Sobering message
from World Bank on post-crisis global economy:
Reduced export growth opportunities,
sustained
fiscal stimulus needed
By Jon Fernquest 
Asian
economies may be driving the global economic recovery.Fiscal stimulus in China has led to a surge in bank lending and economic growth that may have even inflated a new asset price bubble (Read The Economist, see graph, read ADB report and more tables and charts).
China's apparent recovery already seems to have helped Thai exports (Read Bangkok Post article).
Tempering this good news, the World bank also has some bad news:
In
the medium term,
substantial acceleration of public spending is
the only way for the
Thai economy to avoid stagnation,
rising employment and social problems.
So despite all the impatience for immediate visible results from fiscal stimulus in the short-term, it is the medium-term (2-10 years into the future) when the impact of fiscal stimulus spending will likely be felt.
In fact, government spending programmes are even more important now than during the Thaksin era years before the current global economic crisis.
Today's article follows vocabulary:
sobering - causes
one to be serious and thoughtful (reduces drunk-like
enthusiasm)
opportunities - situations in which it is possible to do what you want or need to do
sustained - continueing to do something without stopping
X driving Y - X causing Y
recovery - when the economy improves, gets better and starts growing again after a downturn or recession
fiscal stimulus - government spending or tax cuts in order to get the economy moving and growing again
asset price bubble - when the prices of assets in an economy (stocks, real estate) move far above their long-term trend values only to fall drastically later when the bubble bursts
temper Y - make Y less extreme
medium term - a period of time that is 2-10 years into the future
substantial - in a large amount or degree
acceleration - moving faster at a speed that increases over time
public spending - government spending
stagnation - stop progressing, stop moving forwards and growing
impatience - being annoyed and irritated because you have to wait for something to happen
opportunities - situations in which it is possible to do what you want or need to do
sustained - continueing to do something without stopping
X driving Y - X causing Y
recovery - when the economy improves, gets better and starts growing again after a downturn or recession
fiscal stimulus - government spending or tax cuts in order to get the economy moving and growing again
asset price bubble - when the prices of assets in an economy (stocks, real estate) move far above their long-term trend values only to fall drastically later when the bubble bursts
temper Y - make Y less extreme
medium term - a period of time that is 2-10 years into the future
substantial - in a large amount or degree
acceleration - moving faster at a speed that increases over time
public spending - government spending
stagnation - stop progressing, stop moving forwards and growing
impatience - being annoyed and irritated because you have to wait for something to happen
Thailand must brace for revival
World Bank warns of changing economyNAREERAT WIRIYAPONG
24/07/2009
The Thai government and businesses need to be better prepared for drastic changes in the global economic landscape in the post-crisis era, international development finance agencies say.
Country heads of the World Bank and the Asian Development Bank, speaking at the "Thailand's Investment Environment" conference, said the global economy was expected to gradually recover over the next two to three years.
Thailand's real GDP growth is expected to return to positive territory in the final quarter of 2009, Annette Dixon, country director of the World Bank, said at the forum hosted by the Joint Standing Committee on Commerce, Industry, and Banking.
But the global economy will be significantly different by that time and will suffer from increased volatility.
Declining world consumption will result in demand for Thai exports from developed countries falling as export competition intensifies. A sharp rise in capital inflows would cause the Thai baht to appreciate, reducing local exporters' competitiveness.
An expected surge in oil prices and inflation would hurt both businesses and consumers, said Mrs Dixon.
The World Bank recommends Thailand strengthen its political stability, facilitate the use of hedging instruments and improve access to finance for small and medium-sized enterprises. Better education and social safety nets are also needed, she said.
Consistency of government policies is required. And public investments must be implemented in a timely and transparent manner, she said.
The private sector, meanwhile, has to move up the value chain through innovation in areas of technology, products, and marketing in order to penetrate new markets.
Jean-Pierre Verbiest, country director of the ADB's Thailand Resident Mission, said the global economic environment would remain weak over the next two to three years and liquidity in the global capital market would remain tight.
The Thai economy is expected to perform below potential over the next couple of years with a growing fiscal deficit of 5-6% of gross domestic product, while public debt could increase to more than 60% of GDP, he said.
While external demand is weak, there is large potential to increase regional trade. Economic prospects for Asia remain bright and will drive the world recovery, he said.
In the medium term, substantial acceleration of public spending is the only way for the Thai economy to avoid stagnation, rising employment and social problems.
Thailand should reform its capital market and deepen the equity market through transforming the Stock Exchange of Thailand into a private entity and integrating the bourse with others in Southeast Asia, said Mr Verbiest.
Prime Minister Abhisit Vejjajiva, meanwhile, said greater political stability was critical.
"There is now clearly greater stability. But the government recognises full well that for the investment environment to have a positive outlook we will continue to work very hard to achieve reconciliation," he said.
On the economic front, the government has swiftly moved from the first economic stimulus package to a second package to ensure the Thai economy has a capable workforce, solid infrastructure and investor-friendly policies, when a global recovery takes place, said Mr Abhisit.
