outlook 2012

[imerlot]

The global economic outlook for 2012 isn't pretty

A eurozone recession is certain, the UK is double-dipping and the US is growing at a snail's pace – fasten your seatbelts, it's going to be a bumpy year

The outlook for the global economy in 2012 is clear, but it isn't pretty:
recession in Europe,
anaemic growth at best in the United States,
and a sharp slowdown in China and in most emerging-market economies.
Asian economies are exposed to China.
Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the eurozone.
And turmoil in the Middle East is causing serious economic risks – both there and elsewhere – as geopolitical risk remains high and thus high oil prices will constrain global growth.

read more:
http://www.guardian.co.uk/business/econ ... 12-roubini

[imerlot]

Global Stock Markets Lost $6.3 Trillion in 2011
Saturday, 31 Dec 2011 09:39 AM

Global stock markets saw $6.3 trillion in value wiped out in 2011 thanks largely to the European debt crisis, which roiled markets for a good chunk of the year.

Worldwide stock market capitalization fell 12.1 percent to $45.7 trillion, the Financial Times reports, citing Bloomberg data.

..
"Investors were more optimistic at the start of the year, but as the year progressed they were forced to come to grips with the debt levels in the western world," says Navtej Nandra, the international head of Morgan Stanley’s asset management arm, the Financial Times adds.

The S&P 500 ended 2011 flat, while in the U.K., the FTSE 100 lost 5.5 percent.

In Europe, the damage is more telling.

The Eurofirst 300 gauge of blue-chip European companies fell 11 percent in 2011, led by the French and Italian bourses, while the MSCI Emerging Markets index shed a fifth of its value, the FT adds.

Japan's Nikkei index lost 17.3 percent in 2011, a year marked by a devastating earthquake and tsunamis, while Hong Kong’s Hang Seng index fell 20 percent and the Shanghai Composite was down 22 percent.

The Dow Jones Industrial Average, meanwhile, finished up 5.5 percent at 12,217.56.

Europe wasn't the only culprit, as political bickering over how to fix the economy in the U.S. spooked investors as well.

Many investors grew weary of the massive swings in stock market indices.
"It has been such a difficult year," says Rick Bensignor, the chief market strategist for Merlin Securities, according to the New York Times.

"Things changed on a dime."

And while Europe and the U.S. won't solve their problems overnight, investors will likely move into 2012 somewhat more prepared for volatility.
"

Read more: Global Stock Markets Lost $6.3 Trillion in 2011
http://www.moneynews.com/StreetTalk/Glo ... /id/422700

[imerlot]

Asian stock markets post first yearly loss since 2008
Sun, Jan 01, 2012
..
BIG LOSSES:The TAIEX was among last year’s losers, with its market capitalization shrinking NT$4.63 trillion, translating into a NT$200,000 loss in assets for each Taiwanese

The TAIEX closed on Friday at 7,072.08. The marginal loss disrupted a five-year streak in which the index had posted gains in the year’s final day of trading.

Overall, the index shed 1,900.42 points, or 21.18 percent down from the 2010 finish at 8,972.5. While the TAIEX managed to stay above the 7,000-point mark, total market capitalization shrank from NT$23.81 trillion (US$785.8 billion) to NT$19.18 trillion.

The figure could be translated into a loss of about NT$200,000 in assets for each of Taiwan’s 23 million people.

Read more:http://www.taipeitimes.com/News/biz/arc ... 2003522099

[imerlot]

Thailand’s Economic Situation in 2011 and Outlook in 2012 (31/12/2011)
http://thailand.prd.go.th/view_inside.php?id=6066

The Fiscal Policy Office has predicted that the Thai economy in 2011 would grow by only 1.1 percent, as a consequence of the flood disaster. A better outlook is seen in 2012, with economic growth between 4.5 and 5.5 percent.

The Director-General of the Fiscal Policy Office, Somchai Sujjapongse, said that the flood crisis had had a very bad impact on the manufacturing and agricultural sectors. Private consumption was likely to slow down and farmers’ income would also decline because of huge damage to agriculture.

Inflation in 2011 is expected to stand at 3.9 percent, with higher production costs in food products, such as meat, vegetables, and fruit. Domestic fuel prices have also increased in line with crude oil prices in the world market. Private investment is likely to decelerate, because the flooding situation has compelled a number of factories to temporarily suspend production.

