Cablegate: Thai Economy Improves in Second Quarter (for Most)

VZCZCXRO1347
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #2150 2381108
ZNR UUUUU ZZH
P 261108Z AUG 09
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 8071
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
INFO RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 6911
RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY

UNCLAS BANGKOK 002150

STATE FOR EAP/MLS AND EB
STATE PASS TO USTR
TREASURY FOR OASIA
SINGAPORE FOR FINATT BLEIWEIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON EINV ELAB TH
SUBJECT: Thai Economy Improves in Second Quarter (For Most)

REF: Bangkok 2032

Sensitive But Unclassified. For Official Use Only.

1. (SBU) Summary and Comment: Second quarter economic data released
August 24 by the Thai Government showed an improved economic
situation in Thailand. Gross domestic (GDP) was down 4.9 percent
when compared to the same period in 2008, but improved 2.3 percent
over the first quarter of this year. Many financial analysts
believe the data shows the Thai economy has reached the bottom and
is on the road to a "V-shaped" recovery from the global economic
crisis. According to some private sector observers however, the
benefits of recovery are being felt primarily by large business
owners. Laborers and small and medium enterprises, pressured by
cost cutting measures, stiff competition, and a lack of access to
capital, are still being squeezed and will enjoy the benefits later
and to a lesser extent. End Summary and Comment.

2. (U) On August 24th, the Thai government's National Economic and
Social Development Board (NESDB) released its official report on
Thailand's second quarter economic performance. While GDP
contracted 4.9 percent (year on year (yoy)) when compared to the
second quarter of 2008, seasonally adjusted real GDP expanded by 2.3
percent over the first quarter of 2009. The NESDB anticipates
positive quarterly growth to return in the fourth quarter of this
year, and the total 2009 GDP forecast to come in between a 3 and 3.5
percent contraction.

3. (U) The manufacturing sector contracted by 8.4 percent (yoy), an
improvement over the first quarter contraction of 14.4 percent
(yoy). The construction sector moved into the positive zone for the
first time since early 2008 with an expansion of 2.5 percent (yoy).
The financial sector also showed improvement, growing by 5.6 percent
(yoy). The agricultural sector, which had shown positive growth in
the first quarter of 2009 (3.4 percent yoy) reversed to negative
growth of 2.7 percent (yoy) due to a decrease in prices and yields
of several important agricultural products (e.g., rice, maize, and
cassava).

4. (U) Numerous private analysts, the reports of whom we have seen
or have been cited in the press, concur with Thai government claims
that government consumption (through fiscal stimulus) and investment
had much to do with the positive second quarter performance.
Government spending was up 5.9 percent in the second quarter.
Public investment increased dramatically from -9.1 percent in the
first quarter of 2009 (yoy) to 9.6 percent in the second quarter
(yoy) (NOTE: One private analyst told us that much of the Thai
government's investment resulted from the purchase of aircraft by
the national air carrier, Thai Airways. End Note.) Private
consumption and investment improved only slightly. Consumption
registered negative 2.3 percent (yoy) compared to negative 2.5
percent (yoy) in the first quarter. Investment was at negative 16.1
percent (yoy) compared to negative 17.7 percent (yoy) in the first
quarter.

5. (U) With regards to foreign investment, Thailand's benchmark
stock index is up roughly 45 percent from the beginning of 2009
compared to an approximately 48 percent fall over the course of last
year. However, while the Thai stock market is up, it has not
performed as well this year as other exchanges in the region, namely
those in Indonesia, the Philippines, Vietnam, and Singapore.
According to the NESDB, Foreign Direct Investment (FDI) inflow
during the second quarter stood at USD 2.037 billion, just slightly
more than the USD 1.993 billion total inflow during the first
quarter.

6. (SBU) The Managing Director of a private securities firm
tempered the generally positive reaction to the second quarter's
improved economic performance. He noted that companies ran down
their inventories in the first quarter which, once exhausted,
required replenishing. He also noted that small and medium
enterprises (SMEs) continue to face difficulty receiving loans from
banks, unlike large businesses. As such, much of the stock market's
increase is due to large businesses soaking up market share left by
SMEs. He also suggested, as we have heard elsewhere (reftel), that
laborers are generally not yet experiencing improvement in this
"crisis of the working poor," since a return to profitability for
many companies has been achieved through cost cutting (fewer
laborers, fewer hours, etc.).

© Scoop Media