The Recession Is Not Over

by JW on August 25, 2009


Presumably there are political factors influencing the continuing and inaccurate series of newspaper reports that the recession is over, the economy is recovering and so forth (an alternative explanation is just that journalism standards are low here and that is also possible).

Today we learn, based on NESDB figures, that “The Thai economy emerged from the recession in the second quarter, thanks to a pickup in government spending.” This is not, of course, strictly speaking true.

What is true is that the contraction of the economy in the second quarter (4.9%) was not quite so disastrous as the contraction in the first quarter (7.1%). However, projections are that the economy will contract for the whole year some 3.0-3.5%. Recessions end when there is positive GDP growth – so, since the economy will contract at least until the end of the year (and probably beyond), Thailand has not exited recession.

The export sector continues to be the worst hit and this is where the bulk of the economy is concentrated. Since the nascent ‘recovery’ in the west, notably the USA, is being described as a ‘jobless recovery,’ the demand for Thai exports is not likely to rebound very quickly. The government spending has had an effect and, it is to be hoped, this will increase rapidly over the next few months (the delay in spending the money is at least partly due to the results of the anti-politician campaigns mounted by the unaccountable elites over decades) – the effects will be mostly in construction, since this is the principal means of developing the infrastructure. That means most of the new jobs will go to men, since men predominate in the construction industry.

However, it is far from clear that government spending is going to provide sustainable recovery in the economy – in other words, once the projects the government is planning to support end, will there have been secondary impacts in the wider economy to continue improvements without government money? For example, will improving the infrastructure make some activities profitable that were not profitable before and so people will open companies to take those profits. It is not yet possible to predict this accurately.

Of course, politicians have a duty to talk up what they are doing and encourage consumer and investor confidence but that does not mean it is right to misrepresent the facts.

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