Thailand's Bubble Economy Is Heading For A 1997-Style Crash

[uncle tom]

Ever since their own boom burst, American finance writers have been trawling through asian stats trying to find reasons why China (and to a lesser extent, the other emerging asian economies) will follow suit.

Whilst elements of these economies have certainly over-cooked, articles like this do seem to be founded on sour grapes, and I personally don't give them much weight.

Thailand would benefit from a little currency devaluation, and of course, greater political stability.

The latter, however, is probably too big an ask!

[StevePIraq]

Thailand has a population of some 70m people of whom I don't know but say 60% are subsistence level farmers in Isaan, street vendors and so on.
At the moment the government is buying support with the Rice Pledge Scam, first car owner tax payback scam, government employee housing benefit scam and god knows how many other inefficient, uneconomic subsidy schemes that even the World Bank and IMF have declared as unsustainable.
Properties are being purchased by people who cannot afford them. My Thai neighbor is a marvelous example of this, buying a 7m Baht property with an add on loan to modify and buy furniture, buy a new car, and the guy earns a gross of 75k Baht a month. Yes he has a government mortgage of 0.5% per year, same with the car loan subsidized by the government but the basic fact is he cannot sustain the repayments.
It is impossible to sustain this type of government subsidies to buy votes.

My wife's brother just bought a new 4x4 and as he is a farmer he gets a subsidy, but in reality I know he will lose the car within a year as he cannot make the repayments, he is a poor Isaan farmer who has nothing except an expensive 4x4.

Thais just cannot see the issue here, they all want to show off that they have this and that but in the end it will all come crashing down as 60% of the population do not have a level of income to sustain this. The government is just using subsidies to buy support as have many governments around the world.

[Spitfire]

Yep SteveP, the present government using all this tax payers money (and borrowing more) to shower gifts in order to procure votes is one of the original complaints of the protesters......many tax payers don't like their taxes going on such things.

It is completely daft to do this as it has been proved countless times in lots of countries that subsidies of this nature don't work. I don't want to sound too indifferent but that 60% of farmers, street vendors, micro-traders etc are simply not supposed to have 4X4s, houses on estates or LaLa Land situations which they are niether used to nor able to sustain.

The money would be better spent on reforming hopelssly out-of-date institutions like education and the SRT and improving infrastructure to attract investment.

[Korkenzieher]

Stories of conspicuous consumption are everywhere, but I think it is worth stepping back a little - a new 4x4 'Chelsea Tractor' is hard to justify - but a 4x4 truck isn't. Farm access, shifting produce and so on can make a big difference to a small farmer. True subsistence farming is on the wane - and rightly so - and one of the ways in which that it will change is through increasing mechanisation. Absolutely correct on the housing comments too - but it is a pretty bad show if all we do is castigate them for their aspiration. How long do you want people in a G20 country to put up with living in tin shacks - or are bricks and mortar only for us westerners? Don't forget, most of us couldn't own our own home without bank finance and the discipline of re-payment (failed or successful) will simply transfer itself into greater or lesser creditworthiness for some members of society, allowing them to become economically more active. That is how growth is created.

[richard]

Stories of conspicuous consumption are everywhere, but I think it is worth stepping back a little - a new 4x4 'Chelsea Tractor' is hard to justify - but a 4x4 truck isn't. Farm access, shifting produce and so on can make a big difference to a small farmer. True subsistence farming is on the wane - and rightly so - and one of the ways in which that it will change is through increasing mechanisation. Absolutely correct on the housing comments too - but it is a pretty bad show if all we do is castigate them for their aspiration. How long do you want people in a G20 country to put up with living in tin shacks - or are bricks and mortar only for us westerners? Don't forget, most of us couldn't own our own home without bank finance and the discipline of re-payment (failed or successful) will simply transfer itself into greater or lesser creditworthiness for some members of society, allowing them to become economically more active. That is how growth is created.

but 'Rome wasn't built in a day'...........Thailand has a long way to go to

[uncle tom]

There is a theory that in hot countries where it is possible to get by doing very little work, the imperative to service a debt burden causes people to work harder, and in so doing boosts the economy.

However, all things in moderation. If someone is carrying debts of ten times their annual income, the people who lent the money are likely to get burned.