Thailand rules out recession risks after economy slumps

THAILAND’S economy unexpectedly contracted last quarter tracking a slump in exports, prompting officials to rule out the possibility of a recession this year amid a rebound in tourism.

Gross domestic product (GDP) declined 1.5 percent in the December quarter compared with the previous three months, the National Economic and Social Development Council (NESDC) said Friday. That compared with a median estimate for 0.6 percent growth in a Bloomberg survey.

On a year-on-year basis, growth slowed to 1.4 percent in the same period, compared with the median 3.6 percent expansion seen in the survey. That dragged the Southeast Asian economy’s full-year expansion to 2.6 percent in 2022.

W hile the performance raised fears about the Thailand’s outlook, the council’s Secretary-General Danucha Pichayanan said the economy is not expected to contract again in the first quarter of this year because of rising tourist arrivals and government stimulus measures.

The nation, which relies on tourism and trade to pump up private consumption, is forecast to host about 28 million foreign visitors after China reopened its border, helping the nation buck a global slowdown, according to NESDC. The agency forecast 2023 GDP expansion to be in a range of 2.7 percent-3.7 percent, down from 3 percent-4 percent prior estimate.

“GDP data miss poured cold water on the optimism about the economic outlook on the back of tourism recovery,” said Stephen Chiu, chief Asia FX & rates strategist at Bloomberg Intelligence in Hong Kong.

The baht extended decline against the dollar, falling as much as 0.7 percent. The benchmark stock index dropped as much as 0.6 percent.

“We still expect the currency to outperform on further tourism recovery,” Chiu said.

NESDC’s Danucha acknowledged that, for now, “even if other factors, especially tourism, are doing well, exports is the big drag.” Outbound shipments faltered, contracting in each of the months between October and December.

The nation welcomed 11.2 million foreign tourists in 2022, the most since the Covid outbreak, boosted by China’s reopening toward the close of the year.

A bout 28 percent of Thailand’s 40 million annual visitors before the pandemic were from China. Tourism typically accounts for at least 12 percent of the economy and a fifth of jobs while private consumption, which also benefits from travelers spending, makes up 50 percent of GDP. Along with exports that’s equal to more than half the output, they form the lifeblood of the Thai economy.

“It’s quite a surprise,” said Shreya Sodhani, an economist at Barclays Bank Plc. “While manufacturing and exports of good were expected to be weak, I think it is the weakness elsewhere that is surprising and the weak momentum will weigh on growth into 2023, despite the reopening of China.” Bloomberg News

IT pays to be smart, or so the saying goes. But the biggest earners may not be the workers who are the brainiest, according to one recent Swedish study.

The research, published in the European Sociological Review in January, found that higher general intelligence was correlated to higher wages—but only up to a threshold of about 600,000 Swedish krona ($57,300) a year. Beyond that point, the study found that ability plateaus as wages continue to rise. And earners in the top 1 percent score slightly worse than those in the income tier directly below them.

“We find no evidence that those with top jobs that pay extraordinary wages are more deserving than those who earn only half those wages,” wrote the authors of the study, which was led by Marc Keuschnigg, a senior associate professor for analytical sociology at Linköping University in Sweden.

“Extreme occupational success is more likely driven by family resources or luck than by ability,” the authors added.

The study analyzed the cognitive ability of 59,387 Swedish-born men at the age of 18 or 19 and their earnings during an 11-year window between the ages of 35 and 45. The research was based on a standardized intelligence test the men took as part of compulsory military service, which included tests of verbal understanding, technical comprehension, spatial ability and logic.

Women and immigrants were not included in the study because military service was not mandatory for those groups between 1971-77 and 1980-99, when the initial data were recorded.

The research doesn’t account for non-cognitive abilities—such as motivation levels or superior social skills—that may help workers score high-paying jobs. The study’s authors also acknowledge other limitations to their work: For instance, the smartest people may not always opt for the highest-paying job over a more interesting or rewarding role.

(Academia, they note, is “neither the best-paid nor the most prestigious professional field.”)

Still, Keuschnigg sees the lack of a correlation between intelligence and salary at high levels as a warning sign about growing income inequality between the most wealthy and the rest of society.

Given that Sweden has a relatively narrow income gap, “we can speculate that we might see this even more in places like Singapore or the US,” he said.

“The decisions that top earners make are consequential for a lot of people,” he added. “So we as a society might want to have the right people in these top positions.” Bloomberg News

Putin’s war to lop estimated $190 billion off Russia’s economy in delayed reckoning

RUSSIA avoided an economic debacle in the aftermath of President Vladimir Putin’s war in Ukraine, in what was an opening act of a slow-burning crisis that will play out in the years to come.

An economy Putin once wanted to make one of the world’s five biggest is on a path to lose $190 billion in gross domestic product by 2026 relative to its prewar trajectory, according to Bloomberg Economics, roughly the equivalent of the entire annual GDP of countries like Hungary or Kuwait.

But even as Russia logged its third straight quarter of contraction to end 2022, its downturn for the whole year was a fraction of the almost 10 percent collapse that was predicted a month after the invasion. The central bank has put last year’s drop at 2.5 percent and projects growth may resume already this year.

The decline probably intensified last quarter in annual terms and may be even worse to start this year, according to analysts polled by Bloomberg.

In what would be the sharpest contraction since the height of the global pandemic, data due on Friday will show GDP dropped an annual 4.6 percent in the fourth quarter, the Bloomberg poll showed.

“The effect of the sanctions is prolonged,” said Oleg Vyugin, a former top central bank and Finance Ministry official. “And the sanctions process hasn’t ended. More and more new ones are being introduced.”

The sanctions didn’t cover major Russian exports vital to world markets, such as oil and gas and farm products, though some restrictions on energy were added in the last few months.

Still, the resilience shown so far speaks to years of effort by technocrats close to Putin to steel the economy against disruption with policies that stowed away windfall energy revenue and tried to make Russia less dependent on some imports.

At stake now is Putin’s ability to sustain the biggest conflict in Europe since World War II by continuing to marshal the resources, but without antagonizing a population that’s increasingly worried about its financial wellbeing.

What Bloomberg Economics Says...

“Big countries with control of crucial resources, competent economic policy makers and powerful allies aren’t going to crumble in the face of even very severe sanctions. Russia is all four.”

—Alexander Isakov, Russia economist.

The job will only get harder this year as Putin’s government races to stave off a collapse in oil revenues and ramps up spending on social programs at a time when the mobilization of hundreds of thousands of men is hollowing out the labor market.

Analysis by Bloomberg Economics identified several clues to Russia’s economic survival after the imposition of unprecedented sanctions that included asset seizures targeting individuals close to Putin and saw about $300 billion in international reserves blocked.

The need of the US and its allies to preserve access to energy led them to strike a compromise in balancing punitive moves with their own self-interest. Russia actually pumped more oil, and high commodity prices meant it earned enough to prop up its income by seizing on demand from the likes of China and India.

Countries accounting for more than 30 percent of global GDP maintained trade ties and refrained from condemning the invasion, enabling Russia to rebuild supply chains and fight off economic isolation.

For Vyugin, a veteran Russian banker and economist, the sanctions were “less a knockout blow than a light jab.” Bloomberg News