Crisis Impact to the Economy of Thailand - Essay Example

?Essay on How the 2008 Global Financial Crisis Affects THE Economy of Thailand Introduction In around a decade, Thailand has experienced a series of crises financially brought about by the collapse of its currency that reduces the confidence of the investors, tsunami, SARS outbreak, climate change and conflict in the Southern part of its Muslim provinces that caused 4000 death of its citizen. 2008 is a very tough year for Thailand. The country is within its internal political crisis during this year that deepens the manifestation of social divisions and being to be affected by the most serious global financial crisis that has to face and resolve (Singh 2009 p.334). The crisis that the United States experienced that began way back summer of 1987 made way to the pullback to its economy and the world. Economic recession did a domino effect in the global financial crisis. How ever, as the member of the first world country recovers from the crisis, consequences still felt on some of the fast developing countries like Thailand. Economic recovery globally has been a sudden and immediate focus of the countries among Asian nations. The lost of many jobs are expected to happen in the United States and Europe in the coming year and with regard to this, a higher rate of unemployment is very hard to predict globally. Thailand as apart of the Asian nations would also be affected by the crisis as a whole. With the economy that depends on the exportation and importation, Thailand’s economy will be expected to be tumbling down and in effect would be reducing growth and unemployment. Thailand as a part of the global imbalances as it has been manifested in the recent years, will have to double work considering that it has also its own internal difficulties politically in dealing with the policies with the government. In spite the fact that Thailand’s government has been working so hard and ambitiously aiming to build a stronger economy in the middle of the global financial crisis, confusion and disorder among the people are manifested and has become a serious internal problem between the government and the people. Crisis Impact to the Economy of Thailand There are two financial crises that Thailand experiences with in the span of ten years; 1997-1998 and 2007-2008. The first part of the financial crisis was so damaging and required many years to recover. In fact, upon recovering, the country is able to achieve and attain a higher and promising private investment growth in its economy and established good reputation to be a destination of foreign capital. During this time, the country recorded rapid development and sustained the growth of economy but still, the financial system shows vulnerability to the shocks of global crisis and became unstable (Ahmed & Islam 2010 ,p.66). The recent crisis which is the 2008 is merely different from the first one. Although in this crisis, Thailand is not much involve in debts compared to last time. Facing the reality that the country cannot escape from the issue of global crisis, in what way does the issue impacts the economy of Thailand? As it has being known that Thailand after the last crisis increasingly depends on the global economy. When the global crisis burst and the damage is felt and seen among some major institutions in the United States and European countries, credit-default is experienced, shocked the financial market, it is expected that that the real and deep effect of the crisis be seen and felt in the industrialized countries. Thailand has not seen and felt the direct effect of the global crisis during the first wave. The second wave of the crisis brought panic globally which resulted to freezing in the credit market and the global stock market meltdown. This time, Thailand economy was not able to escape as the stock market index fluctuated where billions of dollars were lost in few months time (Chirathivat 2011). The weakening of the economy transcends business programs between the bank of Thailand and the business firms all over the country during 2008. A serious revelation came out that the continuation of economic conditions is slowing down and significant uncertainties economically and politically are manifested brought about by deteriorating world economic conditions. While the business industry is falling, the abating labour market starting to surface and a if this economic conditions were not given proper solution and prolonged, it is expected to have a higher rate of laid off in the coming period. Due to the progressive weakening of economy as evident in the previous quarter, the private consumptions is slowing down as the reflection materialized through lower sales of goods specifically in food and beverages, motor vehicles, garments, electronics, and even in the sales in the real estate industries. Private investments were constricted during the first part of the political turmoil, followed by weakening of the global economic conditions caused the decline in the business reactions and response. The continuous tightening of the financial institutions in the credit standards for the corporate loans made the way for the business investment to postpone. Considering that the import business is the foremost and directly affected by the global crisis, overall exports shrunk in 2008 and inline with this small and medium exporters were the one severely affected by the crisis. Employment sector during the time of global crisis was attempted to be sustained by reducing the working hours as well as the contract-workers and not trenching permanent workers. They also tried to look at the possibilities that the laid-off workers could work in the farm. There is a decreased in the demand in the real estate sector relevantly because of the overall economic condition. All the industry concerning the economy of Thailand during the year 2008 manifest deteriorating and tumbling experience that weakens Thailand economy as a whole. Global economic crisis tandem with the internal political turmoil in Thailand during the year 2008 worsen the situation of the people specifically those that belong to the marginalized sector in the society. Bank of Thailand will not be directly hit and affected by the financial crisis experienced in the United States because this has no significant effect on the financial liquidity considering that Thailand is a less non performing loan. There is a need for the bank of Thailand to drop the interest to be able to align with the reserve rate but unfortunately, because Thai banks are being owned by only a few and they want to hold still the manipulation in the banking business in greediness. Because of this, retailers and wholesalers are affected by paying high fees according to the demand of the Thai bankers. If the banks do not cooperate and come into line, the effect will worsen the economic situation in Thailand. There is no more enthusiasm with the people opening a bank account, accept and consume credit cards, and even sales of insurances failed. One of the main problems the banking business has to face and to deal with in the midst of this situation is the effect of the escalation in the political unrest in month’s