Thai government officials may be in for some nasty surprises this year from the budget and debt department. Political instability has taken its toll on Thailand’s public finance, with the budget in deficit since the 2006 coup that deposed Thaksin Shinawatra. Frequent regime changes have disrupted domestic public and private spending and investment. As the world economy tips into recession, Thailand’s last engine of economic growth – external demand – will sputter out too. Public officials are making last-ditch efforts to pull the economy out of its nosedive into a recession. However, they may have to spend more than they expected and collect less tax revenue than they hoped. Meanwhile, instability will continue to gnaw away at the country’s hard-earned fiscal recuperation from the 1997/8 Asian financial crisis as political tensions simmer.
Another year, another massive protest. Poor Thailand. In recent years, this little tourist haven has become known more for its political instability than exotic attractions. The “Land of Smiles” is eliciting more frowns again after 100,000 protesters stormed the capital and Pattaya, forcing the cancellation of ASEAN and the declaration of a state of emergency. […]
Why Does the ECB Need to Ease? 1. Recession deeper than expected – Though the ECB slashed its 2009 GDP forecast to -2.7% at its March meeting, many analysts are expecting an even deeper contraction in 2009. Production has fallen off a cliff. Unemployment is rising, reaching double digits in Spain (14.8% in January) and […]
The prognosis for Asia’s financial sector in 2009 is relatively better compared to other emerging economies and also compared to the region’s own experience in 1997-98. Even so, further GDP contractions and asset market corrections are likely as the external environment continues to deteriorate and domestic demand falters.
Remittances may contract in 2009, according to a model based on the expected income of overseas Filipino workers (OFWs) around the world, with adjustments made by industry and by country for the employment outlook of OFWs, the estimated share of income remitted, the composition of deployment, and the annual growth rate of deployment and wages. Our baseline scenario is -6.17% annual growth in remittances in 2009. Remittances will total only $15.4 billion compared with last year’s $16.4 billion. This would be a marked turnaround from the +13.7% growth (or $1.97 billion) seen in 2008 and the end of a multi-year run of double-digit growth rates.
2008 has been a tumultuous year in Asia marked by the deterioration of exports and a collapse in many regional asset markets as the global recession worsened and leveraged investors withdrew. Hopes that Asia would “decouple” were, as we feared at the start of 2008, overly optimistic, as Asia’s domestic demand remains strongly correlated with exports and global liquidity. Growth and industrial production are now slowing sharply in many Asian economies and we fear the outlook will worsen in the first half of 2009.
The spike in food and commodity prices has pushed inflation in Asia to record levels since late 2007. Asian central banks, however, initially abstained from hiking interest rates due to fears of contagion from a U.S. slowdown. Instead, countries like India, Indonesia, Malaysia, Philippines and Vietnam opted to fight food and fuel inflation using non-monetary […]
During the past five years, a constellation of factors drove an unprecedented housing boom in New Zealand. The boom fizzled out this year but left behind a set of factors that raise the risk of housing sector weakness spreading to the rest of the economy. In some respects, New Zealand looks more vulnerable to a housing-led financial crisis than the U.S.: New Zealand (NZ) exhibits higher household indebtedness (debt to disposable income: 160% in NZ vs 131% in US, 2007) a larger current account deficit as a share of GDP (8% in NZ vs 6% in US, 2007), a higher share of housing in household assets (72% in NZ vs 39% in US*, June 2007), stronger house price inflation (median home price: US$266,964 in NZ vs US$238,000 in US, September 2007) and a higher benchmark interest rate (8.25% Overnight Cash Rate in NZ vs 4.50% Fed Funds Rate in US, November 2007) with a more justifiably hawkish central bank. This brief discusses the rise and fall of the New Zealand housing market, its outlook, and how the US crisis might throw the match that lights New Zealand’s financial tinderbox.