Category: ARTICLE

Europe’s energy crisis: recession now inevitable

We assume that Russian gas flows to Europe via the Nord Stream 1 pipeline will fluctuate between zero and 20% capacity in the coming months, resulting in a recession in Europe in the winter of 2022/23. We expect Hungary, the Czech Republic, and Slovakia to take the biggest economic hit. Not only will they experience gas shortages, but they are also highly exposed to recession in Germany given strong supply-chain links. Germany, Austria, and Italy will face gas shortages. We expect rationing in the German industrial sector to have region-wide spillover effects. Elsewhere in the EU, the main impact will come through high energy prices, falling confidence, and weak external trade. The Baltic states and Bulgaria are particularly exposed. Problems in its nuclear sector make France’s position more precarious than might have been expected. Next year, Europe will struggle to restock its gas storage without flowing from Russia. The winter of 2023/24 will therefore also be challenging. We expect high inflation and sluggish growth until at least 2024.           Russia’s aim has been to make a

Analysis of 2022 Thai Baht depreciation

          The impact of the depreciation of the baht using the macroeconomic model If the baht depreciates by 5%, the real gross domestic product (RGDP) would expand by 0.40%, mentioned Mr. Thongchai Chavalitpichet, Director of NESDB. Fitch Ratings-Bangkok-22 June 2022 stated Thailand’s economic recovery is strengthening, although rising inflationary pressures and slower global growth pose risks to the near-term rebound, according to Fitch Ratings’ analysts at its 2022 Thailand Sovereign and Bank Outlook Webinar. However, the continuing Russia-Ukraine war is a key risk factor exacerbating uncertainties for the economy, money markets, the inflation rate, and energy prices worldwide. There seems Inflation has risen and is likely to increase further. Depreciation is a method used to allocate a portion of an asset’s cost to periods in which the tangible assets helped generate revenue. Following the Ceicdata report, The Gross Domestic Product (GDP) in Thailand expanded 2.2 % Year-on-Year in Mar 2022, following a growth of 1.6 % in the previous quarter.           The central bank has indicated that the baht’s depreciation could impact

Thailand to offer land ownership to attract wealthy foreigners

          Thailand will allow foreigners to own land for residential use, a government official said Friday, as it seeks to boost its economy by attracting new foreign residents from overseas at great expense. Thailand has for decades been a popular destination for expatriates to retire, but land ownership by foreigners has been restricted. For now subject to cabinet approval, foreigners will be allowed to own up to 1 rai (0.16 hectares) from September this year, provided they can invest 40 million baht (about $1.09 million) in property in Thailand, and also in Thai funds over three years, the government spokesman said.           The Thai government is also interested in attracting more skilled workers and retirees and the proposal would include some tax benefits and a 10-year visa. The plan, which would be reviewed after five years, aims to add 1 trillion baht ($27.25 billion) to the economy and boost investment by 800 billion baht, the Thai government spokesman, Thanakorn Wangboonkongchana said. The government expects the economy to grow 3.5% this year and

The Completed China-Laos Railway: Bringing Opportunities for ASEAN and the Asia Pacific

          In early December 2021, Laos inaugurated the Boten-Vientiane railway, a 414-kilometer (km) electrified high-speed railway that runs between the capital Vientiane and the town of Boten through the Laos-China border of which the railway is built on a single track with passing loops and is electrified to China’s first Class trunk railway standards, suitable for 160 km/h passenger and 120 km/h freight trains, making Laos the first country to connect to the Chinese railway network using Chinese technology. An expectation of this project is, A railway link through Laos would greatly reduce cargo transit times and transportation costs between Laos and China. However, The cost of the railway has contributed to a $480 million increase in Lao debt to the Chinese Export-Import Bank. This has led to concern that Laos could fall into default on its debts.           This US$6 billion project (equivalent to one-third of Laos’ GDP) is backed by China as part of its Belt and Road Initiative (BRI) and is a sign of the deepening ties between the

ECB hikes interest rate for the first time in 11 years

          On Thursday, 21st July 2022, the European Central Bank announced to raise the interest rate by 0.50%. This is the first time since 2011 which has raised interest rates, and from the announcement, it would begin to be effective on 27th July 2022. The cause of the ECB to raise its interest rates is because annual inflation in the European Union rose to 9.6% in June, reaching 8.6% for 19 countries that use the euro, and another factor is the surging of energy prices.           After the ECB announced raising interest rates, ECB denied providing a definitive direction of the rate raises in the future. Christine Lagarde, ECB president said “From now on we will make our monetary policy decisions on a data-dependent basis, We will operate month-by-month and step-by-step. What happens in September is going to depend on what data we have for September.”           However, We have to keep an eye on the interest rates in Europe that would affect the world economy together with