Exports would also face a slowdown due to production disruption in the country and uncertainties in the global economy, as well as the problems of the debt crisis in Europe and unemployment in the United States. Export growth is expected to be 16 percent, while imports would increase by 23.3 percent.

The unemployment rate is expected to be 0.7 percent of the total labor force in the country. Thailand would have a trade balance of 26.3 billion US dollars.

..

As for outlook in 2012,
the Fiscal Policy Office pointed out that the implementation of the Government’s restoration and rehabilitation measures would be a supporting factor to spur the Thai economy. Private consumption is likely to grow by 3.8 percent. The Government’s policies of raising the daily minimum wage and the starting salary for new graduates holding bachelor’s degrees and working in the public sector would stimulate public spending.

Private investment is expected to grow by 10.3 percent, with the Government’s post-flood rehabilitation as a supporting factor. The effect of the global economic slowdown is likely to bring down Thailand’s export growth to about 9 percent. The government spending would grow by 4.5 percent.

According to an economic report issued recently by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the devastating flooding in Thailand would reduce the country’s economic growth to 2 percent for 2011.

However, the Thai economy should bounce back in 2012 thanks to post-flood reconstruction. As a result of post-disaster investments for economic recovery, Thailand’s growth rate in 2012 is expected to be 4.5 percent. With a low public-debt level, at 40 percent, Thailand has fiscal space for investment to rebuild infrastructure for better flood management.

[imerlot]

Morgan Stanley Global Economics Forum 2012:
ASEAN
When DM Falters, How Do ASEAN Economies Stack Up?
December 15, 2011
source:
http://www.morganstanley.com/views/gef/

Thailand: 2012 Reconstruction Payback

What's New? How Are We Different from Consensus?

We lower our 2011 GDP growth forecast from 4.5%Y to 2.4%Y, reflecting the flood impact, and raise our 2012 outlook from 4.0%Y to 4.5%Y via growth payback from post-flood reconstruction. We roll out our 2013 forecasts at 4.5%Y. Our 2012 forecasts are slightly higher than consensus expectation of 4.3%.Y Overall for 2012, we think Thailand will see two elements less observed in other ASEAN, namely growth and inflation. Given the strong base in 2012, Thailand is not likely to show a further growth acceleration in 2013. We expect 2013 to register similar growth momentum of 4.5%Y.

Flood impact to spill over to 1Q12... In our October assessment of the flood impact, we had highlighted that supply-side disruptions from the flood could shave 1.0-1.5pp off 2011 GDP headline growth. With 3Q11 GDP being weaker than expected and a more prolonged flood duration, we are now cutting our 2011 GDP growth forecast from 4.5%Y to 2.4%Y. We expect 4Q11 to show almost stagnant growth on a %Y basis.

As a comparison, in the aftermath of the Japanese earthquake, auto production fell by around 40% and it took around two quarters for production levels to normalise. We believe that the near-term impact from the flood could be more severe as capacity utilisation effectively falls to zero. Operations in some industrial estates may take 3-5 months or more to normalise - which means 1Q12 production would be impaired as well. Meanwhile, even when supply-side disruptions normalise, production levels are unlikely to return to previous levels, given the DM demand shock.

...but reconstruction to offset global slowdown and production disruptions from flood: However, reconstruction efforts are likely to provide a significant boost. Policy-makers have laid out a ‘New Thailand' plan, which targets up to THB 900 billion for post-flood reconstruction. Of this, THB 100 billion is for rehabilitation of industrial estates and is scheduled to be implemented in the next 12 months. Meanwhile, THB 600-800 billion is for longer-term overhaul of the water management system and development of logistics and infrastructure capability.

Specifically, in terms of disbursement, policy-makers have expanded their FY2012 fiscal deficit from THB 350 billion to THB 400 billion (3.4% of GDP versus 2.7% in FY2011). We think the fiscal deficit is more likely to rise to 4.5% of GDP, especially if the corporate tax cut is also incorporated.

A soft loan programme of THB 325 billion (3.2% of GDP) to help businesses impacted by floods has also been approved. With these reconstruction plans, we think that Thailand would be able to achieve 4.5%Y growth for 2012, even without factoring in 100% implementation.

