Thailand’s 10-Year Economic Cycle is Right on Time!

Thailand’s 10-year economic cycle — which strikes every year ending with the number seven — seems to be right on time…once again!

1987: Yes, it started with America’s Black Monday when the stock market crashed 22.6 percent in just a few days and began a ripple effect that hit Thailand and the entire world.

1997: It was in 1996 that the IMF reported confidently that Thailand’s economy would recover in 1997. That certainly was not the case as George Soros swept across Southeast Asia destroying one nation’s economy after another…including Thailand’s.

2007: The global financial crisis of 2007–2008 is considered by many economists to have been the worst financial calamity since the Great Depression of the 1930s.

It began with the 2007 crisis in the subprime mortgage market in the US, and developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008.

Lehman Brothers excessive risk-taking helped magnify the global financial crash. Huge financial institutions experienced massive bail-outs; dramatic monetary and fiscal policies were needed to avoid a possible collapse of the entire world financial system. The crisis was devastating. The downturn in the global economy that followed, known as the Great Recession in the United States, gave rise to the European Debt Crisis for countries using the euro, and then the effects of the Great Recession spread across the world.

2017: Aren’t we seeing this very same pattern of incorrect predictions by the IMF again in Southeast Asia? Or have these prognostications by the IMF been deliberate once again in order to misguide, inasmuch as the IMF had predicted steady growth for Thailand from 2013 through 2018.

It was just a few months ago that the IMF projected that Thailand’s inflation would remain around the low end of the tolerance band in 2017–18, amid subdued core inflation.

Well here we are in August of 2017 where just recently a reputable publication reported that the nation’s top lender, Bangkok Bank, had been hit by a decline in investment gains.

The following statistics are screaming through online news outlets and blogs, and for a very good reason…they are alarming:

* Bangkok Bank 2017 Q2 profit 7.17 billion baht vs. 8.3 billion forecast

* Kasikorn Bank 2017 Q2 profit down 18 percent, H1 loans up 3.24 percent

* Krung Thai Bank 2017 Q2 profit up 2.7 percent, H1 loans down 2.67 percent (Recasts with earnings from other banks)

Reuters issued the following account:

Major Thai banks reported weaker-than-expected quarterly earnings on Thursday as they booked higher provisions to cover rising bad debt amid a gradual recovery in the country’s economy.

The recovery in Southeast Asia’s second-largest economy is still relatively fragile as exports and domestic demand remain weak. However, it grew 3.2 percent in the first quarter, its fastest annual pace in three years.

Thailand’s largest lender, Bangkok Bank, was also particularly hit by a decline in gains on investments and rising expenses because most of its excess liquidity is invested in low-risk assets such as government bonds.

The bank’s second-quarter net profit dropped 10.8 percent from a year earlier to 7.2 billion baht ($205.8 million), lower than the average forecast of 8.3 billion baht by 11 analysts polled by Reuters.

Non-performing loans (NPLs) rose to 3.1 percent of total lending at the end of June versus 2.9 percent end-March, while provisions rose 18 percent from a year earlier, it [Bangkok Bank] said in a statement.

Bangkok Bank said gains on investments, of which 59 percent is in government and state enterprise bonds, plunged 98 percent in the second quarter.

Its lending grew 2 percent in the first half thanks to the government’s spending and booming tourism, while fourth-ranked Kasikorn Bank posted loan growth of 3.24 percent in the same period.

In a separate statement, Kasikorn Bank reported an 18 percent drop in second quarter net profit to 9.43 billion baht, while NPLs rose to 2.89 percent at the end of June from 2.7 percent at the close of 2015.

This compared with average 9.97 billion baht forecast by 15 analysts polled by Reuters.

Kasikorn bank’s gain on investments also plunged 84 percent, it said without giving detail.

Unlike peers, Krung Thai Bank [KTB], Thailand’s second-largest lender, said its quarterly net profit edged up 2.7 percent from a year earlier due to rising interest income and improving margin.

The bank posted net profit of 8.68 billion baht for the April-June quarter, higher than the 7.37 billion baht forecast by 14 analysts polled by Reuters.

KTB’s net interest margins rose to 3.28 percent in the second quarter, versus 3.11 percent a year earlier.

However, the bank set aside provision of 7.74 billion baht in the second quarter, up 3 percent after its non-performing loans increased to 3.89 percent of lending at end June from 3.7 percent at end March. ($1 = 34.99 baht).

Upon reading the above statistics a few items really struck me as more than alarming:

Bangkok Bank said gains on investments plunged 98 percent in the second quarter!

Kasikorn Bank saw its gains on investments plunge 84 percent!

Krung Thai Bank set aside provisions of 7.74 billion baht in the second quarter, up 3 percent after its non-performing loans increased to 3.89 percent of lending!

I am sorry, folks, but this does not sound like the IMF’s prediction that growth would remain steady through 2018.

These are awful signs of something very good as it does appear that Thailand’s 10-Year Economic Cycle is once again right on time.

What is good, you ask? Well I guess it’s that old light at the end of the tunnel thing…once you hit bottom you can finally stand up and get moving towards recovery.

Back in 1997 it took until about 2003 (five years!) for the real estate industry to really start moving forward. And what a ride it was. Land and condos on the Eastern Seaboard tripled and quadrupled in value.

Then again in 2007-8 the Eastern Seaboard was virtually unphased as the Russian invasion came and Thais were purchasing 50 percent of all properties, and we just kept booming until about 2013-2014.

So whether a long- or short-recovery time, we are very close to turning that economic corner.

Yes we are going to pay dearly with time and money, but at least we will be working our way in the ‘Right Direction’ for a change!

Personally, I think this next Eastern Seaboard real estate cycle is going to be the biggest yet, and we will see a new and vibrant growth with results nobody had imagined.

Amazing Thailand…Incredible Eastern Seaboard!

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