28 May 2009

Economy enters a recession

The economy contracted by the largest percentage in a decade in the first quarter of 2009, as tumbling exports and slumping domestic spending pushed the country into recession for the first time since the 1997 Asian financial crisis.

GDP shrank by 1.9% compared with the fourth quarter of 2008, and by 7.1% year on year, as the global economic crisis and political instability continued to take their toll. Exports, which historically accounted for almost 70% of GDP, fell by nearly 25% in the first quarter of 2009, according to commerce ministry figures.

The economy plummeted even with massive stimulus measures introduced by the Democrat-led coalition government, which included handing out cheques for 2,000 baht (about $60) to more than nine million low-income earners to spur consumer spending. Critics said the programme was nothing short of vote buying. The government announced an initial 117-billion-baht stimulus package in January, followed in May by a further four-year, 1.4-trillion-baht ($40.6 billion) investment plan.

Much of the funding for the stimulus plan was to be borrowed from international lenders such as the World Bank, as well as from local money markets. Whereas in the 1997-1998 economic crisis the recovery was led by an increase in exports and inbound tourism (helped by the baht’s steep fall), this time around, the global nature of the crisis meant that Thailand could not rely on external demand for help.

28 May 2009

Economy enters a recession

The economy contracted by the largest percentage in a decade in the first quarter of 2009, as tumbling exports and slumping domestic spending pushed the country into recession for the first time since the 1997 Asian financial crisis.

GDP shrank by 1.9% compared with the fourth quarter of 2008, and by 7.1% year on year, as the global economic crisis and political instability continued to take their toll. Exports, which historically accounted for almost 70% of GDP, fell by nearly 25% in the first quarter of 2009, according to commerce ministry figures.

The economy plummeted even with massive stimulus measures introduced by the Democrat-led coalition government, which included handing out cheques for 2,000 baht (about $60) to more than nine million low-income earners to spur consumer spending. Critics said the programme was nothing short of vote buying. The government announced an initial 117-billion-baht stimulus package in January, followed in May by a further four-year, 1.4-trillion-baht ($40.6 billion) investment plan.

Much of the funding for the stimulus plan was to be borrowed from international lenders such as the World Bank, as well as from local money markets. Whereas in the 1997-1998 economic crisis the recovery was led by an increase in exports and inbound tourism (helped by the baht’s steep fall), this time around, the global nature of the crisis meant that Thailand could not rely on external demand for help.