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Thailand's rate of inflation is not a major concern as China is currently "exporting deflation" globally, according to the chairman of the state planning agency.
During the delivery of his keynote speech at the annual seminar of the National Economic and Social Development Council (NESDC), under the theme "Geopolitical Uncertainty: Navigating The Future", Supavud Saicheua, chairman of the NESDC, said yesterday that as a small country, Thailand is inevitably affected by geopolitical problems.
Mr Supavud explained that China, as a global economic superpower, is trying to restructure its economy towards becoming a high-tech producer after its real estate bubble burst, with the government opting not to intervene.
He noted that China is exporting deflation globally, which affects Thailand, because China produces large quantities of goods for global markets, while domestic consumption remains low at just 0.5%. China's consumption-to-GDP ratio is only 24%, causing its goods to flood partner countries, while Western nations restrict Chinese products.
Deflation exports refers to a phenomenon where a country experiences a decline in its domestic price levels, which then influences other economies, often through trade dynamics. This process can be particularly observed in major economies such as China, where deflationary pressures can have significant global ramifications.
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Supavud Saicheua, chairman of the NESDC, says that Thailand will inevitably be affected by geopolitical problems.
Deflation is defined as a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit within an economy. This results in an increase in the purchasing power of the currency, meaning consumers can buy more with the same amount of money over time.
"Thailand should then position itself as a connector for Chinese goods, similar to how Hungary acts as a conduit for Chinese products into Europe," Mr Supavud suggested.
"China cannot produce enough food to sustain its population, which represents 20% of the world's total, while only 9% of its land is arable. This presents an opportunity for Thailand, a major food producer and the fourth-largest exporter of agricultural products to China. More importantly, as China's population continues to age, agricultural production is likely to decline even further."
Regarding the upcoming US elections, Mr Supavud said that regardless of who wins, there will be an impact on Thailand. If Donald Trump wins, protectionism could intensify.
He pointed out that the US has a large budget deficit, currently standing at around 6% of GDP, and in the next 10 years public debt is expected to increase from US$28 trillion to $50 trillion. As a result, long-term interest rates in the US are likely to remain high at 3-4%, and could even rise to 5%, despite short-term rates starting to decrease.
Nonetheless, in the competition between the US and China, regardless of the winner, Thailand should maintain relationships with both sides to stay in the most advantageous position, Mr Supavud said.
Danucha Pichayanan, the NESDC secretary-general, said the geopolitical challenges Thailand is facing should be seen as an opportunity to attract foreign investment to help transform the country into a high-value economy by utilising advanced technology and bringing in skilled labour to accelerate development. Additionally, building energy security is crucial for positioning Thailand as the region's energy hub, he said.