This "DB" Rating Indicates: Moderate risk

Transcription

1 THAILAND Region : Asia Pacific Edition : June 2008 D&B Country Risk Indicator DB4a This "DB" Rating Indicates: Moderate risk Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses. Trend Improving The country's overall risk profile is improving as a result of favourable political/commercial, economic and/or external developments The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories: Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment; Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions; External risk - the current account balance, capital flows, FX reserves, size of external debt and all such factors that determine whether a country can generate enough FX to meet its trade and foreign investment liabilities; Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to provide further expansion in business opportunities. The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (ad), with an 'a' designation representing slightly less risk than a 'b' designation and so on. Only the DB7 indicator is not divided into quartiles.

2 Key Facts Country Overview: Population: 64.2m Surface area (sq km): 513,120 Capital: Bangkok Timezone: GMT +07:00 Official language: Head of state: GDP (USD): Thai King Phumiphon Adunyadet 176.6bn GDP per capita (USD): 2,750 Life expectancy (years): 71 Literacy (% of adult pop.): 92.6 Thailand is located in Southeast Asia and borders Burma, Malaysia, Cambodia and Laos. The country was ruled by an absolute monarchy until 1932, and the monarchy retains a powerful position in society and commands enormous respect across the political spectrum. Since 1932 Thailand has alternated between periods of weak elected coalition governments and military backed governments; the most recent coup was when former PM Thaksin Shinawatra was toppled in September The country returned to civilian rule in early 2008 after an election in late Thailand has a free market economy, but state influence remains in some areas, and corruption is a serious problem. Exports (and high-tech manufactures in particular) are a key growth driver: the country is the world s largest manufacturer of computer keyboards. However, Thai firms are seen as increasingly uncompetitive against low-cost Chinese producers of high-tech goods. Trade & Commercial Environment Trade Terms Minimum Terms: SD The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: LC D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: days Normal period of credit associated with transactions with companies in the stated country. Transfer Situation Local Delays: 1-2 months The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. FX/Bank Delays: 1-2 months The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.

3 Trade & Commercial Environment In May 2008, the government agreed to raise the minimum wage in Bangkok and surrounding provinces by just over 4.5% to THB203 (USD6.50) a day; it will increase the minimum wage elsewhere based on a 5% inflation rate. Although the increase is below inflation, it will help to stabilise private consumption; nonetheless, increased labour costs will cut firms' margins further. Between January and April, Thailand's FX reserves increased 21% to USD108.4bn. While Thailand registered a trade deficit in early 2008, net FX reserves increased as a result of strong services income (e.g. from tourism). Despite the Thai central bank removing its capital controls in March, uncertainty in Asian financial markets has obviated any large inflows of international funds. Export Credit Agencies US Eximbank Atradius ECGD Euler Hermes UK Full cover available ST cover available Full cover available Full ST cover available Economic Indicators e 2008f 2009f Real GDP growth, % Inflation, annual ave, % Govt balance, % GDP Foreign debt, % GDP C/A balance, % GDP *Government balance data are for fiscal years (October-September). Currency Information Exchange Rates (London, 19 May 08) EUR GBP JPY* USD *(x 100)

4 Local Currency (Baht [THB]: USD) Local Currency (Baht [THB]: USD) Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Week Week Week Week Week Payments Performance Payments Performance (% of payments made 30 or more days over terms) Data Table Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q

5 Risk Factor Thai economic output picked up momentum in Q1 2008, growing 6.0% year on year (y/y) according to the Bank of Thailand. This marks an improvement over Q4 2007, when output grew 5.7%, and over 2007 as a whole, when output grew just 4.8%. Key macro-economic indicators suggest economic growth will continue its upward trajectory in 2008: private investment grew 7.2% in Q1, up from 4.1% in Q4, and private consumption grew 7.0%, up from 4.2%. Supply-side indicators also showed impressive growth in Q1; for instance, the index that captures manufacturing output climbed 12.9%. These positive indicators have led us to revise upward our forecast for real GDP growth by 0.5 percentage points to 5.5% in However, the economy continues to faces serious commercial risks, particularly from price pressures. Throughout Q1, the continued upward creep of producer prices, elevated by high international fuel and commodity prices, began to seriously dampen the outlook of Thai businesses. In March, processing prices of finished goods, intermediate goods and raw materials increased 8.6%, 14.4% and 15.9% y/y respectively, while consumer prices only rose 5.3%. As a result, business sentiment has fallen. In March, the firms surveyed by the Bank of Thailand expected that commercial conditions would worsen in the coming three months, the first time that they have expressed a pessimistic outlook in eight months. Meanwhile the index that captures the sentiment of small- and medium-sized trade and service firms, prepared by the Office of Small and Medium Enterprises Promotion in March, also had a pessimistic outlook over the next three months; their pessimism has also been triggered by high production costs. According to the Bank of Thailand, firms in the manufacturing sector were the most pessimistic of all; however, the outlook of infrastructure, trade, service and finance firms all worsened as well. In the short term, these sectors may represent potential payment risks. The government has implemented several schemes to ensure that demand remains adequate. For instance, it raised minimum wages to ensure that low earners are not overburdened with the new cost increases, and began selling fertiliser to small-scale farmers 35-45% cheaper than fertiliser sold by private firms. In general, Thailand is well positioned to benefit from rising global agricultural commodity prices: in Q1, farmers (who make up nearly 40% of the workforce) already saw benefits, with farm incomes jumping 21.1% as a result of the high agricultural commodity prices. Continued high prices should encourage more consumption on their part. Thai consumer confidence remains high and should help to mitigate the downside risks of inflation to businesses and economic growth. Glossary & Definitions DEFINITIONS Minimum Terms: The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: Normal period of credit associated with transactions with companies in the stated country. Local Delays: The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. F/X Bank Delays: The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. C/A (current account) balance, % GDP:

6 Part of the balance of payments that records a nation's exports and imports of goods and services, and income and transfer payments. DSR (debt service ratio), %: Annual interest and principal payments on a country's external debts as a percentage of exports of goods and services. Govt balance, % GDP: The balance of government expenditure and receipts. Real GDP growth, %: GDP adjusted for inflation. Inflation, %: The increase in prices over a given period. GLOSSARY CiA CLC CWP FX LC LT MT OA SD ST Cash in Advance Confirmed Letter of Credit Claims Waiting Period Foreign Exchange Letter of Credit Long term Medium term Open Account Sight Draft Short term Customer Service & Support Copyright 2008 Dun & Bradstreet - Provided subject to the terms and conditions of your contract. D&B Country Risk Services For information relating to D&B s Country Risk Services. UK Telephone: Fax: CountryRisk@dnb.com USA Inquiry Telephone: ext 7002 CountryRiskServices@dnb.com Rest of World Telephone: CountryRisk@dnb.com D&B Customer Services For all other information or queries relating to D&B products and services. UK Telephone: (UK) / (IR) CustomerHelp@dnb.com USA Telephone: CustomerService@dnb.com Rest of World You can contact your local D&B Customer Services departments by clicking here. Whilst D&B attempts to ensure that the information provided is accurate and complete, by reason of the immense quantity of

7 detailed matter dealt with in compiling the information and the fact that some of the data are supplied from sources not controlled by D&B which cannot always be verified, including information provided direct from the subject of enquiry as well as the possibility of negligence and mistake, D&B does not guarantee the correctness or the effective delivery of the information and will not be held responsible for any errors therein or omissions therefrom. Dun & Bradstreet Inc., 2008.