Inflation should pick up from supply-side factors... Other economies are likely to see disinflation, but inflation in Thailand will likely remain around 5% for 1H12 for two key reasons:

1) Flood-related impact such as the supply shock from agriculture production losses, hoarding and logistic difficulties will add to inflation pressure. During the 1995 flood episode, food prices rose by 1.5-2.0% for the three months of flood, higher than the average 0.2-0.9% typically seen during that period.

2) Cost-push pressures should stem from the implementation of the minimum wage programme in April 2012. The minimum wage will rise from an average of THB 206/day to THB 300/day in seven provinces (Bangkok, Samut Prakan, Samut Saknon, Pathum Thani, Nakhom Pathom, Nonthaburi and Phuket) and by 40% in the rest of the provinces. The minimum wage in the rest of the provinces will then be raised to THB 300/day in 2013. We have increased our inflation forecasts from 3.7%Y to 4.0%Y for 2011 and from 3.0%Y to 4.5%Y for 2012 to take these factors into account. Our previous 2012 inflation forecast did not build in the minimum wage policy and our current 2012 forecast is now higher compared to consensus at 3.6%Y.

....with policy-makers turning focus to mitigating near-term growth impact from supply shocks: Bank of Thailand has been one of the most hawkish central banks in Asia and, until recently, has been highlighting upside inflation risks. However, we think that policy-makers are now likely to focus on the growth impact from the supply shock (i.e., flood) and demand shock (i.e., global slowdown), rather than the supply-side inflationary pressures from agricultural production losses and the minimum wage increase. The BoT indeed cut the policy rate by 25bp at the November 30 meeting. In total, we expect policy-makers to cut the policy rate by 50bp, which would bring it to 3.0% in 1Q12.

Realising full growth potential requires stable politics, investment and productivity rather than consumption: Looking further out into the medium term, clients have asked us whether there's a structural story for Thailand. The way we see it, for a middle-income economy like Thailand, its growth in the bull years of 2004-07, at 5.3%Y, has (interestingly) not been higher. We cite a few possible reasons:

1) Thailand's demographic trends are not favourable. The growth in its working age population has been lower than other ASEAN economies and continues to decelerate.

2) The non-conducive political environment has hindered the investment rate, which is lacklustre to begin with.

3) The large agriculture sector and status as a net agricultural exporter have slowed down the pace of urbanisation and, with that, the creation of commercial centres with critical mass to drive economic growth.

In the early stage of her administration, PM Yingluck has focused mainly on income redistribution stimulus measures such as the minimum wage and rice mortgage schemes. This would help to spur domestic demand, notably consumption, but with inflation side-effects that would hamper competitiveness.

However, we think that a consumption growth model is not a sustainable strategy for a middle-income economy where the dependency ratio is likely to deteriorate. We think that Thailand's full growth potential can only be realised if policy-makers capitalise on their strong mandate to rebalance the economy via higher investment and higher productivity. This would help to put Thailand on a higher potential growth trajectory and enable it to grow rich before it grows old. In this context, policy actions to overhaul infrastructure system in post-flood reconstruction may just help to push this along.

[imerlot]

downside is relatively high compared with 2011
http://www.bdo-thaitax.com/bdo/in-the-news/3858

External factors are expected to pressure the SET to move sideways, said Kavee Chukitkasem, assistant managing director at Kasikorn Securities.

Europe's debt crisis needs to be monitored closely, he said.

Under the first scenario analysis, if there is a quick fix for the European debt problem, growth in Thailand's gross domestic product is projected at 4.5 per cent next year and the SET Index is likely to reach 1,200 points, with the lowest point 900. This scenario has a 20-per-cent chance of occurring.

The second scenario has a 40-per-cent probability. There are measures to solve the European debt crisis but only to buy time. This development could prompt investors to shift their investment out of stock markets and invest in bond markets. Thailand's GDP growth is estimated at 4 per cent and the SET Index is forecast to move in a range of 800-1,150 points.

Final scenario

The final scenario is that Germany and France disagree on a solution to the debt crisis and no measures are introduced. If this takes place, Thailand's GDP growth is likely to be at 1 per cent and the SET Index could move in a range of 700-1,050 points.

"The first scenario is unlikely. The second has more chance. Thus the SET Index is expected to have less upside next year while the downside is relatively high compared with 2011," Kavee said.