World slowdown, approaching AEC confront business leaders
Several major challenges face Thailand and its corporate leaders in 2013, says Boontuck Wangcharoen, chief executive officer of TMB Bank. He spoke to Nophakhun Limsamarnphun.First, global economic growth will be rather slow, largely because of the consequences of the euro-zone crisis, which will take many years to be resolved.
This means the global economy will heavily depend on the US economic recovery and the performance of Chinese economy. The US recovery will be better than in the previous year, provided there is no prolonged problem from the so-called fiscal cliff.
Meantime, China should continue to be a key driver of world economic growth (returning to a growth rate above 7-8 per cent). Overall, the global economy will expand at a rate of more than 2 per cent in this new year.
Against this backdrop, the Thai export sector should expand by up to 7 per cent in 2013.
Second, there will still be ample liquidity in the financial system as major economies have resorted to quantitative-easing measures, especially in the US, the UK and Japan. Ample liquidity and increased capital inflow mean the [Thai] interest rate may not go up this year, but the baht will be strengthened.
Businesses will continue to enjoy good access to funding. Thailand's credit growth should be in the range of 10-15 per cent in 2013.
Consumption should contribute to around 2 per cent of Thailand's GDP [gross domestic product] growth this year, while private investment should contribute another 1.5 per cent.
The start of water-resource and flood-prevention schemes worth a combined Bt350 billion and other infrastructure projects should contribute another 0.7-1 per cent.
The rice-pledging scheme should help boost domestic consumption thanks to the increased purchasing power of the grass-roots population.
Overall, GDP growth will be around 4.7 per cent in 2013, comparable to the previous year.
In terms of external risks, I believe that the worst of the euro-zone crisis is over, while interest rates are unlikely to go up this year because of ample liquidity.
Domestically, one of the risks is slow disbursement of government budgets, which could be a drag on the economy.
Politically, it will continue to be a learning curve for Thais in terms of democracy. I am positive that the majority of Thai people are peace lovers and do not support violent means in their political struggle. Second, most Thais pay attention to the truth.
Both factors will allow the country to learn about democracy in a meaningful way in coming years. It's also a trial-and-error process. There have been some mistakes but in the end we will benefit from the people's participation in democracy.
On the government's populist policies, such as the rice-pledging or first-car schemes, there are pluses and minuses. On the plus side, the global economic difficulties have hit emerging economies, including Thailand, relatively hard, as evidenced by the much lower growth rate of Thai exports, which is no longer double-digit.
The 2012 export growth could be as low as 3 per cent, while this year should see an improvement at around 7 per cent. This means we have to boost domestic consumption as another engine of growth in addition to the export machinery.
Some of the populist policies have contributed to greater domestic consumption, so they are useful in the short term, but in the long term every country using populist policies must be careful and make sure that public debts do not skyrocket and hurt the country's fiscal position.
The rising household and personal debts are another challenge, as there are already early signs of default, especially on personal loans, even though there is virtually full employment in the Thai labour market.
Fortunately, we have developed a relatively good early-warning system on credit after the 1997 [financial] crisis. Credit data are now timely and transparent.We also have to prepare for the Asean Economic Community. The business sector has taken measures to take on the challenges, especially in terms of boosting efficiency and productivity to stay competitive.
We also need more research and development, technology and a higher level of skills as well as branding.