In 2004, the US Federal reserve upped interest rates. Three years later crisis rocked South East Asia. Some fear a repeat of this, but Matthew Dobbs, fund manager of Asia ex Japan equities at Schroders, is cynical about such cynicism when it comes to the so-called ASEAN counties, and especially when it comes to Thailand.
He said: “Whereas 1997 was a currency crisis, caused by an unsustainable accumulation of US-denominated debt, the country's foreign-denominated debt, as well as those of its neighbours, is at a far more stable level.
“Thailand's domestic economic engine is also being driven by policies aimed at growing consumer spending power and accommodating business growth - such as a near-40 per cent increase in the minimum wage that came into effect in April this year as well as a corporate tax rate cut in two phases, from 30 per cent to 20 per cent by the end of 2013. The ongoing urbanisation process in the country continues to spur growth as GDP came in at a salubrious 6.4 per cent in 2012 and is projected to grow at 5.3 per cent this year. Thailand's latest private consumption growth figures witnessed a healthy increase of over 12 per cent year-on-year in the fourth quarter of 2012.
“Meanwhile, Thailand's public debt-to-GDP ratio is a respectable 44 per cent, with most debt domestic and baht-denominated. It's this fiscal room that has allowed the government to take on an ambitious multi-year infrastructure spending plan which seeks to invest up to THB2tn (US$68bn) over the next seven years. This push in spending will mainly go towards transport, with high-speed rail projects, an extension of Bangkok's MRT and dual tracking of more than 2,000km of existing rail lines all forming part of the government's vision.”
“On the whole, the region's finances have seen a marked improvement over the past decade. Sturdier current account balances, along with robust FX reserves means governments have ample room to absorb any volatility the region may experience, while current account balances are significantly stronger than they were in the years before the crisis.
“Furthermore, there has been upside for countries and their credit ratings. Indonesia, which saw Moody's and Fitch raise their credit rating for the country to investment-grade at the beginning of 2012, was joined by the Philippines as the fellow archipelago was also upgraded by both Fitch and S&P in the past two months to investment-grade status. In addition, Thailand has seen its currency perform the best among the 11 most active Asian currencies so far this year.”
© Investment & Business News 2013