Research findings issued by Phatra Securities lashed out at the recent gross domestic product forecast by the National Economic and Social Development Board (NESDB), saying the latter simply ignored certain facts when calculating its economic figures.
The securities house, highly regarded for the quality of its research, expressed surprise that last Thursday the NESDB predicted that even though the tsunami would cause as much as Bt35 billion in damage, private and government spending for rehabilitation would be higher, thereby boosting economic growth 0.15 per cent.
“We’re at a loss for words when it comes to the NESDB’s reasoning behind its calculations. If – God forbid – my house were swept away by a tidal wave in 2005, it is likely that I would spend more money [for home repair] than I would otherwise. But I would be much poorer for it. GDP is, first and foremost, meant to measure a nation’s wellbeing. Accordingly, its derivative, GDP growth, is meant to measure how much that welfare has increased in a particular year,” read the report.
It noted that it is obvious rebuilding tsunami damage cannot be interpreted as enhancing the nation’s welfare.
The NESDB forecast total losses of approximately Bt34 billion, which would eat into GDP growth by 0.48 of a percentage point. However, gains from rehabilitation were estimated to be Bt44.6 billion, which should increase growth by 0.63 of a percentage point. Overall, growth would rise 0.15 of a percentage point, the agency said.
Phatra noted that the agency’s press conference was quickly organised after Prime Minister Thaksin Shinawatra lashed out at JP Morgan’s economic forecast, which said the tsunami had caused such severe economic damage that Thailand’s GDP growth during this first quarter would be zero. Thaksin asserted that Thailand’s GDP growth for both this quarter and the entire year would remain strong.
Some international agencies have expressed concern about the possibility of so much aid going to the tsunami-affected countries that other needy areas are left out. Phatra noted that resources used to rebuild affected areas could have been productively used elsewhere for the benefit of the entire country.
“The loss of current income by those affected and the need to increase debt to finance the rebuilding effort [which must be repaid with future income] will surely adversely affect economic welfare now and in the future,” Phatra reported.
The report ended with the notion that unfavourable forecasts can only be refuted by positive forecasts that are credible.
Published on January 12, 2005