Random thoughts and musings about what we can expect in 2022. Not scientific in any sense of the word; entirely tongue-in-cheek.
1.Thailand’s Economic Growth: 3.3%
Not terribly robust, but not as bad as it could be. Siam Commercial Bank’s research house recently downgraded its economic forecast for Thailand’s economic growth from 3.4% to 3.2% because of the omicron variant’s global spread.
But we think Thailand can and will do better. Slightly. Because of the pressure on Thai policy makers, we think they are unlikely to repeat the same mistakes they made last year. The pace of recovery will be slow, slower than it could and should be, and lag Thailand’s potential, but there will be recovery of a sorts.
2. Covid – Still with us, but not as bad
We are not epidemiologists or public health specialists, but we don’t see Covid going away. We do, however, see a pattern: one variant of Covid recedes to be followed by a new variant. This is where we may be going too far out on a limb, but although each new variant of Covid spreads faster, it seems to be less virulent and lethal than the last. We expect this pattern to continue. The current variant, omicron, affects the upper respiratory tract rather than going deep into the lungs and thereby causing serious damage. This makes a difference in its lethality and, some researchers suggest, transmissibility.
Public health authorities in the U.S. are now saying that that the current surge of Covid infections will likely peak in US by mid-January. No reason for the same not to happen in Thailand, albeit a bit later since the virus apparently first entered Thailand later. Our prediction: even though Covid will still be us when we ring out 2022, it will not be as lethal as it was a year ago.
3. No Return of Major and Sustained Restrictions on Entering Thailand
Will the continuing pandemic lead to border closures? Mathematical modelling shows that border closures do not limit or contain Covid infections in a country unless those closures occur within a few days after the outbreak starts. That has never occurred in Thailand, and it will not occur in the future.
The only effective remedies for containing an outbreak are vaccinations and social distancing. Thailand has been slow in procuring vaccines that work, but that seems to be changing. There is no evidence, even anecdotal evidence, that visiting tourists engage in less social distancing than Thai residents.
Even though the evidence is clear on these matters, governments typically do not act on evidence alone. Perception often trumps reality. But even that seems to be changing. Border closures only damage economies. And the world does seem to be learning to live with the realities of Covid. We suspect that the Thai government will temper lock downs and draconian barriers on entry. This in, turn, allows Thailand to avoid the economic disaster that a full-scale lock down visited on Thailand last year. Thailand needs tourism.
4. Tourism will recover…slowly
Tourism typically accounts for roughly 20% of the official Thai GDP. Significantly, it is also a major and unmeasured contributor to Thailand’s gray economy. This creates incentives to avoid previous mistakes and open-up and encourage tourism. The Thai Ministry of Tourism and Sport predicted that at least 10 million tourists will visit Thailand in 2022. When compared to the nearly 40 million tourists that visited Thailand in 2019, this is a modest figure. But it shows the depth and importance of the tourism sector to Thailand. It shows the contribution that tourism can make to Thailand. Thailand cannot abandon tourism and it won’t. Too many people count on it.
5. mRNA Vaccines will Prove to be a Game Changer
Although the conspiracy minded may take issue with this, mRNA vaccines are a positive game changer. They do not change our DNA and they are not being used for microchip surveillance technology funded by Bill Gates (the earth is also not flat), but they do shorten the time required to develop effective vaccines and potentially other therapies. mRNA vaccines have been rigorously tested and found to be safe. Scientists and researchers are also looking to harness mRNA for other purposes besides vaccines. For example, the treatment of chronic illnesses, such as (possibly) diabetes. We are on the cusp of a major leap forward in medicine. We should all look forward to great strides forward in medical science.
6. The U.S. will Impose Additional Sanctions on Myanmar
The sanctions the U.S. imposed on Myanmar are not the final sanctions that will be imposed on Myanmar. Despite the lobbying of a certain major U.S. oil company and its retention of former federal government officials, more sanctions will be imposed. Influential diplomats, human rights activists and politicians are all pressing for stronger sanctions. One of Myanmar’s largest sources of revenue is a gas field known at Yadana (disclaimer: a partner with this firm handled a major ICC arbitration involving the Thai side of the Yadana pipeline over ten years ago). As human rights abuses mount, a consensus is developing that stricter sanctions are required. No amount of lobbying will prevent that from happening. We will see those sanctions in 2022.