time especially if the affect goes beyond the ports. This situation will definitely affect the economic situation of Thailand. By November 2008, baht has dropped and crisis in the manufacturers are strongly felt and experienced in the exportation industry. Factories are either closing or down grading and 10,000 people from the marginalized sector are expected to loose jobs. Japan is one of the main investor of Thailand in the recent years. Now that Japan is experiencing recession, there is a need for Thailand to find a new market to be able to catch up with the catastrophe. In effect of this, an expected 20,000 employees will be affected and loose their jobs. Japan’s recession is seen to hit Thailand’s retail markets and even tourism. Political Situation in Thailand In the middle of the civil unrest that is experience in Thailand, decrease of jobs and heightening of unemployment will be manifested as the global companies will be forced to close in effect of the global crisis. Some of the big companies in Thailand are also seen to be going to bankruptcy due the some reasons of imbalance management not having been prepared to the global crisis that the world experiences due to global recession. Big companies in the world have lost balance managing the situation and are forced to close which in domino effect, the associated companies in Thailand follows the closing and bankruptcy. Tourism business in Thailand dropped because most of the people around the world and even locally felt the recession or the global crisis. Local factories are begun closing in effect of the closing of mother factories and civil unrest will be inevitable among the people of Thailand if the Government does not do something to resolve this issue. Turmoil is manifested; strikes are set almost anywhere and the call for the resign of the Prime Minister is being shouted along the streets. As the rate of unemployment raise, turmoil is manifested and as the government trying to stop the striker’s harassment among the people is unavoidable. Local internal conflict between the people and the government of Thailand is rising. Confederations among the working group are calling for a national strike on November 24 in response to the violent treatment against the previous rallies. This time the bigger call for oust will be the shout of the people. The strike will be expected to continue until the government steps down. The ongoing political crisis in Thailand in 2008 is the conflict rooted between the People’s Alliance for Democracy (PAD) and People’s Power Party (PPP). Way back in 2006, Thaksin was re-elected as the Prime Minister of Thailand and continued to be in power. The same year, the family sold the property that is said to be a product of corruption in the Shin Corp telecom group that has the net of 2 billion USD and did not pay any tax regarding the selling. This caused his opponent to move against him until the snap election was held. Tactically, Thaksin steps down to office to calm his opponents. When he gets back to power in May 2006, a military coup ousting him materialized and for around a year a military government took over the position in the government. Even after his ouster as prime minister in a coup in 2006, Thaksin, with his wealth and charisma, had continued — except for a year of military rule — to be the kingmaker in Thailand. In December 2007, the PPP won the election and gave way for the comeback of Thaksin in 2008 from exile. Thailand during this time has a new government but the people still believe that Thaksin is still the man behind the government and the turmoil did not stop and instead an aggressive move from the opponents manifested along the streets. The same year, the Prime Minister were removed from office and replaced by SomChai. It is very relevant to say that Thailand went through a very hard situation considering the fact that they have experienced to have four presidents in the year 2008. It pictures a serious and deep chaos in the country tandem with the global recession which affects the economic situation in Thailand. December 18, 2008, the start for the new beginning Came out in Thailand when the new Prime Minister was declared, Abhisit Vejjajiva. Along with the beginning of new life for the Thai people is also considered to be the end of the most powerful politician in Thailand history, Takshin Shinawata. He is now considered as a fugitive having his billions of USD assets frozen. The take over in the government led by the opposition Democrat Party with the new Leader, Abhisit Vejjajiva, will start the new Thailand after the years of holocaust for the people of Thailand and a new beginning to start recovering the economic crisis just like the rest of the countries that experiencing the same in the global recession. \Thai government is so fragile to face and experience deep economic crisis in effect of the global recession and heavy social and political problems. Conclusion The deteriorating effect of the global financial crisis began to manifest, experience, and felt in 2008 by the main stakeholders of the industrial economies among the regions especially those that are export oriented countries. The internal political indifferences in Thailand compressed its exportation that leads to the weakening of the economy in the year 2008 in comparison to the previous years. The domestic political conflict that made the way to the closure and ends the importance of the airport in around two months further weakens the trust of the consumers and the investors in the country. The decline in the tourism industry also proves the contribution in the contraction on the economy as a result of the internal conflict locally. Thailand’s economy during the year 2008 does not show any growth and did not balanced in the forecasted outcome or target in the previous year and there is a big possibilities that in effect of this, Thai economy can be projected to have a lower-than-expected growth in the economy in the near two years. Thailand is an industrious country and what it needs to overcome the economic crisis is an intelligent leader who would lead the people for the welfare of the people of Thailand. The Political turbulence is swept and a new leader that was elected by the people is the new hope to conquer and overcome the financial crisis that the Thailand experiences during the year of 2008. References Chirathivat, and Malikamas, (2011). Thailand’s Economic Performance and Responses to the Global Financial Crisis. Singapore:Pasir Panjang. Ahmed and Islam, (2010).Financial Liberalization in Developing Countries: Issues, Time Series.Australia:Melbourne. Singh, (2009). South East Asia Affairs 2009: Thailands Crisis Overload. Singapore:Pasir Panjang. Bank of Thailand (2005). Report: Economic/Business Information Exchange Program between the Bank of Thailand and the Business Sector. [online] Available from [December 30, 2008] Thaizer (2010). The Thaksin Shinawatra Factor. [online] Available from http://www.thaizer.com/politics/the-thaksin-shinawatra-factor/ Mydans, S. (2008) ‘Thailands Winds Shift, Setting a Political Boss Adrift’, The New York Times, December 17, 2008, http://www.nytimes.com/2008/12/18/world/asia/18thai.html?_r=1 Read More