Indonesia Economic Prospects (IEP), June 2022: Financial Deepening for Stronger Growth and Sustainable Recovery

          The Indonesian economy accelerated at 3.7 percent at the end of 2021 as the country stepped off from the COVID Delta wave. The momentum continued in early 2022 at 5 percent (YoY), shifting anchors through towards more private consumption and investment. However, due to the challenging global environment, the country is starting to feel the pressures of rising prices and tightening external finance.           Higher energy prices raise food prices through agricultural input costs. Cooking oil and other food prices have also shot up due to global supply shortages and rising demand. Most firms have resumed operations but with below capacity. Large firms, export-oriented firms, and businesses in high value-added services have recovered more quickly than MSMEs.           The budget deficit narrowed in 2021 (from 6.1 percent of GDP in 2020 to 4.6 percent in 2021) thanks to a recovery in revenue and slowing expenditure. Government debt levels rose slightly from 38.6 percent of GDP to 40.7 percent in 2020-2021. The 2022 budget saw a reduction in

Dropped $30B of Foreign Exchange Reserves in Thailand

          On 9th July 2022, the reporter announced that the situation of bearish Thai Baht was hit to 36 THB per 1 USD at this time. It made the anxiety that will be affected the capital would be flown out, while the Bank of Thailand asserted that they won’t intervene in the Baht, and let it be as the market mechanism, according to the bearish Thai Baht is a middle-level when compared to the near regions, and they will take a part when Thai Baht fluctuation. Mr. Poon Panichpiboon said the Bank of Thailand intervenes in the Baht when it fluctuated by using foreign exchange reserves, in the beginning of 2022, the Bank of Thailand has foreign exchange reserves of $279 Billion, but at this time (report updated on 24th June 2022) foreign exchange reserves remain as $251Billion or dropped as $28 Billion, This cause has reflected that the Bank of Thailand seeks to find any path for Thai Baht, not to have fluctuated too fast.           However, the Thai Baht still

Stagflation

What is Stagflation?           Stagflation, also known as the economic recession, is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e., inflation). Generally, stagflation occurs when the money supply is expanding while supply is being restricted.           Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP). Such an unfavorable combination is feared and can be a dilemma for governments since most actions designed to lower inflation may raise unemployment levels. Policies designed to decrease unemployment may worsen inflation. While debating among economists, Elliot Eisenberg, chief economist at GraphsandLaughs, an economic consulting firm, mentioned the short conclusion sentence, which was, “The general notion of stagflation is high inflation and high unemployment.” The Causes of Stagflation           Stagflation is costly and challenging to eliminate, both in social and fiscal terms. There is no consensus among economists on the causes of stagflation. Each economics school offers different points

The impact of increased interest rates from the FED on Thailand

          Since the US has faced an inflation rate hit 8.6% which is the highest in 40 years, the FED has consideration to increases the interest rate, and the latest update on the interest rate is rose to 0.75% after they had seen the inflation report of May.           Accordingly, How will this impact Thailand? The signal to increase the interest rate is the same as the FOMC meeting recently. The governor of the Bank of Thailand, Dr. Sethaput Suthiwatanaraput said about monetary policy “The interest rate in Thailand is the lowest in the region, but inflation in Thailand is the top rank in the region, so the monetary policy that they use considerately.” This quote was analyzed that the interest rate in Thailand will increase exactly, at present the interest rate is 0.5% but the inflation rate hit 7.1% which is the highest 13 years ago. On 8 June 2022, during the meeting The Monetary Policy Committee has a 4:3 solution to keep the interest rate at 0.5%, the votes were

Brunei – Economic Outlook 2022

         According to the detailed research of our analytic team, the anticipated recovery of the Brunei economy in 2021 has been derailed by the materialization of key downside risks—pandemic resurgence, unanticipated domestic oil and gas production disruptions, and delays in the commencement of FDI projects.           Domestic economic activity has been severely impacted by the re-imposition of containment measures. The Brunei economy shrank by 2.2 percent year on year in the third quarter of 2021, the fourth consecutive quarterly decline. Upstream and downstream oil and gas production have been weaker than expected, while some service activities have been hampered by mobility restrictions. Retail sales declined sharply in Q3 2021, reflecting limited consumer spending due to stay-at-home orders and voluntary social distancing to avoid contracting the virus. The contractions across almost all retail activities highlight the severity of the second COVID-19 wave, contrasting the resilience during the first wave in 2020.           The recovery in the hotel sub-sector has been halted by the second COVID-19 wave. Hotel occupancy rates had