
|
17.0
|
8.0
|
10.5
|
|
Import
Growth (%)**
|
20.2
|
10.0
|
13.5
|
|
Inflation
Rate (%)***
|
3.0
|
3.5
|
2.7
|
Remark : * At
Constant price 1988
** In USD
Terms
*** Headline Inflation
Sources : Forecasted and updated by KRC in September
2004
: Forecasted and updated by NESDB on September, 20 2004
: Forecasted and updated by Thai Military Bank (TMB) Research Department
in September 2004
Summary of Thai non-life Insurance
Business 1997-2003
Global
Actuarial Consulting has studied Thai non-life insurance business during
1997-2003. During this period the Thai non-life insurance business gone through
two stages: a recession stage and a recovery stage. during the recession stage
(1997-1999), the Thai non-life insurance business slowed because of the Asian
economic crisis. The direct premium of all types during this stage decreased,
compared with 1996 (See Figure 1).
Figure 1 Direct
Premium and Direct Premium Growth
During the recovery stage
(2000-2003), Thai non-life insurance business
has been growing because of the
terrorist attack in the USA on September 11, 2001 and the recovery of the
Thai economy. Interestingly, the proportion of miscellaneous insurance in the
market has risen from third to second, ahead of fire (see Figure 2). The
recovery of the Thai economy is also the positive factor to Thai non-life
insurance business. (See
more in Table 3)
Figure 2 Proportion of Direct Premium
GAC had analyzed the growth rate
of Thai non-life insurance business by using the direct premium. In 2003,
direct premium of all types was 71,159 million baht. The growth rate of 2003
was 13.63 percent, similar to the
rate of 2001 and 2002, at 12.93 and 13.87 percent. (See in Table 3). If we look
in each line of business, most of businesses have continued to increase except
the fire insurance. Fire insurance growth slowed because of adjustments to Industrial All Risk (IAR). (See in Table
4)
Table 3 Gross
Domestic Product, Direct Premium and Their Growth Rates
|
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
|
Gross Domestic Product
(Billion Baht)
|
4,732.6
|
4,626.4
|
4,637.1
|
4,923.3
|
5,133.8
|
5,451.9
|
5,938.9
|
|
Growth Rate (%)
|
(1.4)
|
(10.5)
|
4.4
|
4.8
|
2.1
|
5.4
|
6.8
|
|
Direct Premium (Billion
Baht)
|
57.7
|
48.5
|
45.9
|
48.7
|
55.0
|
62.6
|
71.2
|
|
Growth Rate (%)
|
(5.8)
|
(15.9)
|
(5.4)
|
6.2
|
12.9
|
13.9
|
13.6
|
Sources : National Economic and Social
Development Broad
: Department of Insurance
Table 4 Direct
Premium and Direct Premium Growth Classified by Lines of Business
|
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
2003
|
|
Direct Premium (1,000 baht)
|
|
Fire
|
9,587,575
|
9,022,670
|
7,878,277
|
7,903,446
|
7,798,548
|
8,452,929
|
6,981,861
|
|
Marine
|
2,634,611
|
2,343,413
|
2,124,400
|
2,403,991
|
2,499,055
|
2,671,436
|
3,127,221
|
|
Automobile
|
36,092,490
|
27,986,958
|
28,555,317
|
29,764,149
|
31,979,029
|
34,702,430
|
41,601,700
|
|
Miscellaneous
|
9,342,327
|
9,121,990
|
7,311,399
|
8,628,926
|
12,721,337
|
16,799,801
|
19,448,805
|
|
All Types
|
57,657,003
|
48,475,031
|
45,869,393
|
48,700,512
|
54,997,969
|
62,626,596
|
71,159,587
|
|
Direct Premium Growth (%)
|
|
Fire
|
2.89
|
(5.82)
|
(12.68)
|
0.32
|
(1.33)
|
8.39
|
(17.40)
|
|
Marine
|
(4.32)
|
(11.05)
|
(9.35)
|