living in the ‘Land of Smiles’

Chiang Mai, Thailand

Thailand – Bubble Economy Is Heading For A 1997-Style Crash (See gif)

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Via: Forbes – Jesse Columbo

Thailand is part of the overall emerging markets bubble that I have been warning about in recent years, along with Indonesia, Malaysia and other Southeast Asian countries.

The emerging markets bubble started in 2009, when China launched a bold stimulus-driven economic growth strategy to counter the deleterious effects of the global financial crisis on its economy. China immediately scrambled to construct scores of new cities (many of which are still empty) and ambitious infrastructure projects for the sake of generating economic growth, which sparked a global raw materials boom that benefited commodities exporters such as emerging market nations and Australia. Global investors soon began to pile into emerging market investments to diversify away from ailing Western nations in wake of the financial crisis.

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As international capital clamored into Thai assets, the country’s 10 year government bond yields fell from their prior 4 to 6.5 percent range to just over 3 percent, while total external debt more than DOUBLE.

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Even more worrisome is the fact that Thailand’s short-term debt to total external debt ratio has roughly doubled in the past decade, which means that the country is more vulnerable to short-term interest rate increases.

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In March 2013, Virabongsa Ramangkura, chairman of the Bank of Thailand, warned about the risk of “hot money” capital inflows inflating a bubble in Thailand’s economy. “Foreign money flows in because of the higher interest rate. If a bubble bursts, everything that we see as good will come to an end or will not happen.”

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As with most other emerging market nations, Thailand is currently experiencing a dangerous credit bubble that is helping to boost its economic growth and consumer spending. Though traditionally an export-driven economy, debt-funded domestic demand has replaced the country’s export sector as the primary economic growth engine since 2008.

Loans to Thailand’s private sector have soared by over 50 percent since the start of 2010.

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Read more, HERE:

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

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November 8, 2013 - Posted by | Uncategorized | , , ,

1 Comment »

  1. Thanks for the inputs. Useful.
    Cheers.

    Comment by David Heng | November 8, 2013 | Reply


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