Economy March 22, 2014 00:00

By The Nation

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Spending to rise, inflation to edge up following rate cut

A Commerce Ministry study has found that the recent lowering of the policy interest rate by 25 basis points to 2 per cent should help stimulate domestic growth, despite concern about the ongoing political instability.
Amparwon Pichalai, director of the ministry’s Bureau of Policy and Trade Strategies, said that with more spending expected as a result of the Bank of Thailand’s rate cut, inflation should increase by another 0.0025 percentage point. 
However, annualised inflation will still be within the ministry’s projected range of between 2 per cent and 2.8 per cent this year.
She explained that as households would shoulder a lower interest burden on their debt, they would be expected to spend more, despite continuing concerns over the political situation. 
Other negative factors that could cause higher inflation are rising oil prices and seasonal drought, which could increase food and goods prices, she added.
SET to build capital market learning centre
The Stock Exchange of Thailand will construct a Thai Capital Market Learning Centre at its new head office.
The facility will be an ultra-modern learning centre with a trendy interactive self-discovery concept, aiming to encourage the general public to realise the importance of investment and financial planning.
A design and construction auction for the centre is currently being arranged, with auction rules and terms of reference being provided until March 27.
Pattera Dilokrungthirapop, working group chairperson for the construction of the learning centre, said that SET is constructing its new head office on Ratchadaphisek Road – next to the Embassy of the People’s Republic of China – to become a comprehensive capital-market centre.
It will allocate 1,260 square metres of space for the new learning centre. 
The centre is designed to be a major learning source to educate the public about the connection of the capital market and economic system, as well as about key developments of the capital market. 
It will also build investment culture, urging the public to understand the capital market’s mechanism and realise the importance of investment and financial planning, she added.
Hella expanding its production in Philippines
The local unit of Germany-based Hella KGaA Hueck, one of the world’s top-50 automotive-lighting suppliers, is further expanding its operations in the Philippines this year as it targets capturing a bigger share of the domestic market.
Hella-Philippines, which manufactures quality automotive lighting, plans to invest some 5 million pesos (Bt3.57 million) in additional equipment at its production facility in Dasmarinas in Cavite province, said Lourdes Soriano, who heads the company’s finance and administration department. “This equipment will allow the company to metalise big lamps as, currently, we are producing only smaller versions. Roughly, (this investment) will increase our sales by 20 per cent,” Soriano said in a phone interview with the Inquirer.
The additional equipment will increase the efficiency and productivity of the Cavite facility, enabling the company to meet the expected increase in demand for its products this year.
Roughly 90 per cent of the automotive lighting products manufactured at Hella’s facility in Cavite are for domestic consumption.
Hella Philippines was established as a pioneering manufacturer of premium-quality automotive and motorcycle lighting components in 1978. – Philippine Daily Inquirer/Asia News Network
Court ruling has no impact on S&P sovereign ratings
The Constitutional Court’s decision yesterday to nullify the February general election has no impact on Thailand’s sovereign credit ratings (foreign currency BBB+/Stable/A-2; local currency A-/Stable/A-2; axAA/axA-1), according to Standard & Poor’s.
   The decision sets back the process of electing a new government and prolongs the current political instability. 
   The court ruled that the election breached the Constitution because it was not completed in one day, after protesters had prevented candidates from registering for the poll in a number of constituencies.
   In the rating agency’s view, the court decision dims prospects for any near-term resolution of Thailand’s political split. 
   Although months of blockade and street protests failed to unseat the current government, there is now the risk that it could be removed on legal grounds in the near future.   Current investigations by the National Anti-Corruption Commission into caretaker Prime Minister Yingluck Shinawatra and several parliamentarians of the ruling Pheu Thai Party have the potential to unseat the current caretaker administration, said S&P.
   S&P’s ratings already reflect its expectations of protracted and possibly increasing political risks. 
   The company believes Thailand’s generally strong economic fundamentals may weaken further. Economic growth could slow further because of the combined effect of depressed private-sector investment and the caretaker government’s inability to implement policies, in particular large-scale infrastructure projects. 
   If violence and disruption to transportation flared up again, the tourism sector would be hit as well, the company said. 
   S&P said it could lower the sovereign ratings if further political instability led to an unexpectedly sharp deterioration of governability (political and institutional stability) beyond what had been seen in the past seven years. 
   This is possible if future political events lead to widespread violence that seriously affects economic activities in the country for a prolonged period, the company added.
Back health tourism, Nesac urges govt
The National Economic and Social Advisory Council (Nesac) has advised the government to put the promotion of health tourism on the national agenda, saying it would generate additional income for the country in the long term.
   Nesac recently proposed to the Cabinet that a committee be set up comprising representatives from private and state agencies as a preparatory step. It also asked the government to raise the number of countries whose citizens are eligible for visa-free entry to the Kingdom. 
   Furthermore, the government should develop a database of products associated with health tourism, in addition to the establishment of ad hoc bodies for the promotion of health tourism, according to the proposal.
Evonik's expanded output now on stream
Evonik has recently opened its expanded production for precipitated silica in Rayong, the investment having increased its capacity for supplying the automotive, food and animal feed, and paints and coatings industries.
   “Expanding our manufacturing footprint in Southeast Asia, Australia and New Zealand highlights our commitment to this region and allows us to better serve regional markets with state-of-the-art products and optimum solutions,” said Peter Meinshausen, regional president Southeast Asia, Australia and New Zealand. 
   Used in the tyre and rubber industry, the combination of silica with silanes enables manufacturers to produce tyres of much lower rolling resistance, thus reducing the overall fuel consumption by up to 8 per cent compared to traditional tyres.
   “With this expansion, we are strengthening our operations in Thailand,” said Florian Kirschner, managing director and country head, Thailand. “This allows us to respond more quickly to changes in market demand and supply high-quality products to our customers.”
   The silica production, now a joint venture between Evonik Industries and Oriental Siam Company, was founded in 1990. Evonik came on board as majority shareholder, taking charge of operating the Map Ta Phut site in 1999. 
   The German company is one of the world leaders in specialty chemicals.