Mekong Monitor: Thailand’s outlook revised from positive to stable amidst COVID-19 uncertainty

Photo credit: Bangkok Post





Thailand’s outlook revised from positive to stable amidst COVID-19 uncertainty
(15 April 2020) S&P Global Ratings has revised its outlook for Thailand from positive to stable amidst the COVID-19 outbreak, pointing to projected “slower political adjustments.” The ratings agency expects Thailand’s political transition under the elected government to be delayed due to coronavirus-induced economic uncertainty. Two political developments that should be observed are the banning of the Future Forward Party and the potential departure of the Democrat Party from the ruling coalition. If there is more certainty about the direction of Thailand’s politics, the ratings agency stated it may decide to raise the ratings while a slower economic recovery and disruptions in Thailand’s political transition would see a downgrade. Thailand’s economy is projected to see a 2.5% contraction and a 5% decline in exports. Measures to alleviate the economic fallout are expected to widen Thailand’s fiscal deficit to 5.5% of GDP, raising net government debt to 31% of GDP in 2020.
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Thai Prime Minister calls for gold sellers to practice moderation to avoid cash crunch at gold shops
(15 April 2020) Thai Prime Minister Prayuth Chan-Ocha urged Thais to sell their gold “gradually” to ensure that gold shops do not suffer a cash crunch. This comes amidst a surge in people trying to sell their gold belongings as gold prices hit a seven-year high. On 14 April, the purchase price of gold bars was US$797 (26,050 baht) per baht weight while the selling price was US$802 (26,250 baht). Many sellers cited getting laid off or having their wages cut during the COVID-19 lockdown. The Prime Minister stated that officials are working with gold shops to ensure they have enough money to deal with a surge in sellers. Thailand’s Gold Traders Association chairman Jitti Tangsitpakdee urged people to avoid selling in large quantities due to worries of possible liquidity problems, concerned that some shops may have to shut down temporarily.
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Thailand’s Kasikornbank to expand digital banking services in Myanmar
(16 April 2020) Kasikornbank’s acquisition of a 35% stake in Ayeyarwaddy Farmers Development Bank was approved by Myanmar’s central bank, making it the first foreign commercial bank to acquire a stake in a local lender. The stake is reportedly worth US$40 million. Kasikornbank stated they would leverage upon Ayeyarwaddy Farmers Development Bank’s network of branches in the country to expand digital banking services to both existing customers and unbanked people. The acquisition would help expand its digital banking services and electronic payment systems. Myanmar’s digital banking market has garnered foreign interest in recent years, due to the surge in smartphone penetration among its people. The COVID-19 outbreak has further expanded prospects for both e-commerce and digital banking in the country.
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Exports expected to drop by 21% in first quarter of 2020
(14 April 2020) Vietnam’s total exports are projected to fall by 21% in the first quarter of 2020 as the country’s exporters see declining orders from Europe and the US, according to a Ho Chi Minh City-based supply chain consultancy. Freight forwarders in Vietnam have seen cargo volumes drop by 70% in comparison with pre-coronavirus levels, as many key markets remain under lockdown. Demand is now the biggest challenge for exports, when initially it was supply side issues that affected businesses when the virus broke out. When supply chains were initially affected, it prompted a frantic search for alternative production and transport capacity in Vietnam. However, Vietnams’ own reliance on raw materials and components from China led to delays and production challenges.
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Vietnam Airlines to sell its 49% stake in Cambodia Angkor Air
(14 April 2020) Vietnam Airlines is set to sell its 49% stake in Cambodia Angkor Air after the former has been left cash-strapped amidst the COVID-19 outbreak. Vietnam Air is reportedly in advanced talks with potential buyers, including the Cambodian government, which owns the remaining 51% stake. Vietnam Airlines informed investors it has received permission from the Vietnamese government (its majority shareholder) to sell its stake. Established in 2009 as the new flag carrier, Cambodia Angkor Air has reportedly not been profitable. It operates about 10 domestic and foreign routes and has a code-share arrangement with Vietnam Airlines. The Vietnamese carrier halted all international service in late March 2020, and furloughed roughly 10,000 employees (about half its workforce).
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About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.

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