Apisak Tantivoravong, the chairman of the Joint Standing Committee on Commerce, Industry, and Banking and the Thai Bankers Association, said bankers had a role to play in stimulating investment and the economy.
"Our role is improving liquidity for the public sector through lending. We will also consider extending credit to the business sector, both creditworthy and problem customers, to help them during the economic crisis," he said.
The Thai banking sector has no liquidity problem at present and a high capital ratio, he said.
(Source: Bangkok Post, business, Thailand must brace for revival, World Bank warns of changing economy, NAREERAT WIRIYAPONG, 24/07/2009, link)
Vocabulary:
revival - coming to life again, economy starts growing againbrace for Y - prepare for something bad Y to happen
brace for revival - prepare for when the economy gets better
drastic changes - very big changes
global economic landscape - the economic situation around the world
post-crisis era - the period of time after the current global economic crisis ends
international development finance agencies -
World Bank - a bank that loans money to poor countries with the goal of reducing poverty (See Wikipedia)
Asian Development Bank (ADB) - a regional development bank established in 1966 to promote economic and social development in Asian and Pacific countries through loans and technical assistance (See website and Wikipedia and backgrounder) .
Gross Domestic product (GDP) - a measure of economic activity in a country, the value of the country's output of goods and services. GDP is defined roughly as: GDP = Household Consumption + Business Investment + Change in Inventories + (Government Spending - Taxes) + (Exports - Imports) (See Economist Glossary)
real GDP growth is expected to return to positive territory - GDP growth will again be positive as it normally is (it is negative during recessions)
standing Y - Y has no time limit, Y is not for one specific situation (for example, a standing arrangement)
a standing committee - a committee that exists without time limit
a Joint Standing Committee - a standing committee formed by people from tow different organisations
significantly different - very different, different in important ways
volatility - going up and down by large amounts in unpredictable ways
X intensifies - activity X increases
export competition intensifies - there is more and more competition between exporters
capital inflows - investment money coming into the country
appreciate - when the currency of a country gains in value and the goods produced in the country become more expensive
expected surge in oil prices - believe that oil prices will increase suddenly in the future
facilitate - help
hedge - do something to protect against future
hedging instruments - securities such as futures contracts or options that can protect an investor from future loss
social safety net - things that prevents people from falling into poverty (usually government aid)
consistency - do in the same way every time, in a way that doesn't contradict or go against previous actions
consistency of government policies - policies done in the same way, so they don't contradict each other
contradict - when there is a conflict between two things, they cannot both be true or exist at the same time
timely - on time, done in time to get benefits from doing it
transparent - visible to the public, has no secret or hidden parts
implemented in a timely and transparent manner - the plan was carried out on time and with all details visible to the public (no secrets)
a value chain - all the activities that add value to a product or service (some of these activities are supplied by the organisation and some of them come from suppliers or are outsourced)
move up the value chain - move onto productive activities that add more value and thus make more of a profit (See Wikipedia on the Value chain)
penetrate new markets - gain market share in new markets
market share - the percentage of customers in a market that a company has
tight liquidity - very little money and cash available for businesses through loans
capital markets - markets such as stock exchanges where companies raise money for their businesses by selling securities such as stocks and bonds
reform - improvements
capital market reforms - improvements in capital markets
perform below potential - could do better, but didn't
fiscal deficit - when taxes received by government are less than government spending, the difference (budget deficit) must be financed by borrowing
public debt - the money the government has borrowed to pay for deficits and owes
external demand - demand for the exports of a country (demand for things that a country produces outside the country)
weak external demand - less demand for a country's exports
regional trade - exports and imports among the countries of ASEAN or Asia
prospects - the possibility that something will happen
economic prospects - when the economy will get better and when
medium term - a period of time that is 2-10 years into the future (See investorwords.com)
equity market - the market for stock shares (the stock exchange of over the counter sales outside the exchange)
deepen the equity market - get more investors participating, raising larger sums of cash, moving away from excessive dependence on bank lending
transforming - changing
private entity - a company owned by shareholders rather than the government
X integrating with Y - X combining with Y to become one functioning unit (X and Y work together)
political stability -
recognises full well that... - they really know that
outlook - what will probably happen in the future
positive outlook - good things will probably happen in the future
achieve Y - reach goal Y
reconciliation - the process of two friends who have fought becoming friends again
a front - one area where enemy troops meet in a war and fight
On the economic front... - in the area of economic policy, solving economic problems
economic stimulus - extra government spending programmes or tax cuts to get the economy moving and grwoing again
economic stimulus package -
a capable workforce - workers in an economy are able to perform many skilled tasks
investor-friendly policies - doing things to attract investors, get investors to invest their money
improving liquidity - making more cash available to businesses so that they can continue to operate (through loans, for example)
extending credit to - give a loan to
creditworthy - has paid bakc loans and bills in the past, so has good credit rating, so they are likely to pay back in the future
liquidity problem - available of money (to finance business through loans)
high capital ratio - a lot of machines, equipment, and technology compared to labour, that makes labour more productive