7. China Cannot and Will not help Thailand Recover Economically
The Chinese government has imposed draconian restrictions because of the Covid pandemic. China’s zero-Covid policy of lockdowns and quarantines has been so strict that the country’s president, Xi Jinping, hasn’t left the country in about two years. Chinese vaccines are less effective against the current variant, which suggests an even stronger crack down. The Chinese economy was already slowing down because of a real estate bubble and a crack down on tech companies. Chinese travel to Thailand has declined dramatically and the latest Covid variant dashes any hope that this will change soon. If Thailand is looking for a major influx of Chinese tourists to save its tourism industry, it will be disappointed. It is not going to happen anytime soon.
8. China will not Invade Taiwan
Chinese perfidy does not seem to know any bounds these days. China blithely ignores undertakings it made about freedom of speech and self-rule for Hong Kong. It makes ludicrous claims about its sovereignty over the South China Sea. It indiscriminately abuses ethnic groups such as the Uyghurs and Tibetans. It almost routinely expels members of the serious mainstream U.S. press on bogus charges. China has tried to expand its power through its confiscatory “Belt and Road” initiative, which critics claim, is a ruse to claim territory in African and South Asian countries. A cult of personality is developing around China’s leader, Xi Jinping, and he is now vying for the title of “Chairman”, a title that has not been bestowed on any Chinese leader since Mao Zedong. China is making noises about reclaiming it “lost province”, Taiwan, by force, but it will not do so. At least not in 2022. Even the Pentagon agrees with this assessment. Why?
The Chinese army is stronger than Taiwan’s army, but that that is not sufficient for a successful attack. The Chinese army was badly mauled when it fought a war against Vietnam. Taiwan is about as an inhospitable an environment as can be imagined for an amphibious assault. The Taiwanese army is technologically advanced, and a difficult amphibious assault against a technologically advanced army would, at the very least, be bloody and costly. Against all that, China does not know how the U.S. and its allies would respond. The Chinese have a track record of unrepentant aggression against weaker powers and countries but taking on Taiwan is another kettle of fish. China may make plenty of noise and threats, but we don’t see it attacking Taiwan soon.
9. The U.S. Economy will Continue Booming (Thailand should look to the U.S.)
The U.S. economy is headed into 2022 with serious momentum. The three biggest concerns about sustained growth in the U.S. – Covid, stained supply and U.S. inflation – are exaggerated, likely to self-correct or both. S&P Global ratings says it expects 3.9% growth in the U.S. in 2022. GDP for 2022 will be strong on continued economic demand from healthy balance sheets. The U.S. economy is and will remain healthy, robust, and strong. It is the linchpin for the world economy and economic recovery in Thailand.
10. U.S. Inflation – Just under 3%
The U.S. economy is the most important in the world. The U.S. has world’s single largest economy, accounting for almost a quarter of global GDP (at market exchange rates), one-fifth of global FDI, and more than a third of stock market capitalization. It is the most important export destination for one-fifth of the countries around the world.
This is why claims about runaway inflation in the U.S. need to be debunked. Using the PCE score favored by the Federal Reserve and thus the one most relevant for public policy, we predict U.S. inflation will be just under 3% for the first three quarters of 2022. We make this prediction in large part because we believe supply chain problems will resolve themselves in 2022. This is good for the world economy and good for Thailand.
11. Foreign Corrupt Practices Act Investigations and Prosecutions: Thailand?
A large automobile maker reported “possible corrupt” activity in Thailand last year based on a filing made with U.S. authorities the previous year (when Trump was in the Whitehouse). This apparently led to grand jury proceedings in the Northern District of Texas last year. And then all went silent. The Trump administration’s disdain for the Foreign Corrupt Practices Act (“FCPA”) is no secret. Because of criminal defamation claims were apparently made in Thailand against the press for simply reporting on this allegation, we are not comfortable saying more even if know more.
But we can comment on why FCPA investigations have gone quiet generally. Covid. FCPA investigations almost always involve activities that allegedly occurred outside of the U.S. We are not the only firm to notice that the Covid pandemic has hindered and delayed FCPA investigations. Those investigations will resume when the pandemic subsides, and the pandemic will subside in 2022.
12. Work Permits, Visas. Foreigner Ownership of Land and Thailand’s Foreign Business Act
Although there is talk of major reform to the Thai laws and regulations that govern these matters, we don’t expect it to happen – at least on the scale reported in the media. We have heard this story, or rather stories, before. Instead, we expect to see some incremental changes around the edges, but nothing major. If you want to know why, send us a